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While the SPX closed up the VIX also rose. Most often they trade opposite each other, so this kind of action is somewhat unusual. But VIX has a tendency to decline going into the weekend (Friday afternoons), and then rise when it returns from the weekend. So to see this action on the first trading day of the week is less unusual than at any other time. Still, combined with the SPX 50-day high, it has often been followed by a dip in the next few days. This can be seen in the study below, which appeared in Monday’s Quantifinder.
Results here appear somewhat bearish over the 1st 1-2 days, and suggest a brief pullback is likely. But I am also seeing evidence that the persistent move up to new highs reduces the probability of a substantial selloff in the near-term. So while there appears to be a possible short-term downside edge based on the study above, I don’t view the current setup as very compelling for shorts. This is something I discussed in more detail in last night’s subscriber letter. (Click here for a free trial .)
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Learn how to identify edges and formulate swing trading strategies in the new Quant Edges Swing Trading Course!
The first group of traders has now completed the Quant Edges Swing Trading Course , and the feedback we received has been tremendous. The course is self-paced, and all Q&A sessions were documented and recorded, so you won’t miss out any anything if you decide to take it now. And you can still get the course for $150 off if you support Rob Hanna’s MS Ride fundraiser with a donation of $35 or more between now and August 30th! Details here .)
Below is a sampling of the feedback we received:
The course is well organized and well presented. The level of detail and coverage was impressive. It was great to see the thought process involved when evaluating an edge. I especially liked the spreadsheets because of their detail and sorting capabilities. This allowed me to see how strategies performed in different environments. The Amibroker code was also a big plus.
I had done no quant studies or analysis before this course and was looking for a good intro and this one was excellent. It gave me good insight into how to look for tendencies via raw studies, try to combine those into a strategy and test that. And Rob expanded the course to various areas to lots of interesting and (to me) new ideas I hadn’t thought of such as Double B, SOMA flows and that you can’t rely on historical NYSE/SPX opening data, among many of the gems and insights of the course. This is a course whose material I’ll need to go through 4 or 5 times to really absorb.
Learned a lot about how quantitative trading works and it gave me a great stepping stone into learning how to develop systems and motivated me to learn how to code in AFL and use Amibroker, which I did not even know existed prior to the course. Basic systems coding in Amibroker was surprisingly easy to learn coming from a non programming background.
Rob put in great effort to continue to build out the course through the Q&A and added content to provide more information for course participants. Rob’s effort and additional work moved this course from an 8 to a 10 for me.
The build up from tendencies (studies) to strategies was excellent. Discussion of the generally “right number” of indicators to have in a strategy. Having most of the studies/strategies be independent of Quantifiable Edges proprietary work (Aggregator, CBI) but also showing that they can be integrated is appreciated. The Fed and SOMA work was all new to me so really great and insightful. Providing the spreadsheets and Amibroker code – thank you! Good references for following work and reading (e.g., Bandy’s work). The extra effort Rob put in to answer a boat load of questions in each section was well appreciated. That helped round out much of the material in the course and put things in context.
Looking at how each input (the vix, days up/down etc) affects returns was great. The best section to me was the one that put several of the inputs together and studied how to use them in conjunction with each other to build a robust system.
I am more of a position trader (2-8 weeks). Even though the timeframe was too short for my taste, I learned plenty from your research process, explanations and techniques. Thanks!
Informative, well explained, and for me just plain fun!
I cannot compliment you enough on the depth and detail you go into during the course. Though I have traded for many years, the value I received from this course was incredible.
Since new course participants will only have access to the recordings of the Q&A sessions, each new purchase comes complete with 1 hour of Q&A / consulting from Rob. Join our group of graduates and incorporate quant edges into your swing trading today!
