Thursday Mar 21st 2019
Adding Some Color to Yesterday.
I mentioned yesterday that interest rates were not increased by the Fed.
Also, according to various comments, it seems that interest rates may not change for the rest of the year and this produces some other significant possibilities for the future.
(blog continues below chart.)
The markets took a positive view today and produced significant upside moves but the news on interest rates tells many different stories.
The longer-term effect could be negative as the economy is expected to cool for the balance of this year.
Cooling and leveling off would still be positive for the markets but could also threaten them for near as well as longer term. I am reminded of the saying that ‘Markets like to climb a wall of worry’.
This is where we see the greatest benefit to our unique approach to portfolios that can adjust to market conditions almost automatically. Yesterday, I commented on their hedging ability with the inclusion of 2 VIX Index related and 18 Sector related inverse pairs of ETFs.
Volatility usually trades in the opposite direction to general market prices but with limited leverage, it still provides a degree of hedging.
However, our sector pairs are mostly 100% inversely correlated so that a buy signal can perform equally well in up or down markets. They do this by switching sides of these inversely correlated ETF pairs.
Our algorithms are designed precisely to equally perform in either direction and whenever the markets change, you can expect them to quickly switch to follow the latest trend.
You just need to follow the daily signals and make any necessary trades to stay in the best direction. Signals are designed to be followed as a ‘Market Opening Trade’ on the next market date but should be followed soon after the change is published.Wednesday Mar 20th 2019
The Fed Holds the Line on Interest Rates.
At precisely 2:00 PM in New York, the Fed decided not to raise interest rates today and the Dow jumped 122 points immediately and another 54 points shortly afterwards.
But it didn’t last long. The Dow ended up 3 points higher at the close than when it began the move at 2:00 PM.
They didn’t raise rates because the economy lost some of its future promise and could have possibly hit some reality.
On the other hand, the shutdown could have taken the steam out and maybe we pick back up again next quarter.
Either way, almost every evening, we continue to describe our new way to look at a portfolio that will respond to wherever the markets go.
We added stocks back in after a brief break in January because a selection of well performing stocks can meet and sometimes beat the performance of 3x leveraged ETFs.
The problem will be if or when the markets turn down and those well performing stocks have to deal with a recession or significant correction.
Picking good stocks at that time will become very difficult and only inverse ETF pairs can easily switch sides to quickly reverse themselves and make money on the way down.
This becomes the perfect hedge for a portfolio because it makes money in both directions.
Only the 2 volatility pairs represent an imperfect and different kind of hedge because although they tend to move opposite to stocks, they don’t have the same built-in leverage. It is also true that they perform better when volatility is coming down rather than going up, so their best direction is when stocks are already going up.Tuesday Mar 19th 2019
Tricks and Possibilities. . . . !
I am publishing yesterday’s subscriber chart because it demonstrates some tricks that are not guarantees but are extremely helpful.
Look at the description of the top 10 ETF ‘BUYS’ by rank and note that they are all bullish for today.
(blog continues below chart.)
That is 10 individual ETFs that all calculate separately that the markets are most likely going up today.
4 of them are new signals to be bought this morning.
It therefore stands to reason that their opposites have a ‘SELL’, but wait. . . . !
Next, look at the 2 volatility pairs and they are both on the ‘BUY’ side. Not surprising because volatility and markets generally move in opposite directions.
Now look at the 14 stocks below and 10 out of 14 are also on the ‘BUY’ side. This is helpful information.
Finally, look at the bottom of the chart at the indexes and note that the S&P 500 Index is also a ‘BUY’.
Nothing is perfect so we also must look at the VIX Volatility Index and it is also a ‘BUY’, which seems to say that markets may be going down and throws doubt into everything I just said.
My answer to that is the VIX Index is the most likely to predict incorrectly and this is purely based on observations. Volatility seems to be short-sighted and reacts to every rumor before it becomes news. I prefer to follow most other asset signals today.
All we must do now is wait until the markets close to see if these signals worked today. So far at lunchtime, I am looking ok.
It is now one hour before the close and we are still looking good with some improvement.
Well, it was a close call but after the markets closed, we are up a total of $337 over yesterday for all 3 groups after the 2 volatility ETFs made a loss of $68.
Monday Mar 18th 2019
ETF Growth to Double in 4 Years.
While our volatility ETF pairs have fallen and our new group of stocks is doing well, sector ETF pairs have sharply risen to the top current performing group.
The strong growth of ETFs will most likely bring more specific sectors to the markets and hopefully, this will be more of the 100% inversely correlated pairs.
(blog continues below chart.)
This ETF growth is already a huge part of investment markets with management fees much lower than Mutual Funds that represent similar goals or indexes.
Leveraged ETF sectors will always have high costs due to using option contracts.
The performance of the volatility pairs may require some form of timing for best overall results but waiting for a higher VIX Index can defeat their use as a hedging investment. For hedging against downward markets, they could be considered as a permanent part of a general upwardly biased portfolio.
Inverse pairs have their own built in hedge because we trade them in opposite directions by switching from the bullish side to the bearish side. That still can be hedged with inverse volatility pairs trades but may be less significant in a portfolio of inverse pairs than one of stocks or other single upward based investments.
It can be a real benefit to mix and match inverse pairs representing different sectors, including volatility, and then adding some stocks into the group to create a unique preferred portfolio.
We are working on including a mixed portfolio in the near future and will report on these details.Friday Mar 15th 2019
How We Report These Top Assets.
Chart 4X appears every evening based on the latest results and measures the performance of all our groups compared to the S&P 500 Index.
Chart 4X also shows the average profit of our current top performing group and the current number of ‘Days of Trading’.
The details in each Group on chart 4X explains the available cash, costs and profits associated with each group.
Finally, we rank each group based on the same trading period results regardless of how many assets are in each group.
For example, today after 39 calendar days, we averaged 3.2 round trades per asset per month. Also, for this same period we would be charged $257 in Broker Commissions at Interactive Brokers. This represents about 4% of our profits but we do not calculate this into profits because like you, we use different Brokers, and each charge different fees.
However, we do recommend Interactive as our first choice and Tradier as our second choice based on cost and our experience with them both.
Finally, our current and annual percentage profits are shown, which are calculated as the total current profits of $6,357 on our total available cash of $68,000 for the 39 calendar days.
It should be noted that we count each pair as a single investment because we are never in both sides of any pair at the same time.
Also note, we are rarely invested in everything at the same time so that significantly less than the $68,000 is fully invested but it must be available to our various groups if needed.
On the Historical Data page of our website, you will also find every trade for each group that we made, up until the end of the previous month. We do not publish the current month trades except to subscribers every evening.
On that Historical Data page, you will also find a full history of our algorithmic trading for about 3 or more years.
As previously mentioned, there are only about 20-22 usable Inverse Pairs that meet the high volumes necessary for us to offer this service, including the 2 Volatility Pairs.
We select the 14 stocks from the 500 included in the S&P 500 Index. We do this by their recent statistical performance without consideration to their fundamental analysis.Thursday Mar 14th 2019
An Update on Volatility as a Hedge.
Volatility hit its lowest point since October 8, 2018 today at 13.16.
Its lowest point ever was on November 24 in 2017 at 8.56 but it generally stays above 10 most of the time in the low range.
I point this out because there is not a lot of downside profit from here except it can oscillate in the low teens for months at a time.
The usefulness of volatility as a hedge was shown in our results over the last few months. Sustained higher values produced long enough trends to send volatility pairs to rank much higher.
Unfortunately, bumping around at the lower-end when trends are less obvious is not the best time for volatility pairs. On the other hand, leveraged pairs and stocks do much better.
That is precisely the value of a hedge that helps portfolios through periods of fear and higher volatility. These are the times when even short trends are more difficult to predict for stock values.
The definition of fear is ‘An unpleasant emotion caused by the threat of danger, pain, or harm’.
Uncertainty is volatility and periods of uncertainty produce the higher values that we have recently experienced for the VIX Index.
So why is volatility approaching the lows when fear still exists? We must be accustomed to the level and type of fear until another situation overtakes the news.
It is also true that our VIX related pairs do not have the leverage and cannot compete with our 3x leveraged ETFs during quieter times.Wednesday Mar 13th 2019
Most Bullish ETFs Up Today.
Nine of the Buy signals for ETFs last evening were bullish.
This also shows up in the S&P 500 Index which was also giving a Buy signal.
We also had a bearish signal for the VIX Volatility Index which usually goes down when markets go up.
These 2 indexes can give useful information and become more helpful when the mix of bullish and bearish ETFs matches any of your goals.
Some of these readings can play a useful part in other investment trades when taken together as indicators.
For the record, TMF/TMV for 20-year Bonds usually goes in the opposite direction to the market ETFs.
We still recommend taking our signals on the first day they appear, as it has historically been a higher percentage winning trade. The “T” is in the second column to remind followers that it is the first day of a new signal.
A correction to charts 1A and 4X appears today. We had previously taken the average returns simply by adding them together and dividing by how many groups we added.
Those math experts out there will know that the number of assets in each group is more important than how many groups.
Consequently, we are now taking the total profits from all groups and using the Total Group Investments, which is $2,000 per stock and $2,000 per ETF pair as the base.
From Chart 4X today, we have $7,007 profit divided by $68,000 available investment. We then multiply that answer by 365 days divided by 37 days of trading for these groups to arrive at 102% annualized profit.
We are rarely invested in every pair and stock, but we must have the capital available for those rare days.Tuesday Mar 12th 2019
Well…..Stocks are Lighting the Way!
Sometimes you just have to say that we all had a better way. Some followers also wanted the stocks back in the program and we were all correct so far!
Stocks have forged ahead in recent days to take over the number 1 position and out-performed everything else.
We know that volatility ended a strong move down and suffered a series of reversals to level out.
Sector pairs have stayed above water and have followed a more even track but stocks are the only story for today.
We are pleased to see the stocks doing well and there is significant evidence that when we chose the best 5 from a statistical search it sometimes became disappointing.
Some of our choices from recent high flyers last year turned out to be poor and sudden legal problems and earnings reversals caused some of those problems.
I think a better way to go is to select at least 7 positions in order to spread the risk. It would also be better to do this with ETF pairs as well because the trades are usually less than 10 days.
Smaller investments in more positions is generally a less risky way to go.Monday Mar 11th 2019
Average Trade Length Up to 8 Days.
Our 18 pairs have averaged nearly 7 calendar days per trade and 2 volatility pairs are 11 days since February 4.
This puts the overall pairs trade at close to 8 days, which is closer to the 9 days we recorded last year.
Stocks are currently running at 8 days this year and are performing well so far.
We are always looking for statistics that tell us something about performance, but we are always hesitant to make changes. A broad selection of market conditions just within the past year have tested our algorithms.
We have changed the selection process slightly for statistically selecting which stocks to choose by changing how many months we take into consideration. This remains purely a current recent performance decision and seems to make very small differences.
By reviewing the stocks in our program this week, they have quickly given us some good performance while markets rise.
Volatility has gone the other way and is bouncing around a more normal average. We are limited to 2 pairs and only 35 days of history, so changes are more pronounced. Where it was in the number one position for some time, it was helped greatly by the long trend downwards from Christmas.
We commented yesterday on the unusual signals for both the S&P and the VIX indexes to indicate a buy signal. Volatility lost that race today by going down, but the S&P performed as signaled.Friday Mar 8th 2019
Returns Down but ETFs Added Back.
Both the S&P 500 Index and the VIX Index are indicating a buy for Monday morning and that is unusual.
Stocks and volatility usually move in opposite directions and seeing them both indicating buys is not normal.
We agree with some follower requests that we should add back the ETF pairs that we dropped last week for March trading. We replaced 6 of the S&P and Energy pairs to introduce stocks back into the mix based on more previous comments.
This improves the mix and adds back 12 ETF algorithms and keeps all 14 stocks.
The returning ETF pairs will benefit overall returns as they belong to higher performing sectors that were kept in March and all previous groups.
Five stocks are new buys and 2 are new sells. I would like to think this is a preview of future markets, but the first week in March has not been good to us.
It appears to be all-round tough going with volatility taking a big hit. Lots of trades indicated for Monday morning based on our signals and resulting from these 5 down market days.
I was hoping to see success with the new stock group, but high performing stocks are likely to perform worse because we only trade both directions with ETFs.
News on Wednesday of the record high US trade imbalance of $891 Billion was met on Friday with a very small Payroll report for February of only 20,000 jobs. However, the recent tax bill is still benefiting stock buy-backs and earnings reports.Thursday Mar 7th 2019
When You Know Bad News is Coming.
Many of you know much about investing and there is no good reason not to use what you have already learned.
We always trade and log the signals that we send out every evening, but you may have heard the same news that I heard last night and maybe wanted to use it.
While the political news has been telling us that the US trade deficits will go down, the factual news last night told us of the highest record deficit for 2018.
A deficit of $891 Billion for the year, up 12%, breaking previous records and the Dow was down 320 points very quickly.
So, we all had a lesson on tariffs with that late-in-the-day statistic, one which would surely affect the markets at the open today.
With this news in hand, you might have preferred to delay any buys to a later hour, with the plan to place the order later in the day or cancel it altogether.
Our algorithms do not listen to current news and are locked in by 4:00 PM New York time every day. In fact, we use algorithms specifically to ignore fundamental analysis.
My previous self would use any and all previous knowledge of any type and we certainly would use it as individual investors. We just cannot include it in our algorithms as they work on their own set of data, but a gain from anywhere is a gain worth having.
We do have followers whose daytime job is to follow the markets and it would not be the first time we heard that the opening price is not always the best price. It is interesting though to count the days when the opening price is lower, and the closing price ends up much higher.
We have dissected years of trading data and our approach has been to improve the buy-date and the sell-date. On average, we may be too early or too late but over time, we have arrived at much improved short-term trades.Wednesday Mar 6th 2019
Historical Data for Consideration.
Every trade by our algorithms that was published on previous evenings should be found on the Historical Data page.
They go back to when we first traded XIV with algorithms 3 years ago. XIV was a volatility ETF and was removed by Credit Suisse over a year ago.
(blog continues below chart.)
At the start of every month of trading, we list previous trades up until the last trade before the new month.
Of course, we do not publish all current trades except to subscribers but at least we are up-to-date on the first day of every new month.
The removal of XIV forced us to diversify and fortunately, our algorithms could be applied to any products that are traded on various markets.
For a while, we ran a series of ETF products off the London markets, but volumes were low, and buy/sell spreads were very high compared to what we are used to.
It is important to make trades on the first day following the signals that we send out. Studies from our past trades showed that the average return on those first days after a buy signal is greater than 2%.
Followers will also find that following a strict program of inverse pairs trading will involve more trades than they may previously expect. The main reason for this is switching directions and trading both of them.
We highly recommend Interactive Brokers at just $1.00 per trade to anyone, whether you follow us or not. While their site is great for professional investors, it is simple to make specific types of trades such as ours.
We also recommend Tradier Brokerage at $3.49 per trade. This is the simplest of sites and very quick and easy to use. We have no financial relationship with them, but they do offer 60 days or $200 of free trades for new accounts with the code ROEBUCK200.Tuesday Mar 5th 2019
Notes for Investment Junkies.
I am always surprised when I get on to eSignal and see how many times our choices bump up against some of my favorite technical indicators.
Although our algorithms are not related to them, they all somehow rely on historical data and I should not be surprised.
I have reached a degree of satisfaction with eSignal charts and basically have set up 50-day and 200-day moving averages on the price chart.
Below the chart I use MACD for a confirming indicator.
Over many years of trying to make technical analysis work for me, it eventually drove me to designing algorithms and I found more pleasure in doing that.
My problem may have been sticking to a system. There was always a new analysis to study and a new book or seminar to attend whenever my efforts proved not to be fruitful. Also, there were always people I met who seemed to thrive enough to convince me to give it a try.
Like most people, it was my second job and I certainly spent the time and the money to buy the books and attend the seminars. However, I would finally look for that next golden opportunity.
I enjoyed all of it and can see where I was probably more interested in the journey rather than the conclusion and I think that sticking to a good method would have been better in the longer term.
If I could do it all again, I would probably make the same journey, but I do know that the 2 moving averages along with MACD below them, would probably end up being my favorites.Monday Mar 4th 2019
Ranking Changes Every Day.
Our new ranking methods worked ok today, and we are hoping that it improves profits as the month goes by.
The response to more recent profits has historically performed better when it only goes back one month at a time.
We will report on this as a few months go by. Markets rarely repeat themselves, so we must rely on statistical results over time for this to be at its best.
Inverse ETFs have a limited availability, but stocks have few limits.
We hope to improve the selection of stocks to fill the 14 positions we now have. We use statistical recent results and not fundamentals in the same way that we now use a more current ranking system.
There are so many stocks available, but we tend to include only S&P 500 stocks which does include all Dow stocks and many larger issues from other indexes.
Our recent comments and charts showing the dramatic increase in volatility from October through January greatly affects our choices but there always seems to be a good supply of high recent performers.
The saying that stocks slowly climb a wall of worry has historically proved to be beneficial to us. On the other hand, recent above normal volatility helps the profitability of our VIX related pairs. This could be a future signal for followers to switch between our groups.Friday Mar 1st 2019
Volatility - The News and The Markets.
I keep coming back to the VIX Index as I find it both profitable and interesting.
The VIX chart of August 2018 until today tells a story that we all experienced.
(blog continues below chart.)
Look for the hearing of Christine Blasey Ford on October 3 on the attached chart. That was when this latest short story of the VIX Index began. It continued through early December when President H W Bush died and the G20 meeting in Argentina brought Putin and other leaders together again.
At Christmas, we saw the end of James Mattis and the start of a long shutdown.
But then, from Christmas onwards, we see the VIX pairs producing a steady profit. Just maybe, the investing public decided that the daily news was no longer surprising and should now be discounted.
The trend of the VIX was a continuous move towards normality and a return to an average daily value of approximately 14 for the year of 2018.
The Fear Index and the VIX Index are the same Index and fear becomes a normal condition if you live with it for a while.
Given time, we will surely ride the VIX Index back up again when something new comes on the 6 o’clock news. We expect to be in the other side of the volatility pairs when that happens.
Importantly, the VIX inverse pairs do not have the leverage of our other pairs and do not incur the same daily management losses that we expect from anything with a 3x leverage.
The new 1A chart for March includes 12 inverse pairs from 12 different sectors plus 2 pairs related to the VIX Volatility Index. We have also added 14 stocks with high recent price rises and all March charts reflect 30 days of our algorithms since February 4.
We have also included the VIX index and the S&P 500 Index and included our algorithmic signals for both. These can be useful indicators for some followers.
Thursday Feb 28th 2019
Some Information for Followers.
We are getting results from the March selections and we do need to emphasize some suggestions to follow.
Regarding ETFs, we are suggesting that followers limit investments to the top 10 for a couple of reasons.
We are including a copy our 1A chart for today so that followers see what they will receive starting on Monday next.
First, there are only 12 sectors covered by these 100% inverse pairs and any more than 12 would put you in both sides of a pair and you would be neutral or 100% hedged in that sector.
Second, the ranking would put numbers 11 and 12 at the bottom of the daily ranking performance.
The 2 volatility pairs are unique and make a good sector on their own as volatility operates differently from the general markets.
The 2 volatility pairs on their own could make a portfolio for investors seeking less trades. It could also be a hedged portion of any larger portfolio.
The 14 stocks being added in March all have good recent performance and are also individually ranked by our recent performance. They are initially chosen from recent 6-month price performance and are not chosen by any fundamental factors or other input.
Their inclusion is like our recent ‘Best 5 Stocks’ group. A minimum of 5 and a maximum of those with a buy signal should make up a suitable selection short of any personal preferences.Wednesday Feb 27th 2019
Thoughts on March.
When running algorithms for March, it was apparent that there may be another one or two specific sector ETF pairs that have not performed as well as others.
The problem is that you never know ahead of time which ones to rank low before the actual results.
A good example of this is the energy sector which suddenly did extremely well on the bearish side with huge drops in the price of oil. It will probably go back up again but we cannot predict when that will happen right now.
It is also true that the ETFs associated with the S&P-500 are mostly related to a more conservative cross section of stocks whereas China could run up quickly if we eventually get out of this tariff policy now being negotiated.
There is little doubt that longer term trends can be a significant factor and much of that is expected to eventually find its way into the algorithms. The point here is our algorithms by their design, are looking at short-term trends.
Had a question about my blog yesterday regarding my intention to use a flat $2,000 for each successive trade that we will make in the same asset. To clear that up, we run several accounts and the only reason that this cropped up is we are changing our charts to be in date order rather than alphabetical order for each asset. This suggestion has been made and we will see how effective it is.
My personal habit is to divide the daily account value by the number of assets that I decide to invest in that account and use this new value for new buys as needed. The change will not affect our algorithms or the signals that they generate.Tuesday Feb 26th 2019
Our Maximum ETF Investment.
When we invest in the 12 inverse correlated ETF pairs, we never advise buying both sides of any pair at the same time.
Consequently, we only need capital for a maximum of twelve positions in that account if we use all the pairs.
In the past, we have listed trades in alphabetical order and used the proceeds of sales to invest in the next trade of that same asset. This has the effect of increasing our investment in the best performing ETFs.
In March we are changing that method.
We will be using the same $2,000 initial investment but will continue with $2,000 for all trades and will not accumulate profits in later trades of the same asset.
In some of our investment accounts, we act a little differently. When a buy is indicated in an account that may have a maximum of 12 assets, we divide the current whole account value by 12 and use that value to buy the next asset.
Although we do not use margin or borrowed funds for these investments, it is always useful to set up new accounts as margin accounts. This simplifies available cash for trading and solves many delays related to the T+2 days Banking Rule.
We normally used to recommend a minimum of $1,000 in each investment but our experiences with Tradier Brokerage at $3.49 and especially with Interactive Brokers at just $1.00 commission fees, we are moving our recommendation down to $750 per asset.
Strictly from a risk point of view, it is better to increase the quantity of assets rather than invest larger amounts in fewer assets. My own understanding is that once you reach 11 different assets, you are close to a good and manageable quantity and portfolio.Monday Feb 25th 2019
What to Expect in March Algorithms?
Many improvements with the reduction in duplicate inverse ETF pairs down to 14, which includes the 2 volatility pairs.
The only energy pair will be OILU/OILD and the S&P-500 pair will be SPXL/SPXS.
(blog continues below chart.)
A new addition will be 14 high performing stocks ranked on their recent performance. You will now see all ETFs and all stocks ranked every day by their individual profit performance.
