On Friday, markets gapped down, forcing me to close the QLD long position at the first bounce.
The Portfolio has lost 0.28% in January. Nothing really that cannot be turned around. The most important is to try to ride trends in the right direction.
We are still very close to the S&P500 profit correlation trend.
The trade ideas for today are below.
The Futures indicate that we are going to open on a positive gap. I believe that this will make trading long positions much more difficult because many bears will sell strength. So no need to hurry buying morning strength. It is safer to buy afternoon positive divergence if we detect one.
I am taking this opportunity to publish here a Table related to a back-test of a strategy that consisted of buying positive 20DMF/Price divergences detected in the afternoon and closing the trade at the open of the following day.
We can see that this strategy has a win ratio higher than 57% for the past four years, but most importantly, this strategy worked well in 2015.
This might indicate that there were funds that started buying weakness in some afternoons, to sell at the open of the following day. This is a very disturbing "anomaly". Funds buying would be detected by the positive divergence (MF trending up while the price is trending down.) How could these funds know that prices would be pushed higher overnight?
I am also posting below a Table that shows how riding up/down trends from the morning until the end of the day worked out. These trends are detected using a combination of 20DMF and Price measures.
Also note that in 2015, the strategy to ride downtrend has produced consistent strong returns.
if we combine the two Tables, we can suspect great market manipulations.
There is still more work to convert a back tested algo to life signals, but we are working on these.