Part of the reason the market has rallied over the past few days is an indication that a rate cut is likely coming as soon as the next Fed meeting. It is interesting timing for the Fed to begin cutting rates, since their QT program still remains in place (though it is winding down). By reducing the SOMA at the same time they are cutting rates, the Fed is basically going to be driving with one foot on each pedal. They’ll be instituting both a contractionary policy and a stimulative policy at the same time. While curious, that is not unprecedented. I decided to examine SPX performance since 2003 during weeks where 1) the most recent interest rate move was lower, and 2) the SOMA contracted. Results of starting with a $10,000 portfolio and not including any trading costs can be seen below.
Results overall have been fairly poor, and very inconsistent. Not terribly encouraging. Of course rates were already at zero for many of the past instances. And the SOMA decreases occurred during policies like Operation Twist, where there was not actually an overall reduction in the SOMA, but rather week to week oscillations. So past comparisons like in the chart above are not perfect. If the Fed does cut rates, it would also be very unusual from the standpoint that the market is currently at new highs. Looking back to 1990, the only other instance I could find where the Fed began a rate cutting cycle while the SPX was within 1% of a 200-day high was in July of 1995. That rate cut was followed by 7 months of continued rallying for the market. Bottom line is that I am seeing mixed messages using difficult comparables with regards to the Fed. Anticipating market reaction in such an environment can be difficult. I will likely be relying more on some of my other indicators in the coming months to help set my market bias.
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In March I discussed how the weeks following options expiration in March, June, and September have been the worst 3 weeks of the year . Below I have updated the June stats and profit, which I also showed last June .
The strong, steady downslope and bearish numbers suggest we are entering a very weak seasonal period. It will be interesting to see how the market holds up this week, and whether the recent strong upside momentum can overcome the bearish headwind.
Speaking of headwinds, the Quantifiable Edges MS Ride fundraiser is ongoing, and readers generosity to this point has been outstanding. Unfortunately, I broke my wrist last week playing basketball. So I will not be able to face the Cape Cod headwinds on my bike. But I will still be volunteering for the weekend and helping raise funds towards the cause. More info on how to contribute and how to receive research and discounts from Quantifiable Edges with your donations can be found here .
The last two years Quantifiable Edges readers helped me raise over $4000 each year
Thank You Level:
One bit of research that Quantifiable Edges has become known for are the many studies I have published on Fed Days . In fact, you could say I wrote the book on Fed Days . And the pdf version of that book sells for $25. But between now and June 30th I will send you a zip file containing the following if you make any size donation to my MS fund raiser page .
The Quantifiable Edges Guide to Fed Days (pdf version)
My “Fed Day” code for both Tradestation and Amibroker (new this year)
Text file versions of the code in case you do not use Tradesation or Amibroker, but still want the full list of dates, or to translate the code into another program for your own testing.
Note that the code has only been offered with the book as part of the MS fundraiser. So even if you already have the book – make a donation and get the code! Or if you donated last year, get the updated code!
Big Thank You Level:
Donate $35 or more and you will get everything above and I will also include a coupon good for $50 off any Quantifiable Edges Products , other than recurring (gold or silver) subscriptions. This includes systems, courses, code, or research that Quantifiable Edges has to offer. And if you want to use the coupon towards the new Quant Edges Swing Trading Course between now and when fundraising ends, I’ll make that $50 coupon a $150 coupon!
Why am I doing this?
Check out my personal fundraising page to learn the story of how I became involved in raising money for MS.
I’ll put in the training, endure the pain, and brave the traffic, but I need your help in fundraising efforts!
The Process:
1) Go to my personal fund raising page
http://main.nationalmssociety.org/goto/olderslower
2) Make a donation of any size
3) Send an email to support@quantifiableedges.com with your receipt Quant Edges Swing Trading Course ). If you don’t receive the package in 24 hours, feel free to send us a 2nd email, because that means we likely missed the 1st one, or post a comment below letting us know we somehow missed it!
Thanks for your support and generosity! I hope the Quantifiable Edges Fed Day MS Ride package will pay you back your donation size and much more in your trading accounts! And I hope together we can make a big positive difference in the fight against MS!