We recommend limiting purchases to any of the top 10 of each group plus the top 4 volatility ETFs. All are ranked but number 1 is always the current best.
We have also run 2 Indexes through similar algorithms as useful indicators to be aware of. Day traders may find these helpful. We are returning the VIX Volatility Index and adding the S&P-500 Index at the bottom of the daily 1A chart.
I have previously indicated that due to the early signal design of our algorithms, we find that they work well with leveraged ETFs and eliminate the need to consider each inverse pair together. Consequently, when markets are rising, there will generally be more upward-biased ETFs in the top-10.
The great advantage of 100% inverse pairs will be experienced during down-markets when more downward biased ETFs will automatically be in the top-10. This allows us to profit in both directions.
Using volatility pairs has traditionally been used as a hedge in many portfolios. When the VIX Index goes up, UVXY and VXXB will also go up but when the VIX goes down, SVXY and ZIV will follow it down.
During this current high volatility period, stock picking has introduced more risk, but our volatility algorithms have produced higher profits.
We have updated the start date for calculating current profits to February 4 for our March algorithms. Volatility has trended down to a more normal range and this has encouraged us to re-introduce stocks.
Note that staying with a small quantity of stocks can increase risk due to overnight surprises such as law suits and announcements. These are rare but more dramatic with high performing assets.
Our average trade length has increased with ETFs from a recent low of 5 days and is moving back towards our historical length of about 9 days.Friday Feb 22nd 2019
A Close Look at our Algorithms.
This first hot-off-the-printer back test chart tells the story of why our algorithms work for a wide range of assets and conditions.
This first stock to come off the printer today is Automatic Data Printing from the S&P 500 with the symbol ADP.
We sorted the S&P for the last 12 months for the top 40 gainers and then sorted them in alphabetical order and applied our algorithms to ADP.
The stock gained 32% on its own and we gained 62% by using our algorithms but look at the chart for how we did it.
When dealing with leveraged ETFs, we often boast at the speed that our algorithms get in and out of a trade. Not every trade, but many trades over a reasonable time period. Just look at this stock chart for ADP.
For the first 4 months it gained 20% and so did we, plus a few more percentage points.
For the middle 4 months ADP was on target for another 20% but something bad happened towards the end and we both had close to a 10% correction. This looks like an overnight surprise at first glance and ADP never recovered for the rest of the year.
However, we managed to double our profits from about 30% up to 60% while ADP fluctuated below its previous high.
The main point of interest here is that when ADP made normal day to day trends with little success, we made the up-trends and avoided the down-trends. Just look at the down-trend in Oct/Nov for ADP and notice that we flatlined and held cash for most of that period.
Also important to mention is this would be done with 25 trades which would cost a total of $25 with an Interactive Broker account or $87 with Tradier Brokerage.
There are always many examples every month when we publish our complete set of new charts for that month.
Sure, we are not perfect in every case but a portfolio of 5 to 11 assets is a portfolio worth having and achieves my original two goals from 8 years ago: -
1. Eliminate stock picking and
2. Choose better Buy and Sell dates.
Thursday Feb 21st 2019
Duplicates Taking Up Space.
We used to warn followers about taking positions in duplicate sectors with our attention based on finding enough pairs to meet our requirements.
Volume was and still is a consideration, but a fresh look tells us that duplicates are probably no longer beneficial.
We have 5 energy pairs that pretty much represent the price of oil when 1 would be enough to do that job.
We also have 3 S&P-500 pairs that also could be handled by a single pair rather than all 3. Having duplicates can increase risk when balancing a portfolio.
This started when we emphasized our selection on professional portfolio managers, and we realized that 60% was often created from S&P types of stocks so that close duplicates seemed appropriate.
By eliminating 4 energy pairs and 2 S&P-500 pairs, we make space for 12 others but taking advantage of the elimination of duplicates does not produce replacement pairs that we can use.
However, it does make sense to fill these spots with alternatives and this is where we can provide a better service by bringing back some alternative investments.
Getting back into volatility proved to be a good decision as recent market behavior has shown. The VIX Index has produced 2 pairs that have taken over the top position and they may stay there for a while.
Looking back at the performance of stocks, it was not always good, but it seems that law suits and other corporate news was not helpful. With some minor improvements, we think that a wider selection may be needed, and we are looking at those 12 available spots.Wednesday Feb 20th 2019
Seeking Less Volatility but More ETFs.
Asjylyn Loder in The Wall Street Journal today noted that investors are escaping volatility by choosing ‘Smart’ ETFs.
Apparently, these are ETFs that invest in less volatile stocks and would typically include S&P 500-type stocks.
It seems that this recent volatility is causing all types of investors to have a degree of concern.
In ‘Investment Europe’, there is news of an increase in the ETF market of 7% in January over December which further confirms the continued growth and interest in this relatively new asset.
Leveraged ETFs normally have enough volatility of their own without help from the news cycle. This leverage comes from the options and time-value used to create the leverage every day and will increase and decrease with daily volatility issues.
A climate of high volatility over a period will affect the percentage of time-value and volatility assigned to the leverage and will increase or decline from the start to the end of the volatile period.
Due to re-balancing the ETFs in order to maintain the leverage every day, the value becomes a less precise quantity, and has reduced the length of our average trades by about one third.
On the bright side is the increase in profitability of our 2 volatility pairs even though they do not carry the same 3x leverage of most of our pairs.
This is a good example of why they are considered for hedging portfolios of traditional stocks.Tuesday Feb 19th 2019
Trade Length Could Affect March.
I talked about how many days we average in a trade yesterday and it may bring about some changes when we start the new month in March or April.
We normally start getting serious about changes for the next month about this time.
After constantly checking and re-checking the algorithms and charts for improvements, this shorter trade length does present some opportunities.
It may be that stock trading could be re-introduced back into the system but with some definite changes.
Reducing risk has always been a main goal since the early days and the speed of the algorithms getting in and out of positions has been excellent.
However, it presents a difference when dealing with the 3x leveraged ETFs or with plain vanilla stocks that generally move much slower.
We do have some tests going and will report on them.
Meanwhile the Best 5 and Best 10 groups have switched positions as far as performance is concerned but volatility-based pairs with minor leverage continue to perform well.Sunday Feb 17th 2019
Trade Lengths Make a Difference.
One of the side effects of this period of volatile news and volatile markets has been the reduction in our trade length.
Since December 1, 2018 the average number of calendar days in regular ETF trade-days has been 5 days. Volatility trades have been 6 days.
This is considerably different to earlier pre-December ETF trades which averaged out to be 9 days.
We do not plan on changing the algorithms due to this as they have been back-tested for many years and need to operate in all investment climates.
We are looking at different ways to make some general decisions because the most beneficial aspect to our algorithms is their speed at taking a decision.
This perhaps defies the above statements because the current shortened trade length appears to lessen the results.
However, our results are still far superior to any random buy and hold strategy such as the S&P 500 stocks. Many followers will recall the results pre-October 2018, when annual returns were at levels that may seem impossible to achieve.
I have often mentioned my goal of getting away from stock picking. The consequential idea of matching professionally selected world-wide investment portfolios came from this concept.
The challenge now is that our algorithms, as applied to 100% inversely available ETF trading, has overcome the need and ability to be a good stock picker with one small difference.
There are only relatively few inverse ETFs to choose from and we are now looking at ways to rank them in different ways.
Taking this one step further, it is likely profitable to return to a current selection of well performing stocks each month; maybe 10-15 of them. The difference then would be staying in cash on the downtrends and therefore being invested less of the time.
Alternatively, a backup set of stocks or investments could be found to move into, when some of the 10-15 stock picks go negative.
Another alternative would be to manage the money available and increase the investment in new or current buys, therefore being invested profitably in the down-days by compounding your account into the up-days.
Another opportunity to balance risk against profit? - There is always a better way!Thursday Feb 14th 2019
Charts Updated - No Blog Tonight.
(blog continues below chart.)
Wednesday Feb 13th 2019
Volatility Pairs and Risk.
The VIX Volatility Index is worth keeping in mind as an alternative investment source and our pairs are doing well in recent performance.
Both pairs were in the top 10 at the start of February and were in positions 3 and 9. They are currently in positions 1 and 10 and we buy ZIV tomorrow.
UVXY/SVXY and VXXB/ZIV have produced over 50% of annual profit in 75 days and are outperforming other groups at the present time.
This is part of their advantage to act as a hedge against holding stocks and funds.
These volatility pairs are not without risk themselves and as markets trend up, they will lose some of their positive performance.
The bearish or short side of pairs carry their own pricing risk if volatility shoots up quickly and SVXY has negative leverage to reflect this. The prospectuses for all ETFs can generally be found online for background review.
The Energy sector of 5 pairs represents 25% of the total 20 inverse pairs that we follow and has been particularly volatile since October. Some of the bearish sides gained 70%-80% of their value while the opposite bullish side made equal losses.
These leveraged ETFs in conjunction with the extremely high volatility over the same time period have created severe tests for pairs trading. We continue to recommend a portfolio of pairs from different sectors to balance risk.
Since the latest groups were started this year, the S&P 500 has gone nowhere except up and down with the volatile news cycles. Selecting the length of time to remain in leveraged trades is always going to depend on future conditions but our history of trading both directions with inverse pairs and short-term algorithms remains profitableTuesday Feb 12th 2019
Some Statistical Research May Help.
We have way too many numbers to sort through but some of them may be useful if you are a numbers-type person.
As we run our algorithms every day, we see some trends which repeat but are not permanent.
An example of this is the potential profit indicated from both sides of each pair.
There are 6 pairs that show almost equal potential from both the bullish side and the bearish side of the pair. The current 6 are EDC/EDZ, ERX/ERY, TECL/TECS, TMF/TMV, TQQQ/SQQQ and VXXB/ZIV.
On the other end of the scale, there are 5 pairs that show the widest potential profit from one side versus the other side. These 5 are GUSH/DRIP, LABU/LABD, OILU/OILD, SOXL/SOXS and UWT/DWT.
We make no predictions from this current data but continue to delve into it to see if benefits can be gained.
One of my priorities has been to reduce risk. We constantly are relying on the speed of our algorithms to switch between bullish and bearish conditions with enough accuracy to continuously show a profit.
Our algorithms have so far given this result.
1. We are investing in both directions with 100% inversely correlated ETFs.
2. Our invested trade length is less than 10 calendar days which allows us to trade in 3x leveraged pairs.
3. There are only about 20 pairs that meet our goals as well as having enough volume.
4. There is a wide range of ETFs within sectors and indexes to create wide ranged portfolios from fixed income to very volatile narrow sectors.
The net result of this combination in conjunction with inversely correlated pairs, demonstrates we can invest in up or down markets all year round. We also reduce overall risk by rapidly changing directions with current markets and can reduce risk further by selecting a portfolio from different sectors or indexes.Monday Feb 11th 2019
A Lot of Selling and Cash.
It seems that selling is in vogue recently as we only have one position in the Best 5 and a total of three in the Best 10.
Out of 20 pairs, we only have nine positions of which 6 are bullish and 3 are on the bearish side of pairs.
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Four of the 5 Energy pairs are in cash as well as both volatility pairs and two of the 3 S&P 500 related group are bullish with one in cash.
Last week we showed the VIX Volatility Index chart to emphasize how active it has been, but we have nothing else to go by but the cash positions.
It is telling us that the algorithms are un-decided in many areas and that alone could be a good thing as it preserves cash.
It is also saying trends are hard to come by today so we should wait and see which way to go.Sunday Feb 10th 2019
Pairs Trading and Pairs of Algorithms.
I think the first joke I understood as a child was “What goes up when it comes down”? – Umbrellas.
A better example might be “What is open when it is closed and closed when it is open” – A Railway crossing.
There is something in these examples that reflects 100% inversely correlated pairs trading but there are also some differences.
Investments seem to go down faster than they go up and volatility goes up faster than it comes down. That maybe why the VIX is called the FEAR index.
100% inversely correlated pairs tell us that if one side goes up 10%, the other side will go down 10% and if you look at the results for one day of trading, it will appear close to being true. But then, the ETFs are re-balanced after each day of trading and it gets worse from there.
If you invest $100 and your stock goes up 10%, you will be worth $110 but if that stock then proceeds to go down 10%, you will only be worth $99. That is probably where the words Fuzzy Math came from.
Fear and risk are reflected in prices that produce the investment phenomenon. You can see the differences in the length of time that our algorithms remain in bullish ETFs as compared to bearish ETFs. The profits also average higher in the bullish ETFs than in the bearish ETFs.
However, daily management and re-balancing costs are pretty much equal for both sides of each pair.
So, inverse algorithms must invest in the opposite direction as fast as a reversal occurs, but on the second day and thereafter, they must consider whether they are going up or going down.Thursday Feb 7th 2019
Looking at Portfolios.
A good reminder today about long and short-term portfolio choices and ETFs.
One of the first ETFs that matched the S&P 500 was the SPY, also known as Spiders or SPDR’s or more completely, S&P Depository Receipts.
Following are the annual back-tests for 2 sets of S&P 500 pairs. First the 2x leveraged SSO and SDS and after that, the 3x leveraged SPXL and SPXS. You can see that we generally stayed out of the downward trending inverse ETFs with the symbols SDS and SPXS when the S&P 500 Index was moving up.
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If you want to follow a broad range of industries and sectors, this index has returned a 9.8% annual return for the past 90 years, from 1928 to 2016 according to CNBC and LPL Financial.
Long-term investors like this return together with the diversity that it represents for their portfolios.
We follow several S&P 500 ETFs that have the leverage and have performed better than 3x the SPY return with some help. The leveraged ETFs move at faster daily rates but daily re-balancing is necessary which involves considerable cost.
There are two methods we use to take advantage of the extra leverage and to reduce the re-balancing cost for us to produce this potential extra return.
First, we trade the shorter trends within the S&P movement, which avoids much of the longer-term re-balancing cost by using algorithms to pick and choose the trends.
Second, by selecting ETFs that have 100% inversely correlated partners, we invest in the up-trends, but we also switch sides and invest in the down-trends. This is made possible by our algorithms that reduce the average holding period to less than 10 days in either direction.
It is these two benefits that create the returns that you can experience by following our pre-published Buy and Sell signals each evening. You can try the 30-Day Free Trial and paper trade for a month.
We only signal one direction at a time, but you will be trading much of the year. You are usually invested whether markets are going up or going down.
You can also choose other sectors from our range of 20 inversely correlated ETF pairs, including 2 volatility pairs related to the VIX Volatility Index.Wednesday Feb 6th 2019
A Typical Annual Back-Test.
Here is a sample of a 1 year back-test for EDC, the bullish side of the Emerging Markets inverse pair. Our back-test results are in green.
Starting in February 2018, you can see that it tends to profit from trades where the normal price performance is slowly moving up in February.
It does this by taking advantage of short-term upward trends and getting out of short-term downward trends.
By early in October it was up about 25% while EDC was down about 50%.
Next, it took a few days where we went down to about 5% profit and recovered in a short time. EDC stayed flat at about a 50% loss until the end of November while we went back up again to about a 35% profit.
EDC then recovered some of its loss to about a 35% loss until today. We proceeded up to about an 80% profit for the complete year.
I chose this pair because we now must look at the next inverse ETF known as EDZ which tells almost the opposite story. From a start a year ago, EDZ had a steady ride upwards until the end of October where it topped out at about 50% profit whereas we topped out at about 180% profit.
The last 3 months were a different story and EDC lost everything, going back to 0% where it started the year and we went back to about 100% profit for the year.
Now comes the advantage of 100% inversely correlated pairs trading.
Add them both together and the back-test indicates a potential profit of 80% plus 100% for a pairs total of 180% profit for the year after a total of 148 total trades or 74 round trades. At Interactive Brokers, this would cost $148 commission or at Tradier Brokers it would cost $516.
There are no guarantees for this kind of profit but because we trade both directions, there is very good potential that no matter which way the market goes, we will do OK.
Tuesday Feb 5th 2019
Looking at Trading ETF Pairs.
Each pair of ETFs have a bullish ETF and a bearish ETF which move in opposite directions.
You can buy either side of the pair depending on which direction you think it will go. You can also switch directions when you think it will go in the opposite direction.
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You only buy one side at a time and stay in cash if you are not sure which direction is most likely tomorrow.
The ETFs pairs we trade are leveraged 3x and are about 100% inversely correlated.
Our algorithms are designed to signal which side of each ETF pair is likely to go up tomorrow. By following the signals, we buy the side going up and stay with it until we get a sell signal.
We never own both sides of any pair and we stay in cash if the algorithms cannot decide on the direction.
The average length of each trade is less than 10 calendar days and the first day of ownership is usually higher than the succeeding days.
There are only about 20 of these inverse pairs with enough volume. We rank them by their performance during the previous month. We then list the best 5 and the best 10 pairs along with 2 specialty volatility pairs that are based on the VIX Volatility Index.
All pairs are based on large indexes or sectors that offer a balance of investments.Monday Feb 4th 2019
Facts about Inverse Leveraged Pairs Trading.
Our top performing ETF pair in the February groups will be TECL and TECS which represents the Technology Sector.
TECL is long technology and TECS is short technology. One advantage is the elimination of short-selling. You just buy whichever side you prefer - Up or Down.
Also, these pairs move up and down 3x faster than their underlying assets.
If the technology sector goes up 3% tomorrow and you own TECL, you will make about 9% and if you own TECS, you will lose about 9%.
The disadvantages of owning leveraged ETFs are variously described as daily re-balancing cost, decay, management cost, high volatility cost and several others which Google will supply.
They are used mainly to warn potential investors that long term holding of leveraged ETFs is a bad idea and we entirely agree.
Over the past several years, our trades have averaged less than 10 calendar days from the day you buy to the day you sell.
If you imagine that an ETF worth $100 loses its entire value for a year, due to all the above reasons, our loss for each trade would average 10/365 x $100 or about $2.74 per trade. Even with volatility losses, low losses could be 1/3 as much at $0.91 cents. High losses could be 3 times as much at $8.22 for the entire 10-day trade.
We recommend that each pair should be traded with a minimum capital of about $1,000, which puts these high-end losses at about $8.22 for each $1,000 dollars traded or less than 1%. We use two different brokers at $1.00 and $3.49 per trade so you can add $2.00 or $6.98 for each round trade to the above losses.
This puts our maximum loss in the range of $8.22 decay plus $6.98 commission for a total of $15.22 per $1,000 trade or a maximum of 1 1/2 percent. You can see from our Historical Data page that our profit potentials are well above these costs with annual ranges in the 50% to 150% annual profits which includes decay costs but does not include commissions.Saturday Feb 2nd 2019
Preview of new Sunday night 1A signal chart.
These will be the groups for February trading. Monday's trades will be distributed to followers as usual on Sunday evening.
Friday Feb 1st 2019
Some Maintenance Facts to Know.
VXX was replaced after 10 years by VXXB which is good for 30 more years. The ETF prospectus ran out and it had to be renewed.
The all new February groups are now in effect and you may want to hold any January Best 5 ETFs until they get a SELL signal before replacing them with the any of the new February Best 5.
(blog continues below chart.)
The new February Best 10 replaces the old Investment Manager 10 Pairs. All 20 pairs are listed in rank order for current profits. No changes in these groups will be made until March 1, 2019.
Recall that the evidence in recent years trading these inverse pairs using our short-term algorithms has easily overtaken many single direction portfolios. The new Best 10 group has the potential for greater returns with less risk.
If you are following your own lists of inverse pairs, you may want to consider the new ranks for February. Most changes were caused by the unusual continuation of high volatility and it looks like it may continue this month.
The high volatility has created an opportunity for very small tweaks in the algorithms and we continue to monitor them each day. We hope the new 1A chart is more helpful in creating your own group to follow.
We no longer limit the inclusion of duplicate ETFs in our groups when they belong to the same sector. However, it can reduce volatility and risk by selecting a range of sectors.
Thanks for your continued interest in these 100% inverse pairs.Thursday Jan 31st 2019
January Stayed Bullish all Month.
All bullish sides of our inverse pairs had a great month by themselves except for 20-year bonds and volatility.
Bonds often move down when stocks move up, so that makes perfect sense and the VIX Volatility Index also moves down when markets are happy.
So, why did we miss such a positive month?
Most likely, the large number of these one- and two-day reversals which do not align with our signals.
We did get a higher number of sell signals for tomorrow and the new February charts will publish on Sunday evening. That will list the new groups and ranking for February trading.
The newest group will replace the Investment Manager series with a Best 10 group, which would have less risk than the Best 5. These 10 ETFs will include the Best 5 plus the next 5 current high performers.
The 2 Volatility pairs will remain as before. We look forward to the February trading and I do want to emphasize a recent comment about 100% inverse pairs.
There are only between 20 and 25 worthwhile inverse 3x leveraged pairs to choose from and it makes sense that we work with all of them. About half of them are either major stock indexes moving slower than average or energy sector which has been moving faster.
Our experience in recent years is that individual volume has significantly increased but new issues are slow to achieve enough volume for us to be able to offer.Wednesday Jan 30th 2019
February ETFs Will be Chosen Tomorrow.
We will have several changes for February and will publish them this weekend. We need extra time at the start of each month in order to line up our changes and a weekend gives us that time.
I already mentioned the replacement of the Investment Manager group as it has become an obsolete method to select which inverse ETF pairs to select.
You will remember that 100% inverse pairs trading has many benefits, and these include the reduction in medium term risk from trading both directions.
This risk reduction outweighs the previous benefit of a professionally selected portfolio that we first used. Now it is more important to look at the makeup of each ETF pair and match it to our algorithms.
Each time we make a change, I realize that some followers may be disappointed, but we need to keep following any progress that we can make.
Today the Feds did not raise interest rates and the expectation is for higher markets. That was why they went up today. Our algorithms also seemed to recognize the change judging by the buy backs tomorrow morning.Tuesday Jan 29th 2019
The Good, the Bad and the Ugly.
The concept of trading 100% inverse ETFs and using algorithms to buy and sell them is new, although short-sellers most likely used some form of technical analysis to reverse their position.
The good can be characterized in several ways and 100% inverse movement with our ability to choose the direction is a definite bonus. No short-selling needed.
The good is also the range of movement from no leverage to 3x leverage for the same underlying asset.
In fact, the good is most likely still to be fully appreciated and developed.
The bad is the short-term history of the concept but we do appreciate all the comments that we get from followers. We come with inquisitive minds as well as some experience and our group continue to enjoy the process.
As with most technical analysis, instant news can be difficult to deal with for any investor and especially when financial news has become a 24-hour event.
