Wednesday, April 4, 2012

Update for Wednesday, April 4th - Another Short-Term Whipsaw

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I do not post here daily; I post daily at www.effectivevolume.com.  I post here as time allows.

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With the close of markets on Tuesday, April 3rd, the short-term LCR timer has transitioned to CASH. 

Under the rules of the re-entry timer, the index position entered into yesterday will be closed at the open. The Elder intermediate-termed timer and the 13d / 65d long-term timer are still long, so positions that were entered into early in January or the middle of March, which have gains, should continue to be held.






As with all my images on this blog, right-click to open in a new tab or window.


While any system that whipsaws is frustrating, you can see that the secondary re-entry system manages the trades quite well (as long as you execute flawlessly), with the worse trade ever recorded at -5.46%, the average loss at -1.59%, and with a significant positive edge (ME = 0.84, want > 0, and PRR = 1.5, want greater than 1.0 at a minimum).

I'm not as anxious to sell, and backtesting that I have conducted shows that a 1% trailing stop loss (TSL) placed on the trade 5 minutes after the market opens typically works in your favor (e.g., you get a higher price on exit than the opening). I intend to place the TSL and let it ride from there.

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The Price Slope Model is wavering on turning bearish, but simply has 1 day of bearishness developing on a good bullish base:




Although the 2d and 3d slopes turning negative is undesired, the weakness we see is characteristic of being within a range.

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The LCR Slope Model has resumed the bearish stance it has had for a while and tells us that more stocks are moving below their historical, optimized performance levels and that we should not be buying stocks today:






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I'll be away from my desk all day today until near the close.

Regards,

pgd