ETF Prophet

Two weeks ago my first “Sensitive Issues Scoring” model based on relative positioning of and among nine economically sensitive ETFs issued a first warning for equities. Last week, a fuller, more robust version driven by fifteen intermarket sector, style and country ETFs weighted for importance joined the party with its own warning signal as trading [...]

Last fall I spoke at an active money management conference, where I introduced about a half-a-dozen or more weekly inter-market ETF models designed to measure “risk acceptance” in equities. The subject of this post features one of the more basic models, which was partially inspired by the highly recommended “The Lawyer Trader” blog.

I’ve been working on bigger projects till about a week ago then I got real curious about a trading idea: what happens to S&P 500 next week when commodity currencies are aligned up or down the same day? What happens if I want to reduce the drawdown periods and increase the run-up periods? what happens [...]

In the last post we introduced the Gini Coefficient as a measure of inequality and statistical dispersion. The primary benefit to using the Gini versus standard deviation is the proper consideration of abnormally large values in the cumulative distribution. There are many applications of the Gini within quantitative finance. One example is the Mean-Gini framework, [...]

“Trapped Between the Living and the Dead Again,” the film poster tagline reads. By one measure, the retrace from 252-day highs, this bear market  has been mild in nature, politely reversing on a dime October 4 at the official -20% mark, currently registering a mild -7% (12/13/11). For all the dramatic daily swings, even the VIX [...]

Update Last week the portfolio saw a decrease in equity (-1.23%). For the coming week no change in positions. However capital will be moved from GLD into ERTS. Next weeks portfolio profile: Gold  17% Treasuries   17% Stocks   66% Cash  0% About Portfolio Trader Read more about Portfolio Trader here (link). Past trades can [...]

Traders seek to find the next BIG think ala Apple, Bidu and co. Often times this desire is founded by the underlying assumption that taking higher risk is rewarded with higher returns. Furthermore many traders believe in an efficient market where as one can outperform the market only by taking above average risk. However this hasn’t been [...]

Update Last week the portfolio saw a decrease in overall portfolio equity (-1.4%) due to severe weakness in major markets (SPY -4.6%). Fortunately TLT protected us somewhat from the overall market weakness. Furthermore some of the stocks (BIIB, ORLY, ALXN) showed resistance and didn’t sink with the overall market.  For the coming week two new [...]

This post is about the impact of survivorship bias on various types of strategies. I want to look at mean-reversion as well as trend-follow strategies to see how their performance gets impacted by using today’s stock index constitution vs. a historical correct definition aka survivorship bias free. Test setup Indices: NDX100, SP100, SP500 All trades are close/close, no [...]

Update Last week the portfolio saw a decrease in overall portfolio equity (-2.6%) due to severe weakness in major markets (SPY -3.7%). Fortunately TLT  protected us somewhat from the overall market weakness. Unfortunately GLD showed weakness as well. WFM will be replaced by BIIB for the coming week. Next weeks portfolio/risk profile: Gold  -  36% Treasuries [...]

The 2-day mean-reversion trade, e.g. RSI2 or DV2 has become very popular. Though  the performance of this trade has weakened lately (during 2011). So the twenty thousand dollar question becomes: Is the edge of this trade gone or is it about to resume? With this post I want to share an observation I’ve made by [...]

Remember this Market Rewind classic? Here is the updated run from this weekend.

With this post I want to share some insight about my portfolio setup.  More specific I want to talk about the various systems I trade, why I trade those and how I trade those. The initial question to ask: Why don’t I simply trade my best system instead of potentially reducing my returns by trading a variety of systems? [...]

These are the trades I’m going to take for the coming week. In case you consider mirroring my trades make sure you do your own homework upfront in order to match your personal risk profile (no investment advice).
- Frank

A desirable goal of relative strength investing or any type of portfolio algorithm would be to track the best stock/asset from a group of stocks/assets in hindsight. In other words, we wish to use an approach that can “follow the leader.” This goal is a close relative of universal portfolio algorithms (see Universal Portfolios http://www.stanford.edu/~cover/portfolio-theory.html  that [...]

I will preface this post by saying that this is a concept that I have not yet had a chance to test out. That said, I usually start first with a theory or a logical observation and proceed to creating a quantitative method to capture that insight. The concept relates to everyone’s favorite topic–relative strength [...]

I’ve been starting to use Excel to back test my system/indicator ideas. Tested a few ideas and realized I need to start using PSAR filter to systems and equity curve “surfing”, as Dave Evans would call it, to improve performance. I had my doubts about PSAR though… So I checked some stats about how it [...]