Political news has become the more difficult factor as it is often instant and often not predicted.
Going back to October 2 of last year, the VIX Volatility Index entered a phase rarely seen on a continuous basis. The current range produces larger movements in both directions but also increases the time-value of futures and options that have fixed expiration dates and becomes a larger daily loss.
Triple leveraged and inversely correlated ETFs encompasses the good prospects for potential profits and also the bad daily losses from time-value at different leverages.
But they can be ugly when you select a single sector. Do not select multiple energy-based ETF pairs, unless you enjoy going to Casinos. Twenty percent moves are often seen and are often intra-day surprises.
To avoid ugly, is to select 3 to 5 minimum diverse sectors that can be jointly profitable by using algorithms to get in and out quickly. Remember, there is a small supply of these 3x leveraged ETFs to work with at the present time.Monday Jan 28th 2019
There is Always a Better Way - 2.
For those who watched us improve our signals for a few years, you know we are constantly looking for that better way.
You will see more changes soon and some of them may surprise you. Eight years ago, the goal was to improve stock picking and stock timing.
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Picking has meant following trends into Exchange Traded Funds and timing has meant using mathematical algorithms to trade 100% inversely correlated ETF Pairs.
We then created a better way by publishing our Investment Manager Portfolio which correlated about 90% with a series of 10 plain vanilla ETFs. Together they emulated several large multi-trillion account manager portfolios and updated along with their monthly statements.
We quickly found that our algorithms, which were designed for short-term trades of less than 10 days on average, could also work more profitably with highly leveraged ETFs. This capability could take advantage of short-term ownership which cancels out the large daily management costs that typically exist with leveraged ETFs.
The later introduction of 100% Inversely Correlated ETFs has now pushed us into even greater profit areas. Our algorithms now can give us profits from ETF Pairs, by switching sides to remain mostly in a profitable direction.
When one side of the pair is going up, we make profits, and when it goes down, we switch and trade the inverse side for additional profits. We have the potential to be invested almost all year-round, making profits from whichever side of these inverse pairs is currently going up in value.
We no longer need the old concept of selling-short in order to profit from downside moves.
So where do we go from here? Stock Picking for us has been overtaken by Pairs Picking and Pairs Timing. We are now taking advantage of always seeking the better way, but this eliminates what we started with eight years ago.
We no longer need to match Professional Investment Manager Portfolios. The progression into inverse pairs trading has overtaken stock picking mostly with our ability to trade profitably in both directions.
What we are doing now is Ranking ETF Pairs Trading into a portfolio that has the greater potential. Doing it with inversely leveraged pairs has replaced our Investment Manager selections which have a lower priority today.
Volatility remains a favorite sector due to its partial hedging ability in any portfolio as well as the different timing.Sunday Jan 27th 2019
Daily Profit from Leveraged PAIRS.
The bullish and bearish sides of each leveraged ETF pair move up and down every day by an equal percentage.
So, we must select the side with the greatest upside potential for tomorrow.
We also must hold positions for a short number of days, to avoid the daily management costs that provide the greater leveraged profit.
At Roebuck Systems, we produce algorithms that tell you which side has the greatest potential for tomorrow.
That is this new trading method called: - Inversely Correlated Pairs Trading.
The advantage is the ability to profit in both directions, rather than only buying on the way up. Hopefully, you would be holding cash on the way down.
We produce mathematical algorithms every day that give you precise signals, telling you which side of the pairs has the greatest potential for tomorrow. We then distribute these to our followers each evening.
At your convenience, you simply place orders for an opening trade tomorrow.
1 Buy one side of the pair.
2 Stay with previous position.
3 Switch to the opposite side of the pair.
4 Sell current position and hold cash.
You can select as many pairs as you like and invest about $1,000 or more in each pair. We recommend a minimum of 3 pairs in different sectors.
We use a ranking system based on recent performance and currently maintain a daily list of 20 inverse pairs with high volume that meet or exceed our daily requirements.
For trading, we also recommend Interactive Brokers with a $1.00 trade commission or Tradier Brokers with $3.49 commission. We use these brokers ourselves because of lower commissions and good service.
Note that we do not have any financial arrangements with either of these brokers. Tradier has a new account offer of $200- or 60-days free trading.Thursday Jan 24th 2019
4 Indexes Have Inside Days Today.
5 minutes before the market close today the S&P, Dow, Nasdaq and Russel all were having inside days today.
That means all highs and lows were within those for the previous day.
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I know that we are going to run the algorithms after the market closes today when we totally ignore everything I used to look at for many years.
Inside days are thought to be when prices take a breather after a trend, but they like significant primary trends to be most predictive. Even then, they get a little fuzzy as to which direction to go.
A major problem is deciding which technical analysis method is going to be decisive today.
It is important to know the original strategy by the person who devised it. Improvements and variations are out there, along with various interpretations and combinations.
Having tried many of these methods, the move to warrants and options promises greater movement along with greater profit and lots more excitement.
If this does little to sustain profits, a move into futures and commodities could work out. There are accounts managed by expert brokers if time is a limiting factor.
That is when and how consistency became my own goal and mathematical algorithms became my solution. GIGO is the key concept here – Garbage IN, Garbage OUT.
So, we use algorithms that consistently follow the same principles and make the same boring decisions every day.
However, that does not stop me from old habits and I personally like 50-day and 200-day moving averages on the chart and MACD below it. After all, judgement is important when investing.
Final thought - one indicator that had an UP-day was Emerging Markets, so the risky end of the spectrum was alive and well. Also, surprisingly, 19 out of 20 algorithm pairs are bullish for tomorrow except one volatility pair that is undecided.Wednesday Jan 23rd 2019
How are Investment Managers Doing?
Investment Managers Portfolios are doing ok but struggling to deal with this volatility.
Volatility investors are doing very well, as you can see from our algorithm groups on Chart 3X.
I have mentioned previously that the CBOE Volatility Index serves as a hedging vehicle for many professionals and our recent results seem to back that up.
I used to like trading XIV before it was removed by Credit Suisse, but our current Volatility Pairs are doing well.
I added the special notice chart to the blog yesterday to demonstrate how wide the concern is for economies around the world. Some of my relatives in the UK are really concerned as the British have difficulty seeing what lies ahead.
Perhaps the Best 5 Pairs next month should include both volatility pairs but that would go against our recent decision to avoid duplicate sectors in that high-performance group.
One idea during these times might be to take the top 3 ETF pairs in January and add both volatility pairs to make up a hedged portfolio.
Even though we trade both directions, investing still requires management and judgment. If you see difficult times ahead, it will surely mean continued volatility for that Index.
I am slowly talking myself into doing that for February. I do not see resolution to anything suddenly changing the outlook within the next 30-60 days. However, I will wait for the end of January to make the decision.Tuesday Jan 22nd 2019
Special Notice + How to Handle IRAs.
Political and significant news events change the day-to-day market volatility.
The BREXIT collapse and the tariff effects in China and the USA, as well as our own political daily uncertainties are creating these circumstances.
The following chart from Bloomberg showing the Global Economic Policy Uncertainty Index should be considered by all investors.
IRA Accounts - I have used my accounts as test vehicles for many years, but tax-sheltered accounts can bump up against the Trade +2Day banking rules (T+2).
A good way to minimize this problem is to upgrade your IRA account to a Limited Margin IRA Account. You will not be able to use margin, but it will help your available trading balance.
Each evening, I like to place all SELL orders first before placing the new BUY orders.
I then divide the current account value by the number of pairs that I am following to determine the value and quantity for each new ETF that I need to BUY.
If I am trading 5 pairs in this account, I always like to leave about 1% or 2% of cash when placing the last of my positions. This allows for changing prices at the market open and avoids cancellations for insufficient funds.
After the markets open, I try to check in just to see if all orders were completed. I can then replace them if an unexpected price or event occurred. Overnight broker maintenance can occasionally cancel pre-placed orders.
Even with these considerations, if you are selling an ETF from having a full house of pairs and with a limit of funds available for trading, you will have no choice but to wait for funds in order to place orders.
We do stipulate that it is best to place all orders to Buy or Sell on the first day that the signal changes, but there are events that cause you to miss a day or two and you will still be correct to place late trades.
A good example of this is when you first begin trading our signals. It is best to place all buy signals, even though they may not be a first-day signal.Friday Jan 18th 2019
FREE TRIALS Receive Complete System.
By reading the previous 2 days of this Blog, you will know what to do when you follow our algorithms.
The Chart 3X shows how well you could have done since December 1.
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This is as simple as it is new and small investments have huge potential profits.
I am showing you our Chart 1A below, which you receive each evening.
There are instructions at the bottom but I want to explain it in more detail so you can better see exactly how simple it is to follow our algorithms each day.
If there is a -T- on the green border in front of the first column, that tells you exactly what to Buy or Sell at the next trading day open. Ignore everything else.
There are a limited number of these inversely correlated ETF pairs.
ETF or ETN stands for Exchange Traded Funds or Exchange Traded Notes and in many ways, they replace Mutual Funds.
The benefit that we use is their ability to create 2 Funds that move in opposite directions at the same time. This is extremely beneficial but very much overlooked.
This is done by using Call Options for the bullish ETF and Put Options for the bearish ETF. This creates 2 separate ETFs that move in exactly opposite directions every time a trade is made. Sounds impossible? Yes, but that is exactly what they do and here is an example.
We can use the S&P 500 Index to demonstrate.
SPXL is the trading symbol for the bullish ETF and it represents all 500 stocks and moves up when the Index moves up.
SPXS is the symbol for the bearish ETF which also represents all 500 stocks but if the Index trades up, SPXS will trade down, exactly opposite to its partner SPXL. In fact, if SPXL (long) goes up 2%, then SPXS (short) goes down -2%.
Several Companies create this booming world-wide industry, which is quickly overtaking Mutual Funds, and Direxion is responsible for this pair of ETFs.
Here is an advantage of ETFs.
This pair of ETFs is leveraged three times (3x). Each day, they are re-balanced to produce 3x the movement of the underlying asset. In this case, if the S&P 500 Index moves up 1%, then SPXL will move up about 3%, and SPXS will move down about 3%.
WOW! If you knew which direction the S&P 500 Index was going to go each day, you could triple your profits when it goes up and triple your profits again when it goes down. That is why we say we profit in both directions.
There is a disadvantage.
Because these leveraged ETFs are re-balanced each day by using Put and Call Options, there is a small cost each day. These ETFs are not designed for long term investments and the shorter time is better to avoid this cost.
Here are the two keys to our unique algorithms and signals.
First, they are uniquely designed for each pair to determine which direction each side is likely to go tomorrow. If both sides say -Sell, then the algorithm is undecided, and you will stay in cash.
When you see the -T- in front of your ETF, that tells you to Buy or Sell at the opening price tomorrow. If there is a -T- in front of both sides of any pair, you will be switching sides by selling the one that you already own and buying the other.
Secondly, the average holding time for each trade is less than 10 calendar days.Thursday Jan 17th 2019
After Choosing from Our ETFs.
Maybe you have chosen our 2 Volatility pairs or our 5 Best Monthly ETFs, or our conservative 10 Investment Manager ETF Pairs. You can select any of the 20 pairs that you receive each evening.
Note that we recommend that you select no more than 10 of the top ranked pairs with no duplicate sectors.
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The reasons for our recommendations are that not all ETF inverse pairs are equal. Also, Energy ETFs often refer to the unique price of oil or gas and duplicating this group can cause much higher price movements or volatility.
Your second decision is how much to invest, and we have some good general rules for you. Mainly we recommend a minimum of approximately $1,000 for each pair and second, is a minimum of 3 pairs except for the 2 Volatility Pairs which have minimal leverage.
We strongly recommend that you use the up-to-date ranking system seen each evening and stay with your choices for a few weeks or more.
Now you are almost ready to trade. One aspect of trading these inversely correlated ETF pairs is you tend to do a few more trades because you are almost always in the market and brokerage commissions can be important. We use 2 recommended but different styles of brokers.
The cheapest commissions are at Interactive Brokers at $1.00 per trade. They are a world-wide broker with a more-complicated and wider range of trading opportunities.
The simplest is Tradier Brokers at $3.49 per trade. Their website is easy to operate and cheaper than most. We have no financial benefits from any brokers but Tradier does offer $200 or 60-days of free trades to new accounts using the code ROEBUCK200. This is for their own marketing purposes.
We do recommend you try our 30-day free trial and paper-trade for a while. You will get used to the signals and trading information that we send out every evening.
The day you see a capital -T- next to one of your ETFs, is the day you need to place an order to Buy or Sell at the following Market Opening price. A - MARKET - order or a - MARKET AT OPENING - order are the usual instructions anytime after markets close and before they open on the next trading day.
A note here is that Interactive Brokers require orders be placed after Extended Hours trading which is 8:00 PM Eastern time. Under Order Type select MKT and under TIF select OPG. This can be confusing because their instructions do not mention this.
By following these few steps and joining our list of happy followers, you will be at the forefront of this entirely new way of investing. While the daily volatility may be higher than normal, the risk is minimized by trading leveraged and inversely correlated pairs in both up and down directions.Wednesday Jan 16th 2019
How to Follow Our Trades?
First you need to select which ETF Pairs you want to follow. That could be: -
1 Your choice from the 20 ranked pairs.
2 The 2 Volatility Pairs.
3 The 5 Best Pairs from last month.
4 The 10 Investment Manager Pairs.
(blog continues below chart.)
Ranks and Sectors are important to consider. Otherwise choose one of our groups. Risk is greatly minimized by trading inverse pairs with proven signals and avoiding duplicate sectors.
Do not trade more than 10 Pairs and be sure they represent your specific goal.Risk and Inverse Pairs.
Our algorithms have historically demonstrated their ability to correctly enter and exit trades in an average of less than 10 calendar days. This short-term feature becomes valuable when dealing with 3x leveraged ETF pairs.
The benefit of inverse pairs is you are always trading an asset that is expected to go up by simply switching between the bullish and bearish sides of each pair. You just follow our buy or sell signals to maintain trends with no need for short-selling.
If the direction is undecided, you will remain in cash until a decision and signal to BUY is made. You will never be in both sides of a pair and should divide your investment by the number of pairs that you decide to follow.
The algorithms will get you out of negative trends by switching sides into the opposing side of the pair. As our algorithms are constantly searching for the positive and upward movement, both bullish and bearish trends become profitable UPWARD trends.
Making a profit in all trends, whether they are up or down, using inversely correlated ETF pairs and our algorithms have the benefit of reducing risk levels and improve the potential for short- and long-term profits.
Daily movements will be larger due to the 3x leverage, but we think the potential for short to longer term profits are well demonstrated by our approximate 3 years of published results.Tuesday Jan 15th 2019
How Often We Trade.
Since we started a new round of trading groups on Dec 1, 2018, we have recommended 139 completed round trades plus 19 open trades.
That is a total of 297 total trades for 40 ETFs within 46 calendar days.
That is 7.4 trades per ETF and about 2.5 trades per market open day if you took every signal on every ETF, which we do NOT recommend.
We use 2 different brokers for our own accounts and can recommend either of them. They both offer orders at the following day market opening price.
The largest group that we recommend, and follow is the Investment Manager group, which offers a range of 10 pairs of ETFs that largely correlate with professionally managed and selected world-wide portfolios, including fixed income.
This group has 55 round trades with 9 open trades totaling 119 for the same 46 days and just 20 ETFs. This suggests 6 trades per ETF and less than 2 trades per market opening day. They are placed at your convenience before the next market opening.
Chart 3x lists the average monthly round trades for each of the 3 groups that we currently follow publicly, and the Best 5 ETF Pairs includes the top ranked pairs for the previous month but avoids duplicate sectors.
In 2019, we have started reporting and ranking each pair of ETFs because of many differences that occur between them.
Some extreme differences can be seen between URTY/SRTY which represent 2,000 stocks covering wide ranges of operations and the 2 pairs of ETFs representing different aspects of the VIX Volatility Index, mostly with no leverage.
Through the years of research, we can see that additional benefits may be generated through our ranking system and these benefits may well have positive effects on our decisions.Monday Jan 14th 2019
Because Inverse ETFs are New . . . .
Inversely correlated ETF pairs represent a completely new way of investing and here is how they do it.
Many years ago, companies bought a range of stocks and created a Mutual Fund so that investors could hold a collection of stocks with a single buy.
Along came Options on stocks which increased movement and risk resulting in the ability to add Leverage to the movement of stocks.
Finally came ETFs which are generally more cost effective than Mutual Funds and have quickly become preferred.
Mutual Funds have annual management and load fees that can generally range from 2% to 8%, whereas ETFs are usually less than 1% per year.
ETFs can represent stocks or assets in almost any sector that you like to follow but they have developed the ability to replace a stock with its options.
With heavy use of computers, they can add leverage or additional movement to those underlying stocks and by re-balancing the quantity and range of options every night, the ETF can have a pre-determined amount of leverage at the opening price every day.
Options traders know that there are Call Options for investors who think the stock is going up and there are Put Options for investors who think the stock is going down.
Both can be used by ETF producers and this is the secret sauce that creates ETF INVERSE PAIRS that move in the exact opposite Bullish and Bearish directions.
(blog continues below chart.)
Consider the S&P 500 Index. If you are confident that this Index is going up tomorrow, you can BUY SPXL, which represents all 500 stocks and will start at the open tomorrow moving UP 3x as much as the Index moves UP. This leverage uses Call Options.
On the other hand, if you are confident that the same Index is going down tomorrow, you can buy SPXS which will start at the open tomorrow moving UP 3x as much as the Index moves DOWN. This leverage uses Put Options and therefore goes UP at 3x the speed that the Index goes DOWN.
By using PUT or CALL options, the same ETF can be produced except that it moves in the exact opposite direction. That is why we have SPXL (Long) and SPXS (Short). If you check the price anytime, you will see that if one of them is up 2%, the other will be down 2%. The other great advantage is there is no short-selling and both sides can be bought just like buying a stock.
Our algorithms are specifically tuned to these high-volume inverse pairs of ETFs and predict which is the potential direction for tomorrow. This tells us which side of the pair to own. When undecided, they will keep us out of BOTH sides and the typical trade is for less than 10 days.
The trades are for relatively short periods because we avoid the management cost of re-balancing the leverage every night.
Friday Jan 11th 2019
We Welcome Questions.
There is little information on trading inversely correlated ETF pairs so please send us questions. It always helps us to explain all the great benefits.
We probably have the first technical trading signals for highly profitable trading of these ETFs and especially for leveraged ETFs with superior profit levels.
Just since Dec 1, while markets have been punishing IRA and 401K accounts, our daily signals have produced profits of up to 11% with annual returns of 97% with REDUCED RISK.
Our instructions and signals are simple and easy to follow for all investors.
These inverse ETFs are relatively new to individual investors, but not new to large international accounts. They are rapidly replacing Mutual Funds as lower cost assets and hedging vehicles.
They replace many Mutual Funds and they trade in pairs in opposite directions. They are bought and sold just like stocks and all you need is their expected direction for tomorrow.
Our algorithms send you that expected direction each evening for the following day and you invest at your leisure without ever having to watch the markets.
Risk is minimized because you get to trade them up as well as down, in both directions and over short periods of time. You can benefit from profits in whichever direction they are currently moving.
With the up and down changing trends, we profit in either direction, and our 3-year record of correctly predicting direction, puts you on the correct side of most trades for an average of less than 10 days for each trade.
When did you last make a profit when your stock went down? You do not have to do any short selling to achieve this strong performance.
Look at our profit charts for various groups during the last 3 years. Every group has made a profit and is pointing up.Thursday Jan 10th 2019
Daily Algorithm Back-Tests.
The attached Algorithm chart shows the results of running them today.
The right-hand column shows you the actual ETF percentage gains over the past year, before using our algorithms.
At the bottom of that same column, you can see the average gain of all 40 ETFs for the year is 2% and below that, there are 20 of them that made a loss for the entire year.
Of course, half of them are Bullish and half are Bearish, and you would expect them to balance out with a small percentage result for the same period.
The middle column shows that after back-testing and using our algorithms, the same ETFs make an average profit of 95% and none of them make a loss. This shows how well they behave when markets change to the opposite direction, no matter if they are a bullish or a bearish ETF.
The worst performance by an ETF with no help from the algorithms was the bullish UWT with a loss of -73% for the year but with the algorithms, a profit of 69%.
The best result by an ETF with help from the algorithms was the bearish DRIP with a profit of 364% for the year but that included a natural profit of 106% without the algorithms.
Why are these numbers significant and what are they telling us?
It is difficult to make assumptions because every market condition for every period is different. The millions of traders act differently every day for each ETF.
We think one of the most significant facts from 8 years of study is that none of the ETFs make a loss with our algorithms during the period and we find this to be true for all reasonable periods.
Another significant feature is the lowest positive result after using the algorithms is for TMV at a positive 13%. But this is not surprising because this is the Bearish side of the 20 Year Treasury Bonds.
We include this TMF/TMV pair of ETF Bonds as part of our Professional Investment Manager group, which needs the availability of a fixed income asset.
When you add the above benefits and features to our investment groups, it demonstrates more fully how well they perform.
(blog continues below chart.)
The application of a well-developed short-term set of algorithms can produce profits from leveraged inversely correlated ETFs that would normally be considered high risk and expensive to own.
Less than 10 days average holding period with historically precise entry and exit signals is the key to all the results.Wednesday Jan 9th 2019
Trading Through Elections.
We have made lots of comments about the political news since October in the USA and around the world.
An early chart that we published on Dec 7 showed how a new volatility range took over on October 4.
Here is the original chart plus an updated chart showing daily volatility increased in December and appears now to be close to recent averages.
Although we have done well over this period, the trade % chart shows that the average profit percentage of our January groups is down to 61% profits.
This percentage has generally ranged from 60% to 70% in the past, showing that while our volatility pairs generally do better in high volatility markets, the other groups pay the price.
61% profits and 39% losses are still acceptable, especially when the S&P 500 has suffered during the same period, but it does help to show the effects on our algorithms.
Over time, volatility tends to go up faster than it comes down, but it is a great indicator of uncertainty and surprises for the investment community. There are still political uncertainties to be resolved here and in the UK with the BREXIT vote and the Common Market with Angela Merkel ending her role in Germany.
It is unlikely that this high volatility range can stay for ever but until political uncertainties begin to show some solutions on the horizon, it may be slow to get back to pre-October levels.
Meanwhile, although the volatility pairs have fewer trades, they have improved their position since we introduced them and may be a place to hedge positions.Tuesday Jan 8th 2019
An Idea Not Proven . . . Yet.
