August 19, 2017

Once Again, Patience Pays

So, as expected the market, or more specifically, the tech-heavy Nasdaq 100 (QQQQ) declined today to further extend the short-term decline that I have mentioned over the past few days. As a result, the QQQQ trade in the newsletters High-Probability, Mean-Reversion strategy made 5.8% and is now up 19.4% since it was initiated back in mid November of last year. The monthly gains since it started have been a consistent 3.7%, 9.6% and so far 4.0% in January.

You can check out the gains and the trades at the following link. Please keep in mind that the drawdown on the 14th did not occur. Collective2 is working to fix this. The QQQQ trade that was on did not even represent 30% of the overall portfolio yet they are showing a drawdown of over 37%. This should be fixed shortly. However, the performance stats are correct.

High-Probability, Mean-Reversion Strategy Performance Results

So once again patience pays. The strategy has had 5 successful trades over the last 75 days, yet some subscribers continue to complain about the lack of trading. As Charles Kirk stated in his post Lessons from 2010,  “Less is more. Learn one “bread and butter” strategy and trade the hell out of it.”

Most seasoned traders already know this little tidbit of information. Yet, greed and the excitement of trading frequently gets the best of both seasoned traders and newbies alike. I mean, brokers want you to trade more frequently. If everyone traded less than that would obviously mean less commissions for the almighty broker.

One thing is certain, I will not trade to trade. I have come to far and spent too many years learning the ropes to fall prey to a few subscribers need to trade more often. I kindly say that this system is obviously not for them and move on. Yes, I lose quite a few subscribers this way, but I truly believe in my system. It is not the holy grail, there isn’t one, but after years of trading this system I do know the ins and outs of how to trade this system and best of all, trade it effectively over the long-term. As the link states above – the performance speaks for itself.

As for the current state of the market, well, options expiration is tomorrow so anything goes. USO is the only ETF that I follow in the High-Probability, Mean-Reversion strategy that has reached a short-term extreme, but I would prefer to see further declines in the ETF before taking a position. Currently, I am sitting on the sidelines waiting patiently for another high-probability set-up.

Until then – have a wonderful night!

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Short-Term High-Probability, Mean-Reversion Indicator – as of close 1/20/10

Benchmark ETFs

* S&P 500 (SPY) – 45.7 (neutral)
* Dow Jones (DIA) 69.6 (neutral)
* Russell 2000 (IWM) – 26.0 (oversold)
NASDAQ 100 (QQQQ) – 39.9 (neutral)

Sector ETFs

*Biotech (IBB) – 38.4 (neutral)
Consumer Discretionary (XLY) – 48.4 (neutral)
Health Care (XLV) – 52.3 (neutral)
* Financial (XLF) – 42.7 (neutral)
* Energy (XLE) – 48.3 (neutral)
Gold Miners (GDX) – 24.6 (oversold)

Industrial (XLI) – 47.3 (neutral)
Materials (XLB) – 23.5 (oversold)
Real Estate (IYR) – 51.2 (neutral)
* Retail (RTH) – 66.5 (neutral)
Semiconductor (SMH) – 53.1 (neutral)
United States Oil Fund (USO) – 27.0 (oversold) / RSI (2) – 4.5
* Utilities (XLU) – 77.5 (overbought)

International ETFs

* Brazil (EWZ) – 33.9 (neutral)
* China 25 (FXI) – 34.5 (neutral)
* EAFE (EFA) – 52.5 (neutral)
* South Korea (EWY) – 52.6 (neutral)

Commodity ETFs

* Gold (GLD) – 27.1 (oversold)

Ultra Extremes

* Small Cap Bear 3x (TZA) – 73.1 (overbought)
* Small-Cap Bull 3x (TNA) – 26.1 (oversold)

UltraLong QQQQ (QLD) – 40.6 (neutral)
* Ultra Long S&P 500 (SSO) – 45.9 (neutral)
* Ultra Short S&P 500 (SDS) – 52.4 (neutral)
UltraShort 20+ Treasury (TBT) – 65.9 (neutral)

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