I will be selling short the SPY, at an amount equal to 25% of my account value, on the open.
I expect this trade to have a 60% chance of being a winner. If it is a winner, it will probably take about 5 days for my profit objective to be met.
I do employ an abnormal market filter for this trade. This filter works similarly to a stop, but very seldom will it ever require a trade to be closed out early. There is a strong chance my abnormal filter will trigger tomorrow. If so, then I will have to close the short at a loss on Wednesday’s open. The filter is telling me that there is a good chance that the market may stay overbought for a great deal longer than I want to be short.
What’s the downside target?
Lower 😉
I don’t have an exact number.
Perhaps you are suffering from acute mental illness?
gotta love fellow IBC’ers going against the FLY… makes for great drama
I agree Woodshedder. The NAUD is pretty high … Last night a huge +billion $ sell and profit taking of Barclay stock took place. Why would the investor sell if future economy/market is so positive? The writing is on the wall for at least the open to be down if not all day Tuesday. I look for alert trades from you full time traders so I’ll put in an order to short something today unless the market has fallen too much before the open. I read your post every week. I work full time so cannot post much. Enjoy your site. Thanks for all you do.
Thanks Nergo. Keep in mind that if the SPY closes up much at all today that I will be covering tomorrow. To be clear, this may be one of those times where we just rally and rally before pulling back, and I do not want to get caught short.
Short @ 94.46 The abnormal filter did not trigger so the position will remain tomorrow.
Hey Wood,
You know I think you’ve either lost your mind or received crystal “balls” for your birthday, but I’m impressed with your willingness to look this monster in the eyes.
I don’t know if you watch money flow, but it has been showing a negative money flow across many of the sectors including today.
http://online.wsj.com/mdc/public/page/2_3022-mfsctrscan-moneyflow.html?mod=mdc_uss_mnyflo
Look at the last week too. Also, QQQQ has stopped advancing (at least for today) at the 38.6% replacement from the entire “bear market” move down from 10/2007.
Anyway, I wish you lots of luck – what is your stop range? Also, did you have any trouble getting shares short? I think I mentioned the trouble getting leveraged ETF’s short these days.
Cheers!
Wood,
Curious as to why you don’t trade futures instead of SPY?
I’m short the NQ but will prob cover on a dip tonight.
Good luck with the trade.
Renn, this trade is a system trade that has backtested well for over 15 years. You’re right though, sometimes I feel like a dumbass for taking the signals. The system is just about breakeven on the year, not bad considering that mean reversion has been getting killed.
I follow money flow, but not consistently. Thanks for the links.
As a pure mean reversion system, there is no stop. This particular system is the only system I use that is stop-less. There is an abnormal filter, but as I stated earlier, it will seldom require open trades to be closed.
I had to call in the trade desk this morning to get shares short, but that was because Tradestation’s Wedbush file had not been updated (evidently most of the SPY shares for borrowing are loaned from Wedbush). Had I tried to place the order after 7:30 a.m. or so, I probably would have found them easy to borrow.
Lazy, as you know, futures trading is on my to do list.
Wood,
That’s cool. I am curious how you define a failed trade in this particular system? I follow your systems from stock fetcher and they are pretty amazing. It just takes some serious steel/crystal balls to trade them at times like this.
If I understand the trade correctly, you’ll close it out within 5 days either way or as soon as it hits a % profit. What triggered this trade at this level (RSI?) and am I correct in saying the stop is basically the 5 day mark?
Thanks again,
R.
Renn, I’m going to refrain saying too much about this system, but if you’ve followed me from SF, then you have a pretty good understanding of how it works.
There is no stop whatsoever. The trade will get closed out when the SPX mean reverts, no matter how long it takes (unless it hits the abnormal filter). The reversion may happen after the market has moved up enough that even after a reversion, the trade is a loser. That is what I consider a failed trade.
As for what triggered the trade, again, I don’t want to be too specific, but take a look at fast stochastics, Williams %R, CCI, RSI, etc. and you will see the market is short-term overbought. Start thinking about what these oscillators will need to do to get back to a neutral range, and there is the foundation for an exit signal.
Wood,
Thanks – makes sense!
Best luck!
R.
Yeah, I know, I just figured I would pile on and give you shit like everybody else.
Lazy, I’m right now trying to pull up the data to see how the Lazy Man system has been doing since I last posted about it.
Not bad actually, I’ve had some choppy days in the last couple of weeks and I’ve made some dumb mistakes but I’m still coming our ahead.
TS is downloading the data. I’ll post the equity curve sometime this week, from the out of sample test, to the post on 4/29, to the present.
For now, time to make up on a lot of lost sleep.
Oh, and glad to know you are still coming out ahead!
Which signal are you moving on?
RSI(2) sell signal?
NR10/Spinning top?
Wood,
Nice call on the shorts.
Shhhhh…you might jinx me 😉
Mike, I don’t trade candle patterns.
Lazy, you jinxed me!
Huh? you crazy! That shit (ES) was at 932 when I posted – commenced to dropping 10 more points. 10 POINTS!
If anything, my voodoo gave you a continuation.
Now back to 932 right where we started at 10:06…
sacrificing a chicken for you now…
Hi Wood,
Will you be closing this trade on Tuesday or Wednesday next week?
Cheers,
R.
Renn, hard to say. It is at breakeven right now. Significant weakness Monday could trigger a cover signal for Tuesday.