There are a couple of reasons why we wanted to start groups with a new start date of Dec 1 instead of the previous Mar 5.
Mainly, we were starting with the new ranking system in January, but the previous date was in the middle of a lower volatility period and we also like to renew the dates every so often to keep up with time and markets.
Another reason is the new ranking data and it was tempting to rely on it to give us a new constantly changing Best 5 group of ETFs.
Volatility does not currently want to cooperate and just as it went up from October through Christmas Eve, it has come down by 45% since then. There is always going to be new conditions, but we continued to make good profits during this volatility reversal.
What delays the concept of a constantly changing Best 5 group, is the shortage of history for the ranking system. It probably needs another month or two of history so that the rank changes less often and the best ETF pairs need time to show their strength.
We will keep testing this and report at a future date. Another reason that hurts the concept is too much trading and switching which comes up against the associated 2-day banking rule.Monday Jan 7th 2019
Why we Recommend 30-Day FREE Trials.
We started our algorithms with stocks and non-leveraged ETFs and had great success without considering any leverage at all.
I have previously mentioned that we also started with the concept of producing very short-term signals, with the idea that we wanted to get in and out of positions as fast as possible.
The result was their sensitivity did in fact give us a high percentage of correct decisions but were perhaps more sensitive than was required to trade non-leveraged assets. This is where 30 days of paper trading might be useful to adjust to them.
That is when we combined them with leveraged ETFs and found that their potential was to obtain a result in excess of double that of the non-leveraged version. We have historically produced about 200% of the 300% that is offered by the leverage as indicated by our actual data on the Historical Data page.
The easy way to see this is our average length of round trades is less than 10 days, avoiding holding them for long periods of time. There is a considerable cost to holding leveraged ETFs due to the daily balancing cost to maintain the indicated leverage.
Now add to this the ability to trade and profit, whether the markets are going up or down and you begin to see the importance of the algorithms and inversely correlated ETFs working together.
Without a profitable method of limiting the number of days in a leveraged trade, these types of trades can be excessively volatile, and it would be difficult to maintain profitability at any level.
The reason that these ETFs have such large volumes is often caused by their use in large portfolios for hedging and very short-term trading. It is a good way to reverse or neutralize a position when needed.
They are not intended for long-term holding and we do not recommend holding these leveraged ETFs without consideration of their very high maintenance cost.Friday Jan 4th 2019
Technical Analysis or Algorithms.
I printed an example of SOXL today when it appeared to be at a favorite set of moving averages, namely 50- and 200-point moving averages.
My chart is every 5 minutes so 50-points represents about 4 hours and 200-points are close to 2.5 days.
Notice that the price at about 11:30 AM is hitting the blue, long-term 200-point signals, having burst through the red short-term signals at the opening this morning. We signaled buy it today.
The question is, where does it go after 11:30 AM today? We will check later.
I will know before writing this blog, but I am trying to convince you that algorithms are also Technical Analysis and perhaps can make more convenient decisions in the long term.
Below the price chart is the MACD chart that helps to see the strength of the move, but at the 11:30 AM timeline, even the MACD is telling us little about future direction and more about history.
There is no shortage of Technical Analysis methods that can be used. Some are preferred more than others. The most important factors are the results in your account after making those decisions day after day. Paper-trading for 30 Free Days would be a good idea.
This attached chart represents the decisions that we must make, either intra-day or longer-term, on a consistent basis. Our algorithms are now making those directional decisions once every day with an average of 60% to 70% accuracy. We have been publishing ahead of time for about 3 years now and they are all posted on the Historical Data page.
We like to recommend a 30-Day Free trial that gives you a complete set of our signals every evening. You can then measure their performance against any Technical or Fundamental Analysis that you may be already using.
See the second chart. I did check SOXL at the close today, as it was signaled for a buy at the open this morning. You would have bought at $73.83 and the value at the close today was $79.42 for a first-signal-day profit of 7.6%.
With SOXL, we were either 60% to 70% lucky today, or we were 60% to 70% correct today!Thursday Jan 3rd 2019
Up & Down Volatility Since Xmas.
From highs up an average of 60% during October through the election and again until Christmas, volatility jumped up an additional 70% through the New Year.
This period has been a very interesting time for the algorithms and they have performed well.
(blog continues below chart.)
Considering there has been more rapid in-and-out trades, they certainly did not participate in the -19.4% market losses of the Dow stocks in the same period.
Since Dec 1, our average group is up 7% and the Best 5 Pairs are up 11% to date.
Our originating concept and Investment Manager Portfolio of 10 ETF Pairs, which correlates about 90% with portfolios of large world-wide investments, is up 3% over this difficult period.
The enemies of our algorithms are the up one day, down the next day of high volatility, but there are enough short trends to allow us to reverse direction and to profit.
Who knows when this volatility will normalize but we have demonstrated an ability to profit throughout all 4 quarters of 2018 as well as previous years. The up trends and down trends were great and the high volatility periods also proved to be successful.
It is no secret that our algorithms were developed over a multi-year, generally up-trending market, and this last quarter has been a new and severe test. I hope we can introduce more investors to experience this great new opportunity in inversely correlated pairs trading.
An adequate supply of high-volume inverse pairs has been the first key to our ability to trade both directions of an Index or unique sector. The success of these ETFs with enough high volume, will probably lead to an increasing supply in the future. We continue to consider new opportunities.
The second key is no doubt our short-term directional algorithms, mostly proven over the past 3 years, that quickly reverse signals with a 60% to 70% accuracy.
You can now make profits on the way up and on the way down, with short periods of indecision, and average trade lengths of less than 10 days in either direction.
Taken over a long period of time, the average First-Day signal makes better than a 2% profit which is further evidence of good directional reversing and is another reason why we strongly suggest buying and selling on that first day of a signal change.Wednesday Jan 2nd 2019
Handling Best 5 Pairs Changes.
Several questions about the new Best 5 Pairs group and the changes we are using.
First, we have listed the best available 20 pairs with new rankings so that followers can create their own groups for investment.
Our Best 5 group will no longer include duplicate sectors based on the recent experiences with oil prices. The 30% drop in oil prices in the Nov/Dec period caused very high volatility.
There are several factors to consider each month when a new Best 5 is listed.
My initial method of switching is to wait for a Sell signal in my previous Best 5 group and then use those funds to switch to the new Best 5 group.
I sometimes overrule this if I can sell the old ETF on a profit day and buy the new one at a lower price.
However, with broker fees being so low, it is perfectly reasonable to sell the old and buy the new, if the T+2-day banking rule leaves enough capital in my account.
This may be a good time to mention Margin Accounts. If you have a non-pension account that allows it, changing to a Margin account can solve some of those banking rules by using borrowed funds just for the 1 or 2 days during the switch. The interest cost is very low.
Even changing your IRA types of accounts to a higher option level, will help with available capital rules and your broker can help here. Unfortunately, leveraged ETFs use up higher Margin, so this also must be considered.
We did think of providing a constantly changing Best 5 group with the new ranking numbers that we provide to followers. We decided that changes were occurring more often as we switched all reports to the new December 1 start date, so this concept may come later.
As mentioned, we did eliminate some of the volatility by avoiding duplicate sectors such as oil in our Best 5 group, but you can select your own group with the new ranking now available.Tuesday Jan 1st 2019
January Changes are Here.
Three of the best performing and most popular of our groups remain but you can now select your own favorite group of inverse pairs by reviewing the 1A Chart on our FREE 30-Day Trial.
Chart 1A includes the top 20 inverse pairs with new profit columns since Dec 1 plus the ranking column showing where most profits were recently generated.
Our original Investment Manager group remains with few changes and still correlates with professional portfolios.
Also, our Best 5 Pairs group remains as well as the 2 Volatility Pairs group.
The Investment Manager group will own a maximum of 10 ETFs that are approximately 90% correlated to professional portfolios held around the world. It includes ranges of stocks, fixed income and specialty sectors for investors able to invest in a maximum of 10 ETFs. Duplicate sectors are included in this group to reflect professional portfolios.
Our Best 5 Pairs group avoids duplicate sectors which helps to avoid excess volatility in a small portfolio and is selected each month based on the previous month performances and ranking.
You can adapt this list of 20 inverse pairs to your own needs and preferences to create your own favorite group. We suggest that you invest in a minimum of 3 pairs with about $1,000 in each pair.
The last change to our algorithms was the elimination of buy signals for both sides of any pair as you are essentially neutral when in the same inverse positions. The very small potential gains from owning both sides are not worth maintaining extra capital for those few occasions.
Therefore, the number of pairs that you select will always be the maximum number of positions you will buy as you switch between each side of any pair.
Remember that the average length of ownership is less than 10 days due to the short-term design of our algorithms. This avoids the large management costs always associated with leveraged ETFs but allows us to pick up 60% to 70% of the leverage in extra profits.Sunday Dec 30th 2018
The New Inverse Pairs Trading.
A new simple concept turns out to be a better solution and is a new way to do pairs trading using inverse ETFs.
We used to think of Pairs Trading in a completely different way before the recent introduction of Inverse ETF Pairs.
It was a skill where traders select two assets with similar trading patterns and buy one and short-sell the other.
By trading the changing spread between the two assets, relatively low risk profits were made as they moved apart and came back together again.
The tricks are the selection of the pairs and the use of a good technical signal to switch directions as the spread increases and decreases.
Our new inverse ETF pairs trading puts this previous method on steroids at least three times.
First, instead of using single stocks, these ETF pairs use various sectors and indexes such as the S&P 500 or Russell 2000 that eliminates the search for good selections and works towards reduced risk.
Second, by the inclusion of put and call options in their design, they maximize the speed of movement by as much as three times.
Third, the pair is inversely correlated to move in exactly opposite directions and that maximizes the spread very quickly.
So, we have assets known as inverse ETFs, that are designed to maximize the available profits by replacing the original pairs of stocks or indexes.
What is needed now is a technical signal that is designed to deal with the speed of these new pairs and can accurately get in and out with larger profits and maintain low risk.
Just as most technical analysis is based on mathematical suppositions; Roebuck Systems algorithms were first designed for short-term and to quickly get in and out of stocks.
About 3 years ago, we made the switch to ETFs and from there, we recognized that our concentration on short-term, made them uniquely able to work with leveraged ETFs.
Our average holding period is less than 10 days, causing considerable increased profit as well as additional trades. The Historical Data page on our website is full of examples from the past 3 years of pre-announced and pre-published trades that we had announced along with resulting profits.
In conclusion, from stocks to mutual funds to options to leveraged ETFs, and now to Inversely Correlated ETF Pairs, new opportunities have used technical analysis to guide many investors.
The new version of inverse pairs trading is here to stay, and taking the time to follow it, may be very beneficial. Our new January ranking formats and groups will be here tomorrow.
Yesterday’s Blog for Saturday Dec 29 is useful for additional information on the rankings and new groups.Saturday Dec 29th 2018
Wednesday Will be Different!
Knowing that Tuesday night signals will have a different format for trading on Wednesday, here is a heads-up today.
Our master list of 20 inverse pairs will have different displays of data.
(blog continues below chart.)
The last column shows profits or losses since Dec 1 and the prior column ranks all 20 pairs based on those recent profits.
We are eliminating all single direction trading algorithms in favor of our inverse pairs trading groups. This is all due to the increased profitability and built in risk avoidance that inverse pairs provide to investors.
The central column which displayed the group, will in future display their ETF Sector and make it easier to avoid duplicates when deciding which ETFs to follow.
Most of these pairs move in exact opposite directions and are 100% inversely correlated by using put or call options in their design. These same options also provide the leverage that ETFs can offer and most of our pairs have a 3x leverage factor.
It is important to remember that our short-term algorithms provide average holding periods of less than 10 days per trade.
We will retain the Investment Manager series of 10 pairs that reflect professional world-wide portfolios. The remaining pairs that made up our Mixed 10 Pairs group will still be available but not recorded separately as a group.
The Investment Manager series correlates to approximately 90% of large institutional portfolios and includes appropriate ranges of stocks, fixed income and specialty sectors. Higher value accounts will appreciate their conservative balance and the extra performance that the group has previously generated.
A favorite to follow will be our Best 5 Pairs group that has performed extremely well and usually includes one or two changes each calendar month. The group rotates monthly to reflect the best performers from the previous month.
Finally, we will also continue our 2 Volatility Pairs that reflect the CBOE VIX Volatility Index and represent an alternate source of interest for investors.Thursday Dec 27th 2018
A Set of Rules to Invest By.How to use our Booster Algorithms to trade Inversely Correlated ETF Pairs?
Follow our Booster Signals each evening. New orders should be placed with your Broker any time before the next MARKET OPEN.
Treat all pairs as a single investment. You will never have 2 buy signals for any pair. If you have previous sales from either side of any pairs, reinvest the proceeds from those previous sales into the same pair.
It is best to place all orders on the FIRST signal change from a Sell to a Buy or from a Buy to a Sell.
Signals should be taken anytime if the first day signal is missed.
You will never receive signals to Buy both sides of any pair. If you choose to follow 5 pairs, your maximum positions will be 5 ETFs.
When both sides of any pair have a Sell signal, the algorithms are undecided, and you are in a neutral position, waiting for a Buy.
When both sides of any pair have a Sell signal or after any Sell signal, you may choose a different pair to follow if preferred.
Keep these ETFs in your account for as long as they have a Buy signal and Sell them on the FIRST day you receive a Sell signal.Suggestions for Choosing Which Pairs to Follow. Here are some tips.
Professional Portfolios generally fluctuate with market conditions and contain 50% - 70% of US Stocks + 30% - 40% of European and World Stocks + 10% - 30% of Fixed Income and Bonds +10% of Specialty Items such as Volatility. DIVERSITY reduces RISK.
Our complete set of 20 leveraged pairs includes adequate volume but also includes some duplicate Sectors.
The original diversified group is our Inv Mgr 10 Pairs 3x
representing professional world-wide portfolios. The highest performing group is generally our Best 5 Pairs 3x
which includes some changes each month and avoids duplicate sectors. Finally, our Specialty group consists of 2 Volatility Pairs
related to the CBOE VIX Volatility Index.
Here are some suggestions for how to make your selections and the amount of money you want to invest.
1 – If you have $2,000 - $3,000 to invest, select 2 or 3 diversified pairs from the 20 ETF Pairs ranking list.
2 – If you have $5,000 - $10,000 to invest, select 5 to 10 pairs. Consider following one of our groups.
3 – If you have $10,000 or greater to invest, Consider our Investment Manager group or your own selection.
When you have determined your choice of pairs, contact your preferred broker to place initial trades, spreading your money evenly across the ETF Pairs. As you proceed, you may decide to keep profits with the same pairs of ETFs.
Look for the new Buy and Sell signals each evening. All initial signal changes are marked with a capital T. If you are just starting, you may decide to take Buy signals at any time. If the signal for one of your choices has a capital T, it is an initial Buy signal and you may have 3 different options.
1 – Reinvest your original amount and percentage for that pair and take out your profits for living expenses.
2 – Adjust your investment to your new current account value, using original or similar percentages for each new Buy.
3 – You may wish to select a different pair of ETFs for your next Buy.
If the signal for one of your ETFs is the first Sell signal with a capital T, you need to sell all your shares at the next Market Opening.A Few More General Suggestions for Pairs Trading Beginners.
We suggest a minimum of $1,000 to be invested in each PAIR chosen.
Choose a minimum of 3 to 5 Pairs from different ETF Sectors. More selections decrease volatility and risk.
Our “TOP 5” group can change each month and will avoid duplicate sectors.
Recent combined pairs performances are generally better indicators for future performances.
Follow the rules for best longer-term results. Market opening prices are not reliable indicators of market closing prices.Wednesday Dec 26th 2018
Interest Rate Whiplash.
Boxing Day whiplash this year was caused mostly by concerns about how long the Fed Chairman will have his job.
That job is not normally in doubt and we will most likely see the current VIX Index continue the current high levels of volatility with this and other political uncertainties into the new year.
The advantage of pairs trading will adjust to these facts and continue in a positive direction over time. Volatility affects the value of both Puts and Calls and consequently, affects both sides of the leveraged pairs that we advise trading.
As we move into the new year, the chosen January 20 pairs will stay consistent with December, except we will start a new series of charts from December 1, 2018 to replace the previous charts from March 5, 2018.
As usual, previous groups of charts will be moved to the Historical Data page for reference.
Due to December being a record negative month, it may be instructive to compare recent results against the S&P 500, which appears on all charts for that purpose.
Our algorithms managed to switch directions and show a considerable benefit compared to the S&P 500 Index as they spent most of December avoiding that huge decline.
We would all rather see profits but sometimes the lack of losses is a worthwhile result and is the reason for trading inverse pairs with us. The S&P Index is down 18% from its recent highs and most IRA’s and 401K’s have suffered major losses since those mid-September highs.
Monday and Tuesday Dec 24th and 25th 2018
S&P Down -14.1% & Pairs Trading Up 6.6%.
Here is a sample that all followers will be receiving in January, showing returns since December 1, 2018, just 24 days ago.
The S&P 500 is DOWN -14.1% in December so far and Roebuck Systems AVERAGE return on 20 pairs is up 6.6%.
Since March 5, 2018 all 7 current groups are up an average of 89% while the S&P 500 is DOWN -12.3%.
The combination of Inversely Correlated Pairs Trading, plus our Roebuck Systems Algorithms, continues 3 years of pre-published trades and 8 years of research, with these unequaled results.
Why trade only UP, when you can now trade UP and DOWN with 3x leveraged inverse pairs by using our unique short-term algorithms and daily trade signals.
In January, we will be offering all 20 Inverse Pairs, together with recent performances and ranking so that each follower can make selections according to their own preferences.
We will also continue to offer the Best 5 Pairs group which today has a profit of 159% since March 5, and an annual return of 197%. However, we do intend to avoid duplicate sectors within the 5 selections, to avoid extra volatility and short-term excesses.
All trades for the past almost 3 years have been published on the previous evening so that followers could place their orders at their convenience, before the next trading day opening.
Please check out our 30-Day Free Trial.Friday Dec 21st 2018
Ranking Inverse Pairs for Trading.
The pros and cons of ranking the best inverse pairs can work out well and offers some great potential.
To repeat a short history, followers will remember that we started with a concept to eliminate stock picking.
The first decision was to match a group of professional investment managers, using a scale of 100% to represent a combined best portfolio.
The second decision was to refine some algorithms that I was already working on to improve the decision of when to buy and when to sell individual stocks.
One of the earlier efforts that showed the greatest success was to work with volatility and an ETN with the symbol XIV. Unfortunately, Credit Suisse took that off the market.
Getting back to stocks, the next decision was to work with the Dow 30 Industrials, and we could combine them into a successful result. This avoided the stock-picking. We soon found that the algorithm was more important than the stock-picking as it led to a sort of the S&P 500, Nasdaq and Russell stocks, to end up with groups of 10 stocks producing exceptional returns.
The turning point was ETFs and the decision to get back to the original concept of no stock-picking. We found we could successfully correlate by about 90%, a set of 10 ETFs that would match those professional accounts.
Further progress came when we could avoid staying in cash after a sale, and instead, could invest in the opposite direction by buying the inverse correlated ETFs. In the recent past, investment managers have made the switch to ETFs and ETNs due to their efficiency and the reduction in management charges of up to 1% annually.
It is important to note that professional accounts that might be returning say 10% to investors, could be improved by using our short-term buy and sell algorithms. Further still, by adding the feature of trading in both directions, they could be improved even more.
This is where the algorithms provided their greatest contribution by having a strong bias to short-term. Inversely correlated and leveraged ETFs have substantial charges due to their daily re-calculation requirement to meet advertised leverage.
But our directional algorithms are fast enough to gain approximately 200% of the 300% offered by 3x leveraged ETFs. Our average length of trades is less than 10 days.
Finally, in January the results will all be available to subscribers. Stock-picking takes a back seat to the algorithms because ETF producers have eliminated the need to be a good stock-picker.
Owning a stock that is preferred by Professional Investment Managers is outdated by inversely correlated pairs of ETFs that can be TRADED in both directions and RANKED by recent performance by using a good short-term algorithm.
In January, you will have a choice of 40 ETFs sorted into 20 pairs of inversely correlated ETFs. It will include pairs for stocks, bonds and volatility. Recent results will be available along with a current ranking for each pair.
You can receive a 30-day Free Trial.
You can choose and invest in 1 pair or all 20 pairs.
You can choose amount to invest in each pair. Minimum suggested is $1,000 per chosen pair.
You can choose or keep your own Broker.
Suggested new broker could be Tradier at $3.49 per trade or Interactive at $1.00 per trade.
You will receive the daily Blog each evening.
and you will receive all buy and sell signals each evening to place orders for the next market opening with your chosen broker at your convenience.Thursday Dec 20th 2018
Winning Trades versus Losing Trades.
I sometimes get questions when the quantity of losing trades is higher than the quantity of winning trades and it does look very odd.
The answer is that the average value of a winning trade is higher than the average value of losing trades.
It works out that way because we stay in winning trades but get out of losing trades ASAP. The algorithm bias trades more often but we get in and out quicker.
This makes sense and is the reason we recommend low commission Brokers.
Unfortunately, the markets have not cooperated with the Santa Claus rally this year. There was a time, when we hoped the political news was going to be limited to the Mid-Term elections, but time has proven us wrong.
Reasons for some good news. We almost completely depend on inverse pairs trading and will only offer inverse ETF trading from January onwards.
Looking at the numbers today, the S&P 500 is down -9.9% in December alone and we are only down -2.5% on all 40 ETFs or 20 pairs. This is the worst December since the Great Depression of the late 1920's.
The political news mostly in the USA, is affecting the world now and inverse pairs trading is a good place to be. Despite that S&P loss, our numbers for December are showing us better than even for the same period.
This precise evidence continues to show why our algorithms, together with inverse pairs, can change your risk profile significantly. Will it go up or will it go down? All our efforts have gone into making that decision and it comes back to that old cricket saying. Perhaps because I was born in the UK, cricketers who maintained a career average of better than 50 runs, are exceptional players but I fear that baseball may have overtaken the old saying somehow.
At any rate, (as an ex-cricketer who played for the Mexico City Cricket Club in the 1960’s), predicting the direction for tomorrow at better than 50%, became my goal over 8 years ago.Wednesday Dec 19th 2018
Commissions Count, as well as Service!
Are you paying $4.50, $7.50, $9.99 or are you still paying more than that?
