I picked up a virus here in Bali, and after 2 days of hitting the toilet like it was an olympic sport, ended up on an IV drip last night. Ugh. And that’s why I’ve been radio silent the last few days.
And although my bowel habits are admittedly fascinating… let’s pivot to some market commentary.
We have some excellent setups for Monday in the bond market. This is the 10 year note, but it’s the same in ZB, ZF and ZT.
As for the stock market, we will probably attempt a counter trend bounce, but it’s still not a very appealing long trade yet.
We are in a VERY high volatility market all of a sudden, and it’s worth considering what that means. High volatility is strong emotions, uncertain outcomes, wider stops needed.
We have trapped longs just waiting “to get their money back”. We have shorts who might or might not hold for another leg down. We have bottom fishing longs, and bagholders too.
Lots of cross currents makes things less predictable.
This is the highest probability outcome, and it’s still not much more than a wild ass guess. I’d stand aside from equities for next week unless you are a thrillseeker. While it is highly unlikely we drop in a straight shot from here without at least attempting a counter trend bounce… we could easily fake drop down first.
Or any number of other possibilities. At this point the bears have the advantage but the high volatility environment makes trading far more difficult.
For the next week or so I’ll be sending you some information on the Vixen volatility system and signal service, and then Michael is going to get on a live event and answer your most vexing questions and open his kimono and show us the real results.
And I’ve convinced him to give you guys a try of it for free, which is nice of him.
I’ve never recommended a signal service before, because most of them are shoddy… but this is a different beast.
I know quite a bit about this system and it is a very, very strong edge. Above .4 expectancy for a fully auto system is quite extraordinary.
Most of you know that back when I was first going down the automated system route, I worked with Michael (from Evilspeculator.com). He originally automated Crazy Ivan and ran it for clients, and we both developed more advanced things off the back of that.
He and I went our separate ways in 2015, but remained friends, and we collaborate here and there and share ideas.
Anyway, his system is based on something which I simply don’t have the skills to do. It’s a volatility system, but not the usual type. We will get into the details later, since those with programming skills might find some useful nuggets.
For those technically minded I’d like you to pay particular attention to where he talks about not trading mean reversion to PRICE, but mean reversion to his model. What he is essentially doing is building a machine learning model of how this market should behave, and noticing when the market is out of sync with the model.
Any serious person knows that market classification and managing regime change are the black belt level topics for serious traders. Michael has some solutions, in an area which stumped my best research efforts for years.
This is an innovative approach with many practical implications, and for those rare nerds that enjoy this stuff here is a video about it.
The real reason for trading volatility edges is that they are INCREDIBLY strong. Vixen does .38-.42 expectancy with very small drawdowns. That’s about double what you can normally expect with a pure mechanical automated system.
Certainly as good as the very best discretionary systems, without any of the messy decisions.
It’s a true holy grail system, Sharpe ratio > 2.0. You trade it on the stock market through VIX structured ETF’s, so most people can trade it.
You get an email/sms alert and buy. That’s it. The time of execution isn’t actually that critical either, which is often the weak link in signal services.
You don’t hold overnight (when bad things can happen).
Or if you want to run it “hands off” he can do that for you, too.
Anyway, watch the video. He’s a great guy, and I can recommend anything he does. I’ll be sharing his track record over the next week or so and opening up for some Q&A questions.
If you have any questions you’d like answered, ask away!
Have a great day