I started with Merrill, Lynch, Pierce, Fenner & Smith because they would open an account with less dollars in the 1960’s even though commissions were enormous compared to today.
The internet brought all the online Brokers and Trademonster became a great site to trade options, especially with the Najarian brothers and their connections to the Chicago Bulls.
At some point, we each look at service and cost for various personal reasons.
We have no financial arrangements with any stock brokers other than having trading accounts and these comments are simply meant to be helpful.
With our current concentration on this new version of pairs trading, we did take another look at cost and service because we are trading more in both directions.
We have found Tradier to be a reliable and very easy site to deal with at $3.49 for each trade. On their own decision, with no kickbacks to us, they offered a $200 or 60-Day free trading to any of our followers with the code ROEBUCK200. They probable do this for other sources and are always pleasant to deal with.
Regarding cost, we have found Interactive Brokers to be both reliable and very inexpensive at $1.00 per trade. Their site is simple, once you have signed up and know your way around and our trades are always easy to place.
We have found Interactive slow in dealing with checks to open an account, so we always wire money to them and from them, which seems to work well. The price makes this international broker well worth figuring out for the savings. They also have an additional security log-in feature which seems like a good idea these days.Tuesday Dec 18th 2018
Up versus Down Yesterday.
Scary yes, but our algorithms did exactly what they are designed to do yesterday.
The VIX Volatility Index shot up; the markets all tanked, and we reversed enough to make a profit.
(blog continues below chart.)
Nobody knew if this would continue today and tomorrow but we ran our algorithms again last night and made our normal recommendations.
This is a good day to explain why we prefer inversely correlated pairs trades.
Why lose the opportunity to switch directions whenever the markets change and when you can stay in most of the year.
I used the word ‘scary’, because that is what happens when the VIX Index goes up. That is why we also call it the Fear Index, even though it can sometimes also go up with exciting positive news as well.
What the current zig zag and continuous high range volatility does to us, is mess with our short-term algorithms that are usually operating in historically trendy markets.
We know that the current news is full of major indecision around the world. Many countries have doubts about interest rates like us, Brexit votes, and prospects for the 2019 economy, not to mention our political problems.
This same volatility is likely to last a while longer, and our algorithms will keep adapting to history every day.
I need to remind followers that we will not be continuing with any stock recommendations in January. Pairs trading is the best use of our algorithms for the future and the reduction of risk is a major factor in this decision.Monday Dec 17th 2018
Our Back-Testing Charts.
Back-test charts show the results when using the current algorithms and applying them to the past 12 months. They will not match the actual results found on the Historical Data page.
Traders like to see these back-tests to show potential results for the future.
As noted on each page it says: –
1 Year Back-tests and Trading Log showing the potential for each.
Investopedia describes Back-Testing as follows: -
Back-testing allows a trader to simulate a trading strategy using historical data to generate results and analyze risk and profitability before risking any actual capital.
A well-conducted back-test that yields positive results assures traders that the strategy is fundamentally sound and is likely to yield profits when implemented in reality.
A good reason to look at back-test charts is to see how well they theoretically dealt with historical trends on all ETFs. In pairs trading there are 2 individual charts, one for the bullish ETF and one for the bearish ETF and they need to be reviewed together.
Of most interest to inversely correlated pairs trading is how quickly they can recognize a change in direction, and therefore maximize profits in both directions.
Volatility plays a large part in this change of direction and followers already know we constantly refer to the VIX Volatility Index. It has a large effect on short-term direction change due to its immediate marketplace influence around the world.Friday Dec 14th 2018
Changes Coming in January.
We will be publishing more information about the performance of all the ETFs that we follow in January. This will be a continuation of our move away from single direction investing.
As noted, our algorithms are well suited to inversely correlated ETF Pairs Trading, giving you the opportunity to trade in both directions without having to use the old short selling strategy.
The relatively new Inverse ETF Pairs offer the very latest in trading both directions of many sectors and indexes and extra profits can be made using our short-term Booster Algorithms.
Most short, medium and long-term trends benefit greatly from these algorithms as you switch within these new inversely correlated pairs of ETFs.
Using Futures and Futures Options, the producers of these inverse ETF pairs, simply build two leveraged assets, by using Call Options for the upward direction and Put Options for the downward or reverse direction.
The result is two opposing ETFs that trade in 100% opposite directions and you can buy and sell just like any other asset listed on the stock markets without Short-Selling.
The good news is our algorithms are developed to tell you which direction has the most potential for the next trading day. You can then place your trades at any time in the evening for tomorrow's market open price.
With an average signal of 60% to 70% correct direction, you now have the added benefit of being invested almost all year, rather than only those days that the markets may be going up. For those down-days, you will be in the opposite side of the ETF pair.
If the algorithms are unsure of the potential direction when a change is indicated, you will receive sell signals for both sides of the pair and will remain in cash.
We highly recommend Interactive Brokers with a trade commission of $1.00 per each trade. We have no financial connection with any Broker. We also trade with Tradier where their commission is $3.49 for each trade and they do offer $200 or 60 days of free trades with the code ROEBUCK200.Thursday Dec 13th 2018
Energy Just Not Cooperating Today.
The daily fluctuation in the price of a barrel of oil is not currently cooperating with our algorithms. On the day we sold the long side of oil and bought the short side, we get reporting that oil prices are tightening.
We were on the wrong side today and we expect to get reversals again tonight.
We do not depend entirely on intraday news reports, but it is also reported that $50 per barrel is close to the cost of production in our part of the world. That unfortunately does not guarantee that we are at the lows and about to see higher prices.
As previously reported, we are making changes in order to minimize the inclusion of multiple pairs from the same sector in our Best 5 Pairs group next month. We will stay with the current group and expect lots of volatility before December 31.
You could decide to drop either OILU/OILD or UWT/DWT from the Best 5 to stay away from these reversals or you could drop them both.
I will stay with them because we have made $3,503 on $2,000 with the OILU pair with 14 round trades. We also made $3,484 on $2,000 with the UWT pair with 39 round trades. These numbers are since March 5 this year.Wednesday - later - Dec 12th 2018
Review the Individual ETF Graphs.
We could have used SOXL and SOXS which do less trades per year -
Wednesday - Dec 12th 2018
Review the Individual ETF Graphs.
On the 5 Best Pairs page of the website, look at the first chart and graph for the ETF, OILU and notice the way the green algorithm line performs relative to the red dotted OILU actual history line.
Both start at 0% in order to demonstrate their relative performance.
The reason we call our algorithms – Boosters – can be seen from this chart.
While the ETF goes up to 110%, the Booster goes up to 270% and then as the ETF goes back down to minus -40%, the Booster finishes the year at 200% profit.
Now look at the next chart for OILD. While the ETF wanders down to -70%, the Booster manages not to lose money, and then as the ETF recovers to minus -20%, the Booster shoots up to 180% profit.
If you add the 2 sides of these back-tests, you have a potential 200% + 180% profit or 380% total profit. This represents the perfect buy and sell dates for approximately the last year for both sides of this pair.
If you look at current day back-test expectations for this pair on chart 1U (below), using algorithms indicates a combined number of approximately 157% + 224% or 381%. Somewhat the same as the individual back-test charts that were produced at the end of November when published to the website.
Now, the actual live results can be seen on chart 1A which is sent to subscribers every evening. This shows that on the same current group since March 5, OILU produced 52% profit and OILD produced 140% profit for a total of 192%. Annually, this would be 192 x 365/282 = 217%.
Here are all the results together.
Original Theoretical Back-Test = 380%
Current Theoretical Back-Test = 381%
Actual Annual Profits = 248%
Algorithm performances = 248/380 = 65%
In this case, we are making approximately 65% of the original back-tested potential profits from this pair of algorithms when applied in real life and real time. Commissions are not included in these calculations and we use and recommend Interactive Brokers at $1.00 per trade or Tradier Brokers at $3.49 per trade.
We have no financial agreements with these brokers but Tradier offers $200 or 60 days of free commissions for new accounts using the code ROEBUCK200.
We made all the above calculations for inverse pairs trading as we built and developed the algorithms. They are deliberately designed for short-term decisions to buy or sell at the earliest market open (tomorrow) as opposed to live intra-day trading.
Hope this helps to see how the process develops over time.Tuesday - Dec 11th 2018
OIL – Benefits and Complications.
1 OILU-OILD Proshares 3x Crude Oil.
2 UWT-DWT Velocity Shares 3x Crude Oil.
3 UCO-SCO Proshares B’berg 2x Crude Oil.
4 GUSH-DRIP Direxion 3x Oil Services.
7 ERX-ERY Direxion 3x Energy.
These 5 energy related ETF pairs hold the top 4 plus the number 7 profit positions from our 20 current Inversely Correlated Pairs from trades since March 5, 2018.
Volatility on Steroids
The following graph shows what happened to oil prices since Oct 3, 2018.
This chart shows you how oil prices moved pre-election and afterwards as well as illustrating how the inverse pairs can make profits in both directions.
We mentioned yesterday that volatility, when married with huge sector price disruptions, is not always a benefit. The speed of the reduction probably had some political bias from one or more of the oil producing countries.
In future, we are working towards a more effective way of grouping the limited sectors of ETFs that are available and here is a list of sectors with quantities.
1 Emerging Markets
1 Nasdaq 100
1 Russell 2000
3 S&P 500
1 Treasury Bonds 20 Year
Our 2 Investment Manager groups of 10 bullish ETFs and 10 Inverse Pairs, represent 10 of the above ETFs that, as close as possible, correlate with their professional world-wide portfolios.
The remaining 10 ETFs are represented in our Mixed groups but do not represent any logical or professional selection and can have greater volatility.
In January, we are likely to prevent the Best 5 Pairs group from concentrating too much in a single sector such as Energy or the S&P 500.
Our concentration on inversely correlated pairs has been highly successful but there are less than 30 inverse pairs that meet our needs. With the rapid growth of ETFs in recent years, we expect choices to increase.
Monday - Dec 10th 2018
All Hitting the Fan Today.
Volatility started back up again today and the pattern we have recently emphasized wants to continue a while.
Using leveraged ETFs increases the daily risk levels substantially and followers may much prefer moving to cash temporarily. We will continue in our own accounts.
It is impossible for any of us to miss our daily news but the Brexit vote in the UK and riots in France are not going away either. China also has economic troubles.
The certainty of world economies needs greater predictability and stability and day to day volatility needs to slow down.
John Harwood said it best today when he noted that everything is hitting the fan at the same time.
What we saw in our own election during September through November has evolved into some solutions on January 3 next year.
The Brexit vote in the UK was pulled today for further consideration.
Two months ago, oil was at $76 per barrel and today it is at $51 per barrel. The opportunistic fuel tax in France has been pulled but with continued riots. We also have Russia plus 4 pairs of leveraged oil ETFs and avoiding these would limit much of the daily volatility.
Chinese markets down 25% due to the tariff policy and now the arrest of the Huawei executive and family member in Canada at the request of the US.
Options values create the leverage in ETFs and the above reasons are likely why volatility is trading in a much higher range. Each problem will be resolved and options and then leveraged ETFs will return to average trading ranges.
Volatility always eventually returns to its annual average value, but it reflects uncertainty. Once we can all be more certain of the future trends, we will return to historical norms with an extra day or two in those volatility trends before changing direction.Friday - Dec 7th 2018
No Relief Yet After Elections.
The following chart shows the VIX Volatility Index from July onwards with the trading problems starting on October 4 and they continue to this day.
The financial projections as well as the political news are affecting huge populations in opposite directions.
(blog continues below chart.)
Alternating good and bad economic news are now thought to be shorter-term for 2019 rather than longer-term into 2020’s.
Can we please get a trend like the one before the October Troubles? With pairs trading, we need a turn-up or a turn-down, but not a constant turn like this chart.
Due to our graphs following 5 or 10 pairs of ETFs, with each group in alphabetical order, our results show profits that are spread out and steadily pointing upwards. The slope has lessened by this day-by-day volatility, but profit levels are still substantial.
We could quantify this type of volatility and cause more sell signals to avoid similar activity but that would also negate other factors and changes are not indicated at this time.
Results of our short-term algorithms have been very positive for 3 years now and do not justify any current changes. This second chart showing 10 years of volatility history, helps us in the decisions whether to make changes. Note that steadily trending volatility is not necessarily an enemy of our algorithms.
We added the 2 volatility pairs to our larger groups in December because they are often used as an alternate or as a hedging vehicle by some investors. Individuals may have your own reasons for including volatility in investing decisions.
We continue to run the VIX Index itself through our algorithms and publish it daily, even though it can only be traded by derivatives such as ETFs, Futures and Options.Thursday - Dec 6th 2018
An Interesting Question.
Are the BUY signals good or bad today? The answer is always easy at the end of the day but the day before is also easy.
Each decision on the previous day, will be approximately 60% to 70% correct. However, when we send out the signals, we do not know which future days will be correct and which will be wrong.
Our algorithms will basically get you into an ETF and get you out of the same ETF with a continuing degree of accuracy.
They will also keep you in longer and get you out quicker when you are losing value.
The great benefit of our algorithms is after they get you out of a losing trend, they will decide, with 60% to 70% accuracy, when to get back in or when to stay out.
Now, we must talk about inversely correlated pairs trading, because when an algorithm tells you to get out of an ETF, it often tells you at the same time, to get into the opposite side of that pair.
If, for some reason, it is not sure which direction to tell you, it will keep you in Cash until a decision is made.
I strongly recommend that you consider trading inversely correlated ETF pairs from now on, but I also recommend that you invest in a minimum of 3 pairs and you paper trade them for 30 days, FREE.
I hope you will then see how simple it is and how successful it can be for you.Wednesday - Dec 5th 2018
More Info on Blog from Yesterday.
Said another way: -
Since March 5, 2018 starting with $2,000, while the markets were going UP, we made $937 or 47% in SPXL
and while the markets were going DOWN, we made $1,457 or 73% in SPXS
. In total 119%.
Equivalent to an Annual Profit of 159% from both directions.Tuesday - Dec 4th 2018
Get Involved in The New Pairs Trading.
This New Pairs Trading world is probably new to a lot of followers and here is how it all works.
We will use the example of the S&P 500 Index which represents a broad range of the USA Stock Market.
A company called Direxion has produced an asset under the symbol SPXL
which represents all 500 of the index stocks.
However, by buying a selection of stock-OPTIONS instead of buying the stocks themselves, their new SPXL
will move three-times faster than the S&P 500 Index.
How do they do that?
Option contract values on stocks move at different speeds, depending on the distance that the OPTION strike price, (or contract price), is away from the current stock price. It also depends on the time left until the Option contract expires.
So, after the markets close every day, Direxion re-calculates which new selection of OPTIONS they need to own, so that SPXL
will move three-times faster than the underlying Index. This means that at the BEGINNING of each day, SPXL
will move three-times faster than the underlying S&P 500 Index.
We now have an ETF (Exchange Traded Fund), that we can BUY and SELL, that will move much faster than the underlying Index, simply using option contracts rather than using the stocks themselves. By using CALL OPTIONS, if the Index moves up $1.00, SPXL
will move up $3.00.
The New Inversely Correlated ETFs can now be created to move in the exact opposite direction to the above SPXL
, simply by using PUT OPTIONS instead of using CALL OPTIONS.
Direxion also creates SPXS
which moves in the exact opposite direction to SPXL
The key advantage of this new Pair of assets is if you think the market is going UP, you would BUY SPXL
but if you think the market is going DOWN, you would BUY SPXS
In one day of trading, if you owned both SPXL
, you would end the day with approximately no difference because one of them will profit and the other will lose the same amount.
As we say, you would be HEDGED with no gain and no loss.
Our algorithms are solely designed to predict which direction is likely to be correct on the next trading day. We have a published historical record of being as high as 70% correct for some periods and therefore, our signals will inform you whether to buy SPXL
or buy SPXS
. In either case, you will make a profit when the direction is correct.
Since March 5, 2018 starting with $2,000, we have a profit of $937 or 47% in SPXL
and $1,457 or 73% in SPXS
. This is a total profit of $2,394 in 274 days on a $2,000 investment or 119% current profit. This is equivalent to 159% Annual Profit, all from the same $2,000.Monday - Dec 3rd 2018
Sometimes Things Just Work Out.
Algorithms don’t always make sense but especially this morning, things just seemed to work out great.
For example, an addition to the Best 5 Pairs for December was OILD and last Friday, it closed at 42.29 when we signaled a new Buy for Monday open.
Well, it opened at 36.14, down 14.5% and that is where we bought it.
Now that will either be a disaster and keep moving down, or a brilliant decision. At least it started back up in the early morning. Algorithms can surprise us, and you will see more days like this. Why?
The answer is in some calculations. We all tend to look at the LAST price to see our values, but the algorithms can only use the LAST price one time. History is always written as the Open, High, Low and Close, and the LAST is not important before today.
The LAST is a problem today because yesterday, it becomes the Close but until trading finishes in the after-hours today, the LAST keeps on changing.
In fact, we often quote slightly different prices to your prices when we publish data in the evening because the LAST changes until after-hours finishes and it becomes a new number when the markets open tomorrow.
Simply put, our algorithms rely on the Open, High, Low and Close for all of history. The exception is just me, because I still watch all day long for the sheer exhilaration and then place my orders the same way you do. At my leisure in the evening or in the morning when I forgot.
The Best 5 Pairs also now includes UWT/DWT and DWT was a buy from 28th November. Based on the rules, we also bought it this morning.
On Friday, it closed at 13.78 and opened today at 11.79, down 14.4% and that is where we bought it. It also started back up immediately this morning. Will that also be a disaster or a brilliant decision?
It seems that our algorithms liked making money while oil prices went down, and they are preparing us for the possibility of oil going back up. That is why the new inverse pairs trading is the new magic – if you have some good algorithms.
For the record, OILD closed at 36.28 and DWT closed at 11.82. Small profits were made on both.Friday - Nov 30th 2018
Changes for December.
I am pleased with these anticipated changes mainly because we have good reasons for all of them.
There are unlimited opportunities with inversely correlated ETF pairs, but I repeat that there are less than 30 of these pairs that meet our volume and algorithmic requirements.
First, we have two switches. SOXL/SOXS switch from the Mixed groups to the IM groups and UCU/SCO switches from the IM groups to the Mixed groups. If you own either of these, you could wait for a Sell signal to keep your group identity. Note that all history follows each ETF to either their new positions or is dropped or added as noted.
Next, we have some more interesting switches. We have decided to move the Volatility Pairs into the main groups. UVXY/SVXY moves to the IM groups and VXX/ZIV moves to the Mixed groups. Volatility has become an important sector and we like it as a partial hedge and for the diversity it offers.
To make way for these two volatility pairs, we are removing Gold as none performing pairs for us in recent times. We drop NUGT/DUST from the IM groups and JNUG/JDST from the Mixed groups.
Finally, you will see that TNA/TZA has been dropped and replaced by UWT/DWT in both IM professionally selected portfolio groups. That is the Bullish only group as well as the Pairs group. As usual each month, we change our Best 5 Pairs group based on recent performance, and you will see improved past performance and potential in the December selection.
It is our intention to eliminate individual stocks, probably in January, and we urge followers to switch to a pairs group before that happens. We will keep the same 5 Stocks for December in the Best 5 Stocks group for your convenience.
Clearly, you have seen our gradual shift away from single direction groups, towards the more successful inversely correlated ETF pairs. Our algorithms are ideally created to this new way of trading pairs and offers much higher returns while reducing risk to a new minimum level.
By reviewing all past performance, this new risk level appears from these graphs, to approach zero in a very short time.
This ETF market of 100% inversely correlated indexes and sectors deserves every investors attention. When you combine them with our short-term algorithms, it creates opportunities that have never been available before their existence.
With our average holding periods of about 10 calendar days or 7 business days or less, we can outmaneuver the leveraged ETF rolling management costs.
On average, from the 3x leverage, we take more than 200% of their 300% daily promise, and then get to switch trading to the opposite direction with similar profit potential.
I hope these small changes work well for you in December and we all get that Santa Claus rally that is so often predicted.Thursday - Nov 29th 2018
Great to see that followers are also seeing the benefits of post-election results. We seem to be back on better trajectories per comments received. Instruction signals are sent out every evening.
It was frustrating during the run-up to elections and I must admit that the best news I received was during my preparations for the November groups.
I learned that some major portfolios were also having unexpected results from their algorithms. Their advantage in this case was their use of non-leveraged ETFs or ETNs. They were also experiencing changes out of tune with normal performance. I very much appreciated their comments.
I know that some of what we do seems difficult to follow at first and we produce a lot of data and charts that may be an overload. We feel a need to explain all of this information.
But it really is simple to duplicate our results in your accounts and to follow the basic principles behind our algorithms.First
, our algorithms are concentrated on direction for tomorrow only and repeated daily. That was my first thought and goal some eight years ago.Second
, although we began with volatility, we found them to be ideally suited to the growing Exchange Traded Funds market as well as stocks.Third
, is the rapid growth of inversely correlated ETFs and our ability to switch 100% to the opposite direction very quickly.Fourth
, our short-term algorithms having average holding periods of less than 10 days, and being able to take advantage of leveraged ETFs that have high daily management costs.RESULT: - We trade fast moving leveraged ETFs almost 100% of the year in whichever direction they move.Wednesday - Nov 28th 2018
Switching Stocks to ETF Pairs.
One of our trading accounts follows the Best 5 Stocks and we have decided to switch it to the Best 5 Pairs 3x.
As we get sell signals for the 5 stocks in the current Best 5 Stocks group, we are making new buys from the Best 5 Pairs group.
It makes no sense for us to follow a group that does not allow trading in both directions. Every month, as we refine our groups, the results hammer home the ability of our algorithms to operate very successfully in the non-leveraged or leveraged inverse ETF pairs market.
Periods of negative markets are not going away and although the algorithms can get us out of a stock position, that is only half the story.
We can go to cash or borrow stock and short sell it. The better alternative is to trade assets that have equal assets that move in opposite directions.
Admittedly, we rely on algorithms that can reverse directions. The first group that we published was created with non-leveraged inverse ETFs, but they also correlated with Investment Manager portfolios, leaving the stock picking to those professionals.
We quickly found that the short-term design of our algorithms worked equally well with 3x leveraged ETFs that lose value daily due to rebalancing after every market close. Our average holding period has historically been less than 10 calendar days or approximately 7 trading days.
With the growth of the ETF market, it is difficult to find a professional investment portfolio that does not contain some ETFs. If you need the proof of this, check out the ownership and volume of the Vanguard Total Stock Market ETF with the symbol VTI. It trades half a billion dollars every day and many portfolios include it.Tuesday - Nov 27th 2018
Holidays and Elections.
We are pleased to be putting the political gyrations behind us for another two years (we hope). Elections cause unusual changes and decisions by sectors of the investing community.
I call it harmonics getting out of whack. Everything from the news cycle to each individual investor is affected by expected results, causing perhaps 50% of them being happy and 50% on the other side.
It gets wider coverage with instant news around the world and we see the effects on algorithms, as do the large portfolios that also use some algorithmic trading.
Our main example was the Brexit vote in the UK which was a complete overnight surprise and shock to most world markets. Any world event that has large financial implications can occur at any time and it is impossible to predict them.
However, election results drag out longer than most events and the uncertainties build to a climax. Six weeks may be a good period to work with and perhaps we should all take a vacation or move to the sidelines in future.
Known blips also affect algorithms and these can be the 9 weekends or 1-day holidays observed by the New York Stock Exchange. We have noticed increased direction switches at those times and many of them move back again within a few days. These quick switches seem to go by with little financial affect and deciding which and when and how to program them would be difficult.
This all fits my description of short-term changes in the harmonics of the market. These zig-zags in the markets and sectors play a small part in the overall trends with the possible exceptions being elections and other large world events.
It gives me more faith in our short-term algorithms and especially in our concentration on inversely correlated pairs of ETFs.Monday - Nov 26th 2018
Professional Investment Managers II.
We expect to make small changes in our Professional (I)nvestment (M)anager pairs group of 10 correlated ETFs as well as our Mixed pairs group for December.
As always each month, we recommend selling any discontinued position and buying any other ETF that has a buy signal.
(blog continues below chart.)
Changes usually occur slowly in these groups, unlike the Best 5 Pairs which can have several changes each month.
Also, it is important to know the full concept of the IM Pairs 3x group. The full 10 positions correlate to professionally selected world-wide portfolios.
We determine the various percentages of stocks and bonds etc. that are held in these professional portfolios and then select 10 leveraged pairs of ETFs, which we review each month. Our IM portfolio is then matched and correlated by roughly 90% to their professionally selected holdings including fixed income.
As near as possible, we select ETFs that hold stocks from American, MSCI EAFE and Emerging Markets, plus fixed income and specialty markets so that our IM (Investment Manager) portfolio represents a broad professional range. The above chart breaks down the distribution of EAFE stocks, otherwise known as Europe, Australia and Far East countries.
We have previously described how our unique short-term algorithms typically produce approximately 200% or more of the 300% that 3x leveraged ETFs offer, mainly due to our average short holding period of less than 10 days.
This overcomes the daily roll-over expenses incurred by leveraged ETFs and allows us the additional profits on top of the algorithmic directional profit produced by Inverse Pairs Trading.
You should plan on holding one side of all 10 pairs in equal dollar amounts if you wish to replicate these IM professional portfolios when there is a BUY signal for one side of each pair.
It is possible that one or more of the pairs will have 2 SELL signals because the algorithms are undecided for the next trading day. If you are trading the full 10 ETFs, you will hold approximately 10% of your account value in CASH for each undecided position until one side of that pair gives a BUY signal.
Following an exact match to the Investment Manager Portfolio is the only case where you would equalize your investment in each of the 10 ETFs. Otherwise, you may wish to accumulate profits from one buy to the next, as we do in our history charts.
In all future trades, you will not be required to hold both sides of any pair. This allows you to plan for each 10% of your capital to be allocated to each of the 10 pairs and will only be in CASH during the short undecided periods.
Now changing the subject away from Investment Managers, the Mixed Pairs 3x and the Best 5 Pairs 3x are created from additional ETF pairs but do NOT represent any predetermined professional selection.
The Mix 10 Pairs 3x group is made up of some remaining viable pairs that perform well with our algorithms but may have duplicate underlying assets such as the S&P 500 Index or Energy. They can be followed independently or as a group and we make no assertion, other than their past performance and future potential, that they are matched in any way.
There are a limited number of 3x leveraged pairs to work with and we make our selection based on volume and viability with our algorithms.
Our Best 5 Pairs 3x group closely follows performance during the preceding period and can be followed independently or as a group of 5 representing 20% of assigned capital to each of the 5 pairs.
Similarly, the Volatility Pairs consists of only 2 available pairs that operate uniquely with their own dynamics and often provide a much different cycle to the general market indexes.Friday - Nov 23rd 2018
Concentrating on the Highest Profits.
We have always relied on Professional Investment Managers to do the stock picking because they have so much more knowledge to offer their clients.
Recall that our first group of 10 ETFs is about 90% or better correlated with their portfolios, including fixed income alternatives.
Results from this group are on the conservative side but probably offer the least risk. Initially, we had more stocks in our offerings, but the picking was mostly based on recent performance.
It soon became far more beneficial to use 10 inverse sets of paired ETFs for our Professional portfolio because our algorithms are uniquely designed for short term next-day direction finding.
This step allowed us to profit equally in up or down markets for the very reason that our algorithms were primarily designed for them. At the same time, the new inversely correlated ETF pairs, have taken over the marketplace and eliminated problematic short-selling approaches to reversals and hedging techniques.
The later growth of the leveraged inverse pairs has overtaken our non-leveraged base portfolio because our algorithms are faster than the rolling daily losses caused by the leverage. Simply said, using underlying options versus using stocks, quickly loses time value.
Where we could initially increase professional portfolios from say the 10%-12% profit range to 25%-30%, by trading in both directions with 3x leveraged ETFs, we can almost double the return to the 45%-60% range. (See IM Pairs 3x group)
Now comes the leveraged ETF bonus. Using 3x leveraged ETFs, we can squeeze another 225% from their 300% leverage. We have lots of history demonstrating that for every 1,000 trades, we hold positions for less than 10 days.
This algorithmic gain gets our pairs trading to over 100% annual profit from markets that we have experienced in recent years.
A note of caution. In our opinion there are currently less than 30 inversely correlated pairs with enough volume and history for us to consider.
Beyond our 10 Investment Manager 3x pairs, we have used up another 10 viable pairs in our Mixed ETF 3x group. They do not represent any developed portfolio but strictly due to our ability to trade both directions, they perform well.
By adding the 2 pairs of inverse Volatility, we get to 22 total pairs that we can offer in our groups. We add to that, the VIX Volatility Index which cannot be traded by itself. We do generate VIX buy/sell signals for traders of various other derivatives for information purposes which may help their trading decisions.Wednesday - Nov 21st 2018
Recognizing Natural Progression.
After completing the Blog comments yesterday, I looked at the ranking charts and probably should have included some comments about them also.
Pairs trading groups rose to the top 4 ranking positions yesterday with an average annual return for all 4 of 112%.
(blog continues below chart.)
The remaining 3 single direction bullish groups took up the bottom 3 ranking spots, with a very respectable average annual return of 44%.
One reason for this was the recent gains in the Volatility Pairs which jumped to an 84% annual return for the last 260 days.
I was pleased to see the volatility pairs performance, especially because it has been a favorite of mine for some time.
Volatility algorithms present a totally different set of problems as well as opportunities when writing algorithms and I certainly hope to keep them in our pairs trading groups in the future.
It should be noted that they do not have the 3x leveraged pairs that we otherwise would use but that does not take away from the wide interest in them by many traders and hedgers. UVXY has some limited leverage but they do have large moves at times.
Volatility has the unique characteristic of always coming back to an average annual value and can never go to zero. It could make a new high but would quickly come back down towards the average.
Some other ETFs tend to have apparent limits. For example, gold and currencies are unlikely to go to zero and perhaps have limited ceilings but stocks have few constraints at all.
I like to think of other advantages we have in using our unique short-term algorithms. There is not much competition knowing short-term potential direction ahead of time, but many investors are using some form of technical analysis or fundamentals in their stock picking.
Professor K C Ma of Stetson University warns - "The rare success of the leveraged ETFs also require the investor to have precise short-term market timing ability."He is absolutely correct, and we have it!Tuesday - Nov 20th 2018
Best 5 Pairs Versus Best 5 Stocks.
You can see very well from chart 1x that the Best 5 Pairs outperform the Best 5 Stocks in these 2-way volatile and politically unusual markets.
We have talked about inverse pairs trading a lot lately and have already moved to 90% ETF pairs versus just 10% plain Stocks. Short selling stocks is available but we much prefer our algorithmic inverse pairs trading today.
(blog continues below chart.)
Investing is making that decision whether you buy or sell and when to do it. Our algorithms make that decision for us and advise us into the best potential direction whichever ETFs are chosen.
As you already know, our uniquely short-term signals from our algorithms operate very well in pairs trading and have been effective in the current environment.
They seek to tell us directional change as well as the continuation of trends on a daily re-calculated basis. The markets since the start of the current sessions last March has had trends as well as abnormal volatility due mainly to elections and unusual political news.
Mathematical algorithms come in various types, but short-term direction is proving to be successful throughout this period and there is no reason to think things are about to change.
We are already hearing doubts about the possible length of prosperity following the supposed all-around benefits of the recent tax-cuts. Debt and interest rates are front and center for many financial outlets.
The market benefits anticipated by stock buy-back programs this fall may not carry through next year as projected, and we believe that short-term direction algorithms will continue with great longer-term performance that builds on their short-term ability.
Your clue to all this evidence can be easily followed from the ranking charts that we publish every evening along with the History Data page of all actual trades on our website.Monday - Nov 19th 2018
Leveraged Inverse Correlation.
The history goes back several hundred years to Edward Lloyd and his London coffee shop in the 17th century.
Being a favorite gathering place for sailors, the conversation often related to what happened to ships lost at sea.
Some of these wealthy coffee drinkers joined forces to provide payments to ship owners who lost ships and cargoes.
Insurance was born for the owners who were STRICKEN by these losses. This is a long way around to explain a STRIKE price on an OPTION if your ship is lost at sea.
These coffee drinkers also invented the Chicago Board Options Exchange, but they never knew it.
If you own a ship worth $100, (we will call it a canoe), you could earn extra income by writing a contract on your canoe that reads – Before the third Friday of December, you can buy my canoe for the STRIKE price of $110 for a fee of $5. You will make $5 on a $100 asset or 5% profit.
Nobody is going to buy your canoe unless the market price goes up before the EXPIRATION date. If the value goes up to $120, someone will pay you $110 and immediately sell it for $120 and make a $10 profit.
Everybody wins something. You were paid $110 for a canoe that was worth $100 plus $5 for the December contract and for every month you write a similar contract. A good income for your Pension Plan is selling CALL OPTIONS against your assets.
The buyer also made a nice profit. He leveraged his $5 and made 100% profit but would lose his entire $5 if the contract expired below the $110 STRIKE PRICE. However, he could also repeat this every month.
Imagine a world where this same ship (or canoe) might go down in value and you want to buy a canoe at a lower price. You might write a contract that reads – Before the third Friday of December, I will buy a canoe for a STRIKE price of $90 and will pay $5 for this OPTION contract.
Again, nobody is going to buy a canoe unless the market price goes down before the EXPIRATION date. However, if the value of canoes goes down to $80, someone will pay $80 and immediately sell it to you for $90 to make a $10 profit.
Everybody wins again. You paid a lower price of $90 for a canoe but you also received an income of $5 and maybe additional income for every month that you wrote contracts that were never exercised.
A CALL OPTION is sold by you if you own a canoe and are prepared to sell it for an agreed higher price by an agreed date.
A PUT OPTION is written by you if you want to buy a canoe and are prepared to buy it for an agreed lower price by an agreed date.
Non-leveraged ETFs are like Mutual Funds. They represent stocks or other assets that move up or down according to the underlying market value. It can own or represent stocks and shares (and canoes) at their current market value.
Leveraged ETFs represent OPTIONS on those same assets that increase or decrease in value at a much faster rate. The difference is that owning the underlying options creates greater movement and higher daily risk. Additional losses are incurred every day because these ETFs require daily adjustment of all the OPTIONS to maintain the published leverage at the start of every trading day.
Leveraged ETFs that move in opposite directions can be achieved by using underlying PUT OPTIONS or CALL OPTIONS. These pairs of resulting ETFs move in the exact opposite direction at different leverage amounts. (Think 100% Inversely Correlated Leveraged ETFs!)
Our algorithms quickly define the potential direction of ETFs and can raise profits by trading inverse pairs of ETFs in both directions as opposed to only trading in a single direction and then holding CASH.
Remember, you can CALL him up or PUT it down.Friday - Nov 16th 2018
The Logic of Pairs Trading versus Stocks.
It is no accident that our pairs groups have found their way to the top of the 1X ranking chart and the bullish groups have moved to the bottom.
Three years of giving trades ahead of time, has shown that our algorithms can exclusively operate in both directions.
More important though is their speed and ability to overcome the rolling daily capital losses that occur with these 3x leveraged ETFs but more about that later.
With stocks or non-paired ETFs, we only trade when they are going up and must stand in cash when on the way down.
Our focused algorithms make it possible to trade almost continuously, now that we have ETFs that go in both directions and even better, leveraged ETFs in 100% correlated opposite directions.
But using options to create the leverage costs large management fees. For example, SPXL, which follows the S&P 500 Index, has average five-year management losses of about 280% in recent years.
That is close to 1/4% for every trading day in the last 5 years. Our average ownership is for 10 calendar days or 7 trading days. This averages out to about 1.75% of management costs for each trade.
That is precisely our advantage. Our algorithms are selecting the periods when the underlying asset is expected to move in a profitable direction and they are taking advantage of the 3X leverage.
We calculate we are getting about two-thirds or about 200% of that underlying 300% leverage that these ETFs are geared to move every day.Thursday - Nov 15th 2018
Pairs Trading the Roebuck Systems Way.
Our new Pairs Trading using Inversely Correlated ETFs needs more explanation.
Prior to ETFs, 2 types of trading were available. The first was a combination of a pair of long positions and making profits from the price differences as they moved apart and back together again.
Hedging is another way of thinking about this method of trading which profited from their differences in price over time.
The other type involved buying when the stock was moving up and then selling it SHORT when the stock was moving down.
Now see how we improved these trades.
Primarily, our algorithms are very short term oriented and can quickly see a potential change in direction each day. These mathematical algorithms concentrate on tomorrow and then recalculate each following day.
Secondly, the new ETFs (Exchange Traded Funds) that replace many Mutual Funds, are uniquely available in pairs. One side of the pair is created to go up with the underlying assets and the other is created to go down (in precisely the opposite direction).
This means at any time of day, you can buy a fund (ETF), that is either going up or going down in the opposite direction at the same time.
So, when we combine our algorithms with these inversely correlated ETFs, they make a profit in both directions by buying which of these directions they are signaling for tomorrow.
Let me repeat that. Our daily algorithms select the direction with 60% to 70% accuracy, and you invest in whichever side of the pair is currently signaled and no short selling is involved.
We specialize in these new inverse pairs of ETFs specifically because our algorithms have this ability to quickly define the potential direction each day and we send this signal to you each evening. If a change is signaled, you can then place an order at your convenience, before the markets open tomorrow morning.
Sometimes, they will tell you to sell your existing position and do nothing. This only happens if they are unsure of a change in direction. Other times, they may tell you to sell your existing position and buy the opposite direction.
Just remember that these ETF pairs are inversely correlated to move 100% in the opposite directions at the market opening tomorrow. We recommend you take the signal on the first day that you see the change, but it can be taken anytime.Wednesday - Nov 14th 2018
Low Online Broker Fees.
I often mention Broker fees because the availability of lower trading commissions continues to be available to all of us.
We maintain accounts at Tradier and Interactive Brokers and have used others but the current trades that we publish have all been based on Tradier who currently charge $3.49 per order.
We have no arrangements with Tradier, but they do offer new accounts 2 months or $200 of free commissions with the use of the password ROEBUCK200.
Interactive Brokers is cheaper at just $1.00 per trade and they have a free trial.
As mentioned, we have no financial relationships with either of these brokers other than our own accounts, but we can recommend them both.
I have to say that Interactive is a much more complex site and offers a variety of trading accounts around the world but our trades are very simple and straight forward for any platform.
Our algorithms are short term with an average hold time of 10 days or less. This unique feature provides the opportunity to trade leveraged ETFs with higher results. The average annual profit from 7 programs is currently 85% with the highest annual profit at 168%. Average brokerage fees are under 15% with Tradier or approximately 4.3% with Interactive Brokers.
Many times, you will have your own preferred broker and the above commissions will allow you to estimate your own fees.Tuesday - Nov 13th 2018
Some Days Look Really Good.
After all the election-type of volatility in recent weeks, we are looking for normal times and maybe yesterday was it.
After a few days of revival and position changes last week, we ended up with the trifecta of short positions in Oil and the S&P 500. They went up an average of 5% each and gave our Best 5 Pairs and IM Pairs groups a nice boost.
This is where algorithms require a change in thinking from my old way of looking at things. Both SPXS and SPXU agreed that the S&P 500 was going to go down but why did Crude Oil and SCO, continue the trek down from $39 to almost $23.
The news is that crude was down around 20% for a record 11 sessions in a row and settled at $59.93 per barrel or the lowest active contract price since February.
Now, I am sure that there are some followers who would be following crude oil prices and probably knew it was going down for another day, but I probably would not have taken that trade.
The interesting point is that all three of these positions are part of our Professional Investment Manager selection which is the matched and correlated portfolio of leveraged ETF Pairs.
It serves as a good indicator that this monthly portfolio includes a range of assets that a broadly-based investor could or should be thinking about. The portfolio also includes a range of stocks and was currently also invested in 20-year Treasury Bonds since Friday.
It is sometimes handy to see that this balanced portfolio of 10 pairs is bullish on treasury bonds and bearish with 9 short ETF positions. Sometimes there are messages in those selections, I think.
The maximum holding to follow this Pairs Investment Manager group is 10 ETFs and normally there would be a variety of long and short positions.
If you follow just the IM bullish portfolio, then you could have from 1 position, (as we currently have in bonds) or up to 10 ETF positions.
The reason that I like the Investment Manager match approach is their ability to look at all investment opportunities. They have a combined knowledge of stock picking that I could never have.Monday - Nov 12th 2018
By Way of Explanation.
About 3 years ago when we first went public with our algorithms, we had a simple problem and we had to make a simple decision.
Because our algorithms worked well with ETFs and Stocks, we were able to list everything in alphabetic order. This worked well until we found how well they worked with inversely correlated pairs.
First, bullish ETFs are not always in alphabetical order with their partner bearish ETFs and second, when we buy ETFs in date order, we do not sell them in the same date order.
The decision we made was to list all single direction bullish groups of ETFs and stocks in alphabetical order and that solved most of the problem.
With pairs trading groups becoming our most popular and successful selections, we must list the pairs together. Here, we decided to list the pairs with the bullish ETF in alphabetical order and the bearish ETF listed next to it.
Finally, as we list and build the history of the trades in the various groups, we had to follow each ETF and Stock in alphabetical order to show the sequence and performance of each individual asset. To do it any other way would make it less transparent and almost impossible for anyone to follow.
This has occasionally received some questions and I hope this explains why it became necessary as a part of our reporting.
The main casualty of having to report this way is the first few weeks of the graph that can look a little odd but in the long run, a gradual move showing profit or loss generally balances out any differences.Friday - Nov 9th 2018
How we Select the Best 5 Pairs Group.
First is a unique set of 10 inverse pairs that we match and correlate to world-wide Professional Portfolios. This IM group represents a well-balanced selection of world-wide investments including fixed income and bonds.
Next, we select a second set of 10 high volume and popular inversely correlated pairs that perform well but do not represent any unique portfolio choices.
Our final 2 pairs are related to the volatility market and are derivatives of the CBOE VIX Volatility Index. That is 22 inversely correlated matched pairs: - 22 bullish ETFs and 22 bearish ETFs.
The attached Chart called RANK includes all 22 of the above pairs and we look at the recent performance and can rank them in order of actual current profits from our algorithms. All this information is also included and available to subscribers on their SUB chart (thanks to Enzo) so that they can put their own list together.
Yesterday, we described more details about this relatively new method of pairs trading with inverse correlated ETFs instead of using the complex short-selling process that was used previously but not always available.
We also explained why the profit is almost doubled with pairs rather than single direction ETFs but most significant is their ability to substantially increase profits while simultaneously reducing medium- and long-term risk.
We did also point out that you need a good direction finder to select which half of the pair you should be invested in. This is now easily done by subscribing to our daily signals.
From all the trades published each month on the History Data page of our website, our average winning and completed trades generally runs between 60% and 72% winners.
Elections Affect Profits. - - - - - This chart shows profits by entry date from March 5 through the 2018 election for IM Pairs and MIX Pairs.
Thursday - Nov 8th 2018
All About Inverse Leveraged 3x Pairs.
Sometimes the group that rises to the top is not for you. I need to always explain for newcomers, the differences between some of our groups and categories.
First, it is important to review the two IM groups which begins at the bottom of Chart 1x with the group - IM Bull 3x - ranked at #7 and finishes with the group -IM Pairs 3x - ranked at #4.
An early investment theory that I learned was all about RISK. With that in mind, a very important fact is the Pairs group, making 69% annual return, is much less risky then the Bull group making only 36% annual return.
The short explanation for this involves the new ways that we can now trade using inversely correlated pairs of ETFs.
On November 5 we wrote that the average number of days that we are in any trade is less than 10 days. This is important because there is a significant management cost in re-balancing leveraged ETFs every day and a we want to avoid long-term ownership.
Our algorithms specifically maintain short-term investments because they are designed to look just one day ahead and are then re-calculated every day ready for the next day.
The pairs that we select are all close to 100% inversely correlated; in other words, they move in almost perfectly opposite directions.
This means that when investing in these inverse pair selections, we make a profit, no matter whether the underlying asset is going up in value or going down in value. Consequently, we are only out of the market during the few days that we cannot determine which direction to own.
So, if you follow our algorithms and agree that they do have the ability to profit on a surprisingly steady basis, then you must agree that we make a profit on the way up, and we make a profit on the way down.
This explanation shows you why the better performing Inverse pairs are usually making almost twice as much profit as the lower performing bullish-only single direction ETFs.
As an example, if the pair of ETFs are based on the stock index – S&P 500, we make profits when stocks go UP in value, by buying the ETF – SPXL.
Equally true, we make profits when stocks go DOWN in value, by buying the ETF – SPXS.
All you need is our algorithms to tell you in which direction stocks are likely go tomorrow. That is why the RISK is lower and the PROFIT is higher. You can now buy both directions without old fashioned short-selling.Wednesday - Nov 7th 2018
Have You Noticed?
I am really looking forward to seeing the investment climate returning to more normal cycles after these elections.
During my monthly research with investment professionals this month, they also note seeing unusual movement and volatility in recent months.
It must be no surprise that large investor portfolios also use algorithmic trading techniques and anything that breaks up the harmonics of their data points to a different cadence, causes unexpected returns.
I am watching an anomaly that we have.
We keep a record on a chart we call – UP and it currently shows that for the Best 5 Pairs group, the overall average gain on the first signal day, UP moves are 2.4%. The overall average first signal day loss is 1.9%, so we do have a net profitable decision day that currently provides a 0.5% profit.
The point of my comment is that the percentages are measured at the close of trading on each first day. If you were to watch every trade, you would notice that they often start that first day with a loss.
That seems like the decision may be wrong and could be improved but the fact that it starts with a loss is helping to provide the end of day gain.
The only way to be more accurate with the signals of less than a day would be to watch the markets all day long and perhaps use an hourly decision with similar algorithms.
Well, the big guys are doing that every minute or every second, but their computers place more large orders much faster and at much lower commissions than we must trade with.
So, what is my point. Those big guys have a lot of money to play with, but they make smaller annual returns than we do.
Perhaps we have the best of all worlds!
Tuesday - Nov 6th 2018
What Happens After Elections.
RiskHedge Report has published their findings for investing after these midterm elections and they don’t see any bad news to worry about.
First, they report a 28% rise in the stock market since the last general election and second, they say there is an 85% chance that Democrats will take over the House of Representatives.
Their investment message is this: - since the end of World War II, there have been 18 midterm elections and no matter what the political outcome was, US Stocks have always climbed higher in the following twelve months.
Back on October 11, we sent out a chart of the market corrections which included a similar survey from 1962 by Strategas Research. On October 17, we sent out the Partisan Conflict Index from the Federal Reserve Bank of Philadelphia. Both were a result of the variations in volatility that we were finding in the markets.
We have since heard comments from various investment managers and of special interest was their algorithmic trading was not performing well due to these conditions and they had lost some profits.
We expect 2 years of relative normalcy from now on and we will keep watch for changes. Our algorithms are very short-term oriented and quickly get out of conditions they don’t like.
The difficulty is the churning that takes place based on unnatural volatility and the result can be little forward progress.
Mathematical algorithms get their strength from thousands of calculated built-in norms and historical facts. Radical changes from past norms are their enemy.
There is a positive side to new short-term experiences, and we have made very small but positive adjustments that will be more helpful if these conditions return, (perhaps in 2 years).Monday - Nov 5th 2018
Average 82% Annual Profit in 245 Days.
Our latest, highest current annual profit is 154% and our low-risk conservative group produced 34% in just 245 days
All trades from Chart 1x are conveniently sent to followers on the previous day. Where else are these returns available in a choice of investments and a free Blog?
(blog continues below chart.)
Our unique mathematical algorithms have been developed over 8 years and here is how they were developed.
Primarily designed to mimic portfolios of professional Investment Managers, they have proven ability to enhance leveraged ETFs as well as inverse ETFs and Stocks.
It started over 10 years ago when I became the Administrator and had responsibility for managing the operations and investments for a USA government ESOP program, also known as an Employee Stock Ownership Plan.
I had related experience but not enough of it. I consequently spent many hours studying large investment portfolios in the USA and Europe and first developed a method of using percentiles of assets, based on changing economic opinions and economic conditions.
This idea first served as a model for a portfolio of Exchange Traded Funds that could equal this new investment model and it avoided the need to individually select stocks and/or Mutual Funds. This then led to a series of formulas and algorithms that could adjust the selections in the model.
At that point, with my background in engineering, I started looking for ways to buy and sell at appropriate times, depending on various variable data that I could collect and develop.
I enjoyed doing this, and at that same time the Exchange Traded Funds market was rapidly expanding. Portfolio Managers that I studied, were moving toward ETFs and away from Mutual Funds mostly for the efficiency and the savings that could often be a half-percent or more each year. These ETFs also offered variations in vertical sectors as well as the standard Indexes.
ETFs have quickly revolutionized the investment industry and inverse as well as highly correlated ETFs now offer increasing possibilities for these managers.
My algorithmic models broadened into shorter term decision-making deciding when to own or avoid ownership of the various ETFs. I also found they worked in combination and are efficient and accurate enough to work with leveraged as well as inversely correlated pairs of ETFs.Important Note
: - Investing in better than 95% inversely correlated and leveraged ETF pairs with proven algorithmic decisions, provides a lower-risk strategy that invests in both directions of covered markets. Leveraged pairs requires a short-term investing decision process and our investments from our algorithms typically average less than 10 days per trade. Our lowest-risk Investment Manager group produced 71% annual return.
Fortunately, my team of managers and geeks are still working with me, and that is mostly why we exist and why 48 years of various business enterprises continues to work for a broad range of our Customers.Sunday - Nov 4th 2018
Back-Testing Things to Know.
We like to show our back-test history for everything that we recommend, and I suggest that you look at the Other Boosters page and then click on the last Volatility Pairs chart. Now follow a few points that will help you to understand how our algorithms work.
First you see the chart with 2 inverse pairs listed and below them you also see the CBOE Volatility Index. I will explain that later but first scroll down the Other Boosters page to see the first chart SVXY of the first pair.
Notice the sudden drop-off in February for SVXY and the relative continuation of our Booster algorithm.
The SVXY drop-off occurred when Credit Suisse removed XIV, a favorite ETF, from the market and SVXY suffered the same punishment but was retained at far lower prices. The underlying problem was that both ETFs moved inversely to the VIX Index and were caught in a huge spike in volatility even though general stocks did not suffer in the same way. You can see the spike if you scroll down to the bottom chart of the VIX Index.
I am using the SVXY chart to demonstrate how our algorithms take advantage of up moves and get out of down moves. However, it also serves to demonstrate that volatility is unique and requires some knowledge and a risk level that has surprised investors in the past.
The pair to SVXY is UVXY which moves in parallel with the VIX Index and makes up our first pair.
The next chart for UVXY shows again how our algorithms seek to take profits even when a meandering ETF is generally going nowhere.
Our second volatility pair is VXX which also moves in parallel to the VIX Index and ZIV which moves inversely to the VIX.
This volatility pair also shows the action of our algorithms relative to each other and their ability to take profits and avoid losses from both.
Volatility has become a major tool for large investors as a hedge as well as a profit center and can be directly owned through the Futures Market and Options on those futures. With the advent of ETFs and ETNs, it is a popular, if different type of investment.
Finally, we run the VIX Index itself through our algorithms, giving Buy and Sell signals but do not specify any derivative investment at this time. It is useful to investors who may invest in VIX Index related products.
Finally, we like to start all back-tests with $10,000 because it simplifies calculations and helps to make comparisons with everything that we do. We also start the graphs at zero percent instead of their price in dollars to easily visualize the gains and losses relative to 1 year ago.Friday - Nov 2nd 2018
Comments on Change.
There will be more improvements and changes on Monday than we have had in quite some time.
In my monthly checkups with Investment Manager portfolios, I also heard a revised sense of what they are expecting and there is a more widespread sense that interest rates may be slower to rise than previously thought.
I also hear that growth will be slower than 2018 but the tax cuts should provide positive markets well into next year.
Meanwhile, Monday Buy and Sell signals will be available as usual on Sunday.Thursday - Nov 1st 2018
For us, November Starts next Monday.
I meant to mention this yesterday, but we need to start each month on a weekend due to the necessary changes and to add History Data and new charts for the individual ETFs.
The Best 5 Stocks will include some changes as well as the Best 5 Pairs. We have adjusted our methods of choosing what to include in these groups and we hope to see improvements in both.
You will not see any changes in the Volatility Pairs although we have some interesting mods in the algorithms and we expect the signals to be better timed.
I am sure you have noticed that the Best 5 Stocks are usually good performers on their own merits and our algorithms do not make so much difference when the underlying asset moves well. However, they may be subject to more powerful reversals and the algorithms help to get out quickly when that occurs.
Recall that we recently had a stock with sudden legal problems, which was not helpful, but we also had a buyout offer on another stock that gave us a one-day boost and then nothing for the rest of the month.
Regarding algorithm performance, the elimination of annual losses is very noticeable if you check out the individual back test charts on each group page.
The change in the Best 5 Pairs is small but may be significant. The new selection will include pairs that meet all our volume and performance requirements, but we added a need for better performance on the downside with the expectation of improved overall performance.
Volatility Pairs are a different story. We started some years ago with volatility and were greatly disappointed when Credit Suisse took XIV off the market. We have entered that market again with our concentration on safety and limited risk using inverse pairs.
Volatility moves to a different drummer and we have adapted our short-term inversely correlated pairs algorithms to take advantage of the volatility market. Long term followers will know our saying that – Volatility always eventually returns to the annual average value.
Traders in volatility know that the VIX Volatility Index never goes down to zero and never goes up and stays there. Just like a yo-yo, – it goes up and down and continuously crosses the annual average value.
Our 2 Volatility Pairs have performed well and should do well in our ranking Chart 1x in the future.Wednesday - Oct 31st 2018
Over 1,000 Trades in 240 Days.
We are always looking for new ways to assess our progress and improve results where we can find opportunities.
These totals include duplicates as some ETFs are being used in different groups.
The current set of charts date back a total of 240 days to March 5, 2018 and include a total of 1,005 round trades since then.
There were 601 profitable trades making a total profit of $15,957 or $26.55 each trade and 404 losing $8,242 or $20.40.
That translates to a winning percentage of 60% wins and 40% losses for the entire period since March.
Some followers will recognize that this ratio has gone down from 70% winners in recent times and I must point out once again, how difficult this election period has been for traders and not just for our algorithms.
Fortunately, we have been doing this for a few years and markets do not always behave in this way. Of course, surprises will always move markets up or down, but they will not always reflect political dialog and hateful rhetoric.
Our emphasis from day 1 was to produce a method of zeroing in on tomorrow and how we could find sources of data that will help make these decisions. My confidence stems from how well this has worked during the 3 years that we have pre-published our trades.
I started the blog today with a few numbers and a few complaints about the current climate, but we have gained knowledge from this current exercise and have already made some adjustments to our selection process and to our algorithms.
You have already seen the obvious superior results being obtained from our pairs trading groups as opposed to the straight bullish groups and some additional tweaks will be applied in November.
Not to stop there, these small but significant changes will be added to our volatility pairs in November also.Tuesday - Oct 30th 2018
A Good Time to Review Results.
Now is a good time to look at our results, especially close to the end of this political period of small gains and great volatility.
If you are trading any of the ETF groups, this political season has frustrated your profits especially if you started recently.
This is a great reason why we concentrate our algorithms more and more on trading inversely correlated ETF Pairs that perform great in most markets.
The bullish single direction groups have given some early profits back and are currently disappointing but will improve.
So, we need to look at what is going on, and a good place to do this is chart 1x which is available every night on the Blog or website.
First, if you are using Interactive Brokers.com which we also recommend, your brokerage fees are about 1/3 rd. of those listed on the charts from Tradier. Although we also use Interactive, we started all the listed groups with Tradier and will stick with them for now.
Tradier does offer $200 or 60 days of free trading for new accounts if you use the code ROEBUCK200.
Brokerage fees affect everyone, but it should also be noted that the professional accounts that we correlate the IM groups with, generally are charging 1% to 2% per year to their clients, depending on funds and fees. Also, the size of your trades makes a big difference. We have standardized our trades at $2,000 per ETF to have all the comparisons that we need to publish.
So, it is the single direction bullish groups in this political climate that have mostly been a recent challenge.
Recall that the IM Bull 3x group is 95% correlated with these professional investment portfolios and they include US, EAFE, and Emerging Stocks plus Fixed Income bonds. At 25% current return and 38% annual gross return, it is doing more than twice the profit of professional world-wide portfolios that you compare it to.
All our charts use $3.49 Tradier commissions whereas Interactive Broker commissions are about $1.00 per trade. The net current commissions on the above IM account would be less than 6% and the annual profit would be about 32%.
The combination of our 1-day short-term algorithms and 3x leveraged ETFs are providing great results but this political season of day by day reversals and high volatility is not the climate that works best for anyone.
All groups of pairs have worked their way to the top of the current ranking list on chart 1x and long-term we expect them to stay there. The two Bull 3x groups remain at the bottom of the ranking and the bullish Best 5 group has also fallen from the #1 position.
We will soon be out of this election period and back to the markets we were experiencing before mid-September. Short periods of reduced performance and shocks associated with overnight news items will always be present. However, overall performance remains excellent.Monday - Oct 29th 2018
A Day of Great Sadness.
As an immigrant myself, I need to participate in a day of sadness and remembrance today.
My early days were spent in and out of an air raid shelter and I intend to join in the days for a revival of the unique American journey that brought me here.
Normal service to Customers will remain and the Blog will be back tomorrow.Friday - Oct 26th 2018
8 years ago, we were making changes all the time but now we offer services to Customers, we must treat changes more carefully.
You know that my motto has always been – There is always a better way.
And so, we have several changes that we have been testing that are increasing the profitability of our algorithms. How long should we test and how long should we wait before publishing them?
We normally make changes at the start of each month and we will begin by making some of these adjustments in November.
One change that we consistently make is the selection of stocks in our list. Recently, we have reduced our list down to only 5 stocks mostly because of the increased safety in trading inversely correlated pairs.
Much of the time, our two best performing groups have been Best 5 Stocks and Best 5 Pairs 3x.
We are changing the method we use to select the best stocks and are confident that we will see long term improvement. In any of these changes we can quickly go back to previous methods if we see that need.
The second change we are making in November involves the selection of the Best 5 Pairs group.
One of the difficulties that we all face is the investment climate that we find around us. Many articles and suggestions, some that we have referred to, indicate how the current political mid-term elections may affect conditions going forward. We have certainly suffered some of that effect since early in September and we are aware that a different climate may be present after the elections.
Some interesting results show that the two sets of Bull 3x groups have not performed as well as the Pairs 3x groups. You can see where inversely correlated pairs are high on our list for less risk due to trading both directions.
Another interesting note that we will be discussing soon is the way the Volatility Pairs group has crept up in the 1x ranking chart.
As always, if you see a change in the assets for the group that you are following, we recommend 2 simultaneous trades to sell the old and buy the new.Thursday - Oct 25th 2018
Trade at Open Tomorrow or Close Today.
Is it a bad idea, a poor decision or just plain wrong to wait until tomorrow morning to make our trades?
I finally had a question about this and realized that we should explain why we do it as it did seem like a problem when we first started.
You might have slightly different results than we do because the value of your shares might affect your result.
We have eliminated the broker commissions as it makes no difference to this calculation.
Over thousands of trades we calculated the difference in value between the closing price today and the opening price tomorrow is $0.16 of additional cost to us. This probably reflects the upward trend of the markets.
However, as we make the same number of buys and sales on the following day opening price, it costs $0.16 cents per share to buy but we make a profit of $0.16 cents per share on every sale.
So, the benefit of having all evening to decide and make the trades ultimately makes little difference to our trading methods but does add a great deal of convenience.Wednesday - Oct 24th 2018
Algorithms Search for Similarities.
Unfortunately, we all woke up today to find another news item that will most likely hurt us all. These overnight shocks to the system have results, whether partial or intended, and algorithms that we create do not like them.
I can only say that in the long run, the blips will mostly be buried, but few systems that are looking for multiple repetitious indicators can be prepared for random social or political events.
We will continue to let our algorithms recalculate every day but also repeat that personally, I look forward to the days after the mid-term elections.
We are both excited at our progress but disappointed at this event and this election news cycle. Having left the UK in 1963, my first comments on overnight news events was the BREXIT vote surprise when the UK voted to pull out of the European Community.
As a consumer of all things Winston Churchill, who first spoke of the need for European countries to organize, I was disappointed by that news. However, it cannot go unsaid that the women in my family voted against BREXIT, showing once again, their wisdom.
When dealing with leveraged ETFs, it is like trading options in that losses can appear quicker than profits. I learned the lesson then that selling was always an available strategy.
Enough negativity. As of yesterday, we do have some great results ranging from our IM Bull group at 42% to our Best 5 group at 160% annual returns and we see some investment climate and algorithmic improvements coming very soon.
One of these changes will be our Best 5 Pairs 3x group which has currently produced 102% and 144% annual return.
Also interesting is the Volatility Pairs are performing better now.Tuesday - Oct 23rd 2018
Professionals are Holding On.
A brief look at those originating professional investment manager portfolios shows little change today.
1%-2% cash and 14%-15% fixed income is still the norm even as interest rates have edged higher. A rumor today was that the next interest rate hike may be later than expected.
65% of mixed US stocks along with 16% of EAFE stocks (Europe, Australia and Far East), topped off with 3%-4% Emerging Markets.
Barely one or two percent shifts from recent monthly totals.
Our Ratios, Ups and Win charts have lost some wins and are down from the 70% range to 61% today. Ratios are also cut in half from about 4 down to 2.
Personally, I am looking forward to November 7 when we hope to get back to a more normal trading climate.
Oil was down over 4% today and there is no shortage of fear as the VIX Volatility Index was over 24 again before closing around 21.
Monday - Oct 22nd 2018
Politics Can Be a Good Investment.
Oppenheimer & Co and Bloomberg put together this chart showing the average returns for each quarter of the 4-year election cycle since 1929 and it looks like pretty good sailing after these elections.
The 3rd. quarter this year saw the S&P 500 closing at $2,914 and the average return for the 4th. quarter of 6.7% would take us to $3,109 by the end of 2018.
If we are to believe these averages, we will see a 12% gain from today for the balance of this year.
Who amongst us would not like to participate in this potential party.
So, for the sake of going to the party, I look at our Chart 1x for today and see that since March 5, 2018 the S&P 500 has gained 2.8%.
For the same period, Roebuck Systems average return for all 7 current groups was 61%. Now if we divide 61% by the 2.8% S&P gain, we get a multiple of 21 and continuing the party atmosphere, the 12% gain of the S&P 500 multiplied by our multiple will put our return from today at about 252% by December 31, 2018.
If we assume that this number is an anomaly, we can look at the end of the third quarter just to check it out. Sure enough, the third quarter from Chart 1x on Sep 30, the S&P 500 was up 8.7% and Roebuck Systems average was up 79%, giving us a multiple of 9.
Just as a further check, from Chart 1x after the second quarter, on Jun 29, 2018 the S&P was up 1.4% and our average was up 37%, giving us another different multiple of 26.
Obviously, these second and third quarter numbers cover a wide range. If I average all results together, I get a new multiple of 21+9+26 = 54/3 = 18, and if I multiply the expected 12% S&P 500 gain by 18, our profit from today will be 216%.
Finally, we can calculate all 3 individual results to see the range.
21 x 12% will give us 252% profit.
9 x 12% will give us 108% profit.
26 x 12% will give us 312% profit.
Returning to Chart 1x for today, our annual return for all 7 Roebuck Systems groups since March 5, 2018 is 96% and this in the middle of these difficult Mid-Term elections. My goal for December 31, 2018 is somewhere between our current return of 96% and the high potential of 312% so I will be at the party.Saturday - Oct 20th 2018
Updates and Changes.
We keep looking for improvements to our algorithms and recently you may have seen my comments on the changing market climate regarding politics and the government Partisan Conflict Index.
Elections may be the leader in market climate seasonality but not enough for us to make significant direct changes to the algorithms today.
We have always based our models on changes to tomorrow and then repeating that process every day whereas other models are often based on weeks or months and even annual cycles.
We did show recently where the average downward correction during the last 56 years for mid-term election years was 19% but the average upward move for each of the following 12 months was an average of 31%.
My point is that zigzag prices on a daily schedule are not helpful to algorithms that only look short-term at tomorrow and of course, that refers to us. The other side of that coin though is our unique ability to stay with and multiply profits from trends and take advantage of that 31% gain statistic.
I am not a politician, but I have heard it said many times that the best times are those with mixed governments and mixed economies.
Regarding the changes that I started to discuss, I do anticipate some differences in the algorithms in the next month or two. We did accumulate an enormous amount of data over these past 8 years and some positive adjustments will be made.
Thursday - Oct 18th 2018
IM Groups versus MIX Groups.
We generate a monthly updated portfolio of professionally managed assets that are currently held by large world-wide Investment Managers.
We then build a matching portfolio with a set of 10 ETFs, (Exchange Traded Funds) that are approximately 95% correlated with the Investment Manager Portfolios.
Our initial group consists of 10 bullish 3x leveraged ETFs that reflect the same mixture of assets and fixed income investments which we adjust each month.
We call this our IM Bull 3x group.
The above group is made up from ETFs that have Inversely Correlated ETFs that trade in the opposite direction.
Each of these pairs make up our second group and consists of 10 pairs of 3x leveraged ETFs that also reflect the professional investment managers.
We call this our IM Pairs 3x group.
It is important to note that our algorithms base their daily Buy and Sell signals, by projecting direction for the next trading day only and are then recalculated after each day.
By using these signals for the IM Bull 3x group, they tend to stay with profitable moves and get out of the position when changes are projected.
Signals for the IM Pairs 3x group, when changes are projected, they will signal a Buy for the inverse version of that ETF pair and will then tend to stay in the new position until a reversal is projected.
Our next two groups operate in the same way as the first two groups except they do not reflect any managed portfolios. They are chosen from different industries and sectors that make up a high performing and high-volume group of ETFs with few monthly changes.
The first of these two groups consist of a mixture of 10 bullish 3x leveraged ETFs and we call this our Mix 10 Bull 3x
Similarly, the second member of this group is made up from the same ETFs along with their Inversely Correlated ETFs which we call our Mix 10 Pairs 3x
Our next group is a selection of bullish performing stocks/ETFs that have a recent history of high performance which we call the Best 5 Stocks/ETFs.
This group can change the most at the beginning of each month.
From all our pairs selections, we make up a list of 5 inverse pairs that are currently performing well and create the Best 5 Inverse Correlated ETF Pairs.
Finally, we have two pairs of inversely correlated ETFs that are derivatives of the VIX Volatility Index called Volatility Pairs.
We also include the VIX Index itself, although it is not available for trading except through the various derivative assets.Wednesday - Oct 17th 2018
Fed Partisan Conflict Index.
The Federal Reserve Bank of Philadelphia tells the story of our political volatility since 1982 with their Partisan Conflict Index as shown below.
It displays the recession that started in 2008 and the doubling in partisan conflict for the next 8 years but it also shows still greater conflict during the past 2 years.
(blog continues below charts)
I have often referred to the political news cycle and how it can affect our algorithms but sometimes it helps to see it more effectively demonstrated by this chart. It really helps to know the climate that we are in and especially notable are their comments regarding elections.
Here are some of their comments from their website which specifically apply to the source and the effect of elections: –The Partisan Conflict Index tracks the degree of political disagreement among U.S. politicians at the federal level by measuring the frequency of newspaper articles reporting disagreement in a given month. Higher index values indicate greater conflict among political parties, Congress, and the President.
The index is an outgrowth of recent Federal Reserve Bank of Philadelphia research that finds that the index tends to increase near elections and during debates over such contentious policies as the debt ceiling and health-care reform. Research suggests that increased partisan conflict increases uncertainty among firms and households. Such uncertainty has been shown to slow economic activity by delaying business investment and consumer spending.
My comments are more to do with the near 55% drop from March 2017 when the index topped out at 271 down to the latest reading for September 2018 of a much lower 127.
Looking at this as a built-in volatility index, this last period would tend to work against smooth trends and give more support to those short-term reversals that are difficult to define.
Overall, there is support for upward trending markets after the elections.Tuesday - Oct 16th 2018
Markets Regain a Third of Their Dip.
It is good to see prices regain some of their recent losses but there is little happiness in the news today.
We were well positioned in the Best 5 Stocks but caught in a few switches in some of the Pairs groups.
Looking one day ahead as we do, will usually end up in choppy conditions when trading with inverse pairs and we much prefer seeing markets go in the same direction at least for a few days.
Three days ago, the VIX Volatility Index was near 29 and ended today down below 18.Monday - Oct 15th 2018
Mid-Term Election Corrections.
Received this chart over the weekend provided by Strategas Research Partners and found it to be a very interesting historical look at our upcoming elections.
As measured by the S&P 500 this year, we closed out 2017 at 2,673.61 and the low point this year so far is 2,532.69. That is a 5.27% maximum decline so far for this year.
This year appears to be the smallest decline in any mid-term election year since 1962. The previous low was down 7% in 2014 during President Obama final 4-year term.
Not very surprising is the worst mid-term election year was 1974 when President Nixon resigned. In that year the markets were down 38%.
The average market correction for the previous 56 years of mid-term elections was down 19% as seen on the attached chart.
Now comes the good news. One year later after every election, the markets were up by an average of 31%. The smallest gain was up 9% and the largest gain was up 58%.
Always looking for numbers that might possibly tell us where the future lies, I noticed that in 1974 when the market low point was down 38%, one year later in 1975 it was also up 38%.
In 2014, when the low point was down 7%, one year later it was up 9% so there does appear to be some possible correlation between these numbers.
If so, and if you like to gamble, the markets in November 2019 might be up in the range of 5% to 7%. A cautionary note would be that this year is not finished yet and we may need to recalculate.
We did also have 2 other significant short-term corrections within this year. The January-February correction was 11.84% and this recent October correction was 8.43%.Saturday - Oct 13th 2018
Most Indexes Back to 200 Day MA.
This is true except for the Russell 2000 and Emerging Markets, which indicates that the larger equities have put the brakes on to test the winds on Monday.
While looking at charts and those moving averages, and considering past habits (before algorithms), I was looking at our Best 5 Pairs for this month.
(blog continues below charts)
I found it interesting that we will own all the bullish sides of these pairs at moving average levels after trades on Monday morning. I mention this fact because those moving averages are not directly within or a part of our algorithms.
I liked seeing this because it shows a relationship between all the technical indicators that we watch over the years and our algorithms.
This week demonstrates the nature of algorithmic trading. We need to shed some positions on the way down so that we can buy back into those positions on their way up. It also demonstrates where that extra profit comes from when using inverse pairs trading.
You get to make that extra profit from those positions that have reversed quickly and were within the harmonics of their algorithms.
Nobody wants a recession or market reversal of any size, but it creates the insurance policy that comes from pairs trading. It is likely that you could ride the down move for much of the way down.Thursday - Oct 11th 2018
Pairs Traders Can Deal with Reversals.
That does not mean we like reversals, but it does help alleviate the worry in the longer run.
The problem with algorithms is you still remember all the years of intense decision making that brought you to the point of liking them.
Inverse pairs trading puts the icing on the cake, but few people enjoy these days, especially if you still watch the markets and political news all day long. They continued with their slide today even though interest rates are still low, the economy is high and tax cuts are still feeding the frenzy for a while longer.
The markets have all overshot the 200 day moving averages on the downside. We are certainly living in a new world today and probably must learn new rules of investment.
Inverse pairs trading allows for changing times and changing directions, especially with a set of algorithms that have a history behind them. Admittedly, we traded up to the higher risks of leveraged ETFs instead of their un-leveraged equals. We did this because we accept the higher volatility and the rolling losses incurred by the producers of the leverage.
However, these turn out to be positives, especially when looking at the smoothness of the daily graphs of pairs groups versus their bullish-side only group.
Zigzag prices on a daily schedule are not helpful to algorithms that only look short-term at tomorrow but if prices did start moving in a zigzag pattern, our algorithms would soon catch up with it.Late Wednesday - Oct 10th 2018
Volatility - Late comment on signals.
Volatility Pairs are showing large advances from the close and should only be bought close to their Wednesday market closing prices.Wednesday - Oct 10th 2018
A Chaos Day for the Markets.
A large number of trades today and many of them signaling a switch in direction although several pairs were in a neutral position.
The Dow was down a huge 832 points or 3.15% and the S&P 500 was down 95 points or about the same at 3.29%.
The volumes today were extreme compared to recent days and the news all day was more and more concern about Hurricane Michael and all the damage.
These actions over the longer-term favor pairs trading due to some of the trades being in opposite directions.
As we run the algorithms every day to get these quick decisions, the worst situations are those that reverse just as quickly as they occurred today. Fortunately, that is unusual and would not be helpful to us.
The pairs trading in larger groups usually comes out best of all because we are likely to be in opposite directions in some of the pairs and if the trends continue for more than a few days, we can profit from them.Tuesday - Oct 9th 2018
Minimum Test or Minimum Investment.
A good way to test our algorithms and at the same time, test our Inverse Pairs trading would be to select from our Best 5 Pairs 3x group.
Many times, a quantity of 3 is mentioned as a minimum number for any test. That would be good for testing a program, but I recommend 5 when testing is complete and serious investing begins.
For first timers trying inverse pairs, a single pair from any of the groups with $500 or more would work but I recommend reading the Blog on Saturday Oct 6 2018 for more information on this subject.
Of course, any of the Best 5 Stocks would also work as well as any of the ETFs but the bullish side of the ETF pairs is usually more profitable than the bearish side.
Worth repeating here – When our algorithms signal to buy the second side of any pair of ETFs, you can decide to buy it or decide to sell the side you already own. Both actions will place you in a neutral or close to neutral position as all these ETF pairs are inversely correlated.
Testing small groups with our algorithms works well because they quickly get out of any investment and in the case of inverse pairs, they also get into the opposite direction very quickly.
It is no surprise that as we sort out all US stocks and all ETFs that make up our seven groups, the small groups of 5 pairs or 5 stocks tend to hold the highest ranks for profitability. The larger groups of 10 bullish ETFs and 10 inverse ETF pairs rank lower.
The 2 volatility pairs that we offer belong to a unique sector of investments along with the VIX Volatility Index and are often used separately for hedging with Futures and Options derivatives.Monday - Oct 8th 2018
Wikipedia on Black Boxes!
After receiving a comment, I checked with Wikipedia and read the following: -Almost anything might be referred to as a Black Box: a transistor, an algorithm, or the human brain.
Regarding the algorithms, we have developed mathematical algorithms that we call Boosters and we certainly have heard about them in Black Box investment programs.
It has been a continuation of a career in engineering as well as a second part-time job trying to be an investor.
Transistors are also familiar as I had an early experience with them.
Many of us had crystal sets when we were young kids, and I remember wiggling the steel spring against the crystal to find a radio station. I found Radio Luxembourg with enough volume, but it was often drowned out by Mr. Tuck from 4 doors up the street, whose hobby was broadcasting on his short-wave radio.
At some point, I acquired a transistor that would replace the crystal and suddenly I had my first transistor radio.
Our Black Box is a series of mathematical formulas (with a few transistors) that mimic the human brain just as Wikipedia says and it sends out signals to Buy or Sell.
This Black Box currently produces a 3.4 ratio of profit to loss from all trades and a 2.4% first day only profit from all Buy signals. It also produces a 65% combined winning trade percent from the entire selection of ETFs and Stocks in all our groups.Saturday - Oct 6th 2018
First, Decide Which Group You Like!
We like charts and we have another for you to look at. Profit is the chart name and it may help you to define which type of investing you like to do. There are 4 main groups that we currently employ and specialize in with our algorithms.
First are the two IM Investment Manager groups that correlate better than 92% with professional manager accounts including fixed income. If you trade all 10 bullish ETFs or 10 ETF pairs, you match their account selections as well as being in 3x leveraged ETFs.
However, unlike their accounts, you will trade in and out of each position by using our algorithms to increase profits.
Looking at the Profit chart, IM Bull 3x made $7,476 and IM Pairs 3x made $12,298 in the 7 months since March 5. On average, they made $5.91 and $6.53 for every day that each ETF was invested during those 7 months.
The chart lists the total number of days that all ETFs were owned during this 214-day period. Example, 1265/214 days = average of 6 bullish ETFs held every day or 1885/214 days = 9 sides of the 10 ETF pairs held every day.Comment on pairs trading
– When our algorithms signal to buy the second side of any pair of ETFs, you can decide to buy it or decide to sell the side you already own. Both actions will place you in a neutral or close to neutral position as all these ETF pairs are inversely correlated.
Second are the two Mixed 10 groups of ETFs that are also 3x leveraged but are not correlated to any investment program. However, they are almost 100% inversely correlated pairs in a variety of sectors. You can select all 10 of these pairs or choose just those that you prefer.
Looking again at the chart, Mix 10 Bull 3x made $10,309 and Mix 10 Pairs 3x made $15,703 in the same period since March. On average, they made $7.79 or $7.76 for every day that every ETF was invested during the 7 months.
Next, we have two Best 5 groups. The Best 5 Stocks group sometimes changes each month and includes 5 current selections that have good potential performance with our algorithms. The Best 5 Pairs 3x group can also change each month and includes our selection of the best performing inverse pairs from the above 20 pairs.
Once again from the chart, Best 5 Stocks made $13,200 and Best 5 Pairs 3x made $11,534 in this period. On average, they made $14.95 or $12.26 for every day that each was individually invested.
Finally, our two current inverse Volatility Pairs represent our move back into volatility trading. As they are based on the VIX Volatility Index, they have unique patterns of profit and loss and currently made $1,632 during the period and $4.49 per day per ETF when invested. We also run the VIX Index through our algorithms as an added feature for those subscribers that use it and find it helpful.
We run all 50 algorithms every day and send out our Blog plus charts to all followers every evening and include signals to all subscribers. I hope this explanation of this chart helps you to follow our available programs.Thursday - Oct 4th 2018
The Geopolitical Risk Index.
The political affects on the stock markets since the 9/11 attack have never been able to get back to the latter half of the 1990s as measured by the Geopolitical Risk Index.
The low point was 2012 and it has been rising ever since with a couple of peaks in 2014 for the Russia-Ukraine crisis and in 2015 for the Brexit vote in the UK.
Unfortunately, the 12-month average is still going up and the volatility is also rising. This makes it more difficult to follow trends and requires another degree of expertise in politics.
The two crises above happened very quickly or overnight with regards to the Brexit vote, but both had lasting effects.
The continuing increase and volatility appear to be a result of extreme partisanship and identities that we are now experiencing but it is probably going to take just as long to go away as it has taken to occur in the first place.
We cannot claim forward knowledge of this news cycle 8 years ago, when we started with our algorithms, but we can claim their benefit as we look at them today.
The two ideas we had initially, were to use professional asset selection and second, to concentrate on which direction will these assets move tomorrow and then to re-check the direction every day.
By checking the individual back-testing of the current selections on the group pages, you can see how quickly they tend to get out of trend reversals and how long they will also wait to get back in.Wednesday - Oct 3rd 2018
Tempted to Read the Tea Leaves.
Occasionally you get a day like today and you want to slip into old habits.
From our Investment Manager selections, Gold Miners and Bonds are both changing directions according to our algorithms.
They are going bullish on the gold miners and bearish on bonds tomorrow and there are different ways of interpreting those facts according to what you follow.
I look at the algorithms and do as I am told but I did sneak a peek at the charts and gold miners are in a longer term down trend but recently up against their 50-day moving average.
On the other hand, bonds have recently had a strong move up and away from their 50-day moving average as well as away from their 200-day moving average.
So, it looks like gold miners are in a longer-term down trend, but we are looking for a short-term reaction. With bonds, they have strayed too far away from the averages and our algorithms are seeing an opportunity for a shorter-term bounce back to their averages.
Call me lazy, but I can take all night deciding what the meaning is behind all these technical details (which often disagree with each other), or I can do what I am told to do by the algorithms in about 10 minutes.
We mathematically look back as far as the data seems useful and attach ourselves to current trends but get out quickly if we are wrong.
Come to think about it, that seems very similar to when I used to take all night to make the same decision.Tuesday - Oct 2nd 2018
Chart 1TPC on Current Selections.
Occasionally we show this chart and perhaps we should do it more often.
It primarily was meant to measure the performance of our algorithms compared to the S&P 500 and as shown we have 5 ETFs performing worse and 45 performing better. Only 1 of them is minus and that is DRIP which pairs with GUSH, the best performing of all.
In fact, GUSH appears twice this month because it also appears as one of our Best 5 group.
All the better performers are in the top ten along with a sprinkling of 5 ETFs.
We do make some progress each month as we make the selections for the various groups. I am probably not going to mix ETFs into the Best 5 group in future months as it does create these duplicates and I think we are better off with our original concept of separation.
Had a great question again today about our original Investment Manager group and am putting my answer here as it may help others. - - - -I am curious if you have algorithm for etf's only, but without the leverage (2x or 3x) or inverse etf's.
Great question - when I started I had decided to analyze what the best and biggest accounts around the world were doing so that I would not have to choose the stocks or funds.
I then matched the portfolio with ETFs that correlated my research because they are moving to ETFs as well. I found that my algorithms improved the return by 200% to 300% and because I concentrate on very short-term projections, we quickly got out of assets that reversed direction.
Next, I matched the portfolio with leveraged ETFs because I was able to get out so quickly. The net result is that nobody wants to know about the non-leveraged groups when the same concept works so well with the leveraged version. Further than that, by using the inverse pairs concept the results are even better.
I should have added that now we have the IM Bull 3x group which uses the bullish side of the IM Pairs 3x group. Both perform well and much better than the non-leveraged groups.
For a long-term larger account, I have to recommend the IM (Investment Manager) Pairs but they are all based on the same algorithms. Thanks for your question. MalcolmMonday - Oct 1st 2018
Why Include the VIX Volatility Index.
The S&P 500 is widely followed as the benchmark of large cap US stocks and represents about 80% of available capitalization.
The VIX Volatility Index is a measure of the expected future market volatility of the S&P 500 Index as measured by options on the S&P 500 Index.
Bloomberg published about 12 years of the relationships, (2000 through 2012) between the S&P 500 and the VIX Index showing an inverse relationship for about 80% of trading days. So, why include the VIX Index if it cannot be traded?
Like most assets these days, ETFs are available to traders for the VIX Index.
Bloomberg results for 12 years tells us that if stocks are trending up, volatility is trending down and vice-versa.
Unlike gambling on red or black, if you have knowledge of the future direction of this Index, you have an 80% to 20% advantage of knowing the direction of them both.
If you consistently watch the news and the Feds increase interest rates by 1/2%, that could depress markets and increase the odds of volatility going up.
On the other hand, if the news tells you that unemployment has an unexpected drop, your fear of the future is reduced, and markets may go up with volatility going down.
This explains why the VIX Index is also known as the FEAR INDEX.
This is a day-traders signal and with your finger on the buy or sell button, you could make gains until the news tells you to reverse your trade.
We have added the VIX Volatility Index because traders who feel comfortable with highly leveraged ETFs may also find the VIX to be a useful additional tool.
Volatility is a unique Index and we do not have a series of similar assets for comparisons. Our VIX algorithms are related directly to volatility only.Sunday - Sep 30th 2018
Pairs Trading Techniques.
I am the most convinced user of our algorithms, especially with their unique ability to perform with inversely correlated ETF pairs trading.
If you trade them as I do, you can sit back with confidence, but you will have a decision to make at some future date and I want to give you all the answers.
Whether you are trading one pair or many pairs with our algorithms, you will come across a time when we will signal you to sell the second side of a pair after you already have previously sold the first side of that same pair.
There is no decision to make here because our algorithms are predicting that neither side is in a strong position to go up tomorrow and that the likelihood is they are not a strong buy. I have found no reason to override this decision.
However, the odds are that one of them will go up if for no other reason that leveraged ETFs are correlated to move in 100% opposite directions when the market opens tomorrow.
It does not mean that when the markets close tomorrow, they will still be 100% inversely correlated but it will be very close to 100% and not mathematically worth any risk. So, if you only own 4 of your 5 pairs or 9 out of your 10 pairs, it is better to hold the cash because time will normally be short.
Next, you will come across a time when we will signal you to buy the second side of a pair after you already bought the first side of that pair.
My recommendation here is to follow the signals ONLY if your account has available cash to make that additional buy without bumping up against the Banking Rule of T+2 days.
Only one side of the pair will go up tomorrow and the small odds favor the side that is currently making the most profit. Unfortunately, the side that goes down will still lose almost the same amount.
My second recommendation in this situation is to sell the first side that you previously bought rather than buy the second side and to wait for a definite signal.
Therefore, I am not undecided. It depends on cash available in my account and my trading mood on the day. The profit difference is very small, and commission costs cancel each other out. I will be effectively neutral whether I am all in or all out.Thursday - Sep 27th 2018
Simple, Proven, Current & Profitable.
Simple – you get daily emails and/or texts with simple convenient instructions to buy or sell at the opening price any time before the markets open tomorrow.
Proven – you can see a great deal of pre-published trades continuing today, with graphs and charts of every trade placed at opening prices that can be confirmed.
Current – you will receive 30 days of free trades for you to follow exactly how our algorithms will work for you.
Profitable – If the system does not pay for itself within 30 days, I will send you another 30 days until it does.
Simple because 5 -10 minutes in an evening is all it takes to receive our direct instructions to Buy or Sell or do nothing.
We run all our algorithms beginning at 3:00 pm Chicago time every day and send out their instructions to you in the early evening. From my own personal experience, I enjoy the freedom of not being tied to more extensive decisions, but the real pleasure is knowing that in the longer run, they quickly adapt to the changing conditions and news cycle.
Proven is a matter of seeing results for yourself every day but also reviewing the individual charts and historical data that continues to be published before any trades need to be made.
Currently, I just looked at some live charts that we occasionally publish for followers and offer these observations representing the last 6 months.
Our RATIOS chart shows that our winning trades make 3.92 times more profit than the losing trades.
Our UP chart shows a total of 732 trades with 54% of those trades ending up on the first day and a FIRST DAY ONLY profit of 2.5%.
Profit comes in various ways and for us, our WIN chart shows that 67% of our trades end up with a profit.Wednesday - Sep 26th 2018
MIX 3x versus IM 3x Groups.
We often refer to the fully correlated 10 IM or (I)nvestment (M)anager groups that we initially worked with using our Booster algorithms.
Here are more details for the 10 Mixture groups that we include on Chart 1X and which are currently performing well.
Correlated inverse pairs with enough volume are in limited supply. Our primary goal is to use available ETFs to match and correlate with professionally selected portfolios that are currently preferred.
Mix or (Mix)tures are selected from ETF pairs that are NOT included above.
Limited supply does not mean limited trading volume. Some of these ETFs represent huge volumes and are held and often preferred by managers of the largest portfolios. They represent a fast-growing industry and group of assets that save management costs when compared to Mutual Funds.
Our MIX groups, unlike the IM groups, do not represent any special selection or concept.
However, we do split both the Mixture group and the Investment Manager group into two types of investments.
The first split is by solely investing in the 10 bullish sides of each pair. After a Sell signal, they remain in cash until the next Buy signal occurs.
The second is by investing in both sides of the pair at different times, commonly known as Inversely Correlated Pairs Trading. This offers the advantage of trading in both directions. These pairs are most often 100% inversely correlated and have the advantage of one side going up while the opposite side goes down.
Our algorithms are completely independent and occasionally buy or sell both sides of the pair during a day or two of indecision.
Some followers will adopt the concept of never buying both sides. On the day that a second buy occurs for any pair, they prefer to sell the side they already own, rather than buy that second position. Either way puts you into a neutral position for that pair.Tuesday - Sep 25th 2018
Dow January High $26,616 Being Tested.
A couple of days above and a couple of days below. While the Dow is probably the most watched index, others have ploughed through old highs and we appear to be resuming a positive trend.
Volatility is low, and many individual stocks moved ahead today giving our Best 5 group a nice boost.
Our average group from Chart 1X is currently up 74% from early March while the S&P 500 is up about 8.7%.
Eight times better than the S&P is a good place to be although recent activity has been slower.
Risk is a large influence on our efforts going forward and all groups benefit from the rapid ability of our algorithms to bail out of reversals. Recent activity seems to have seen too many reversals with indecision in either direction.
The smooth upward trend of our charts demonstrates the value of looking at tomorrow and not waiting for trends to develop.
When trends do develop we either stay in or stay out except in the case of inverse pairs trading where we participate in every trend whether it is going up or going down.
Our groups have also maintained their rank in terms of profit with the Best 5 stocks staying at the top. These 5 are chosen from the entire range of US stocks or ETFs each month and all generally have a recent history of strong upward movement.
We can put these strong performing assets in this small group because we have the confidence of getting out quickly. We have had a couple of surprises in the group. One was a takeover at a higher price which then sat at that price for the rest of the month and the other was an announcement of illegal activity by Company Directors. Not good and both are difficult to put into an algorithm.Monday - Sep 24th 2018
October Changes Next Monday.
We review our algorithm choices every month based on Professional Investment Managers, current trends and recent performance.
Investment managers have made few changes in their portfolio mixes and confidence remains through 2019, mostly due to recent tax bills helping subsequent earnings growth and share buy-back programs.
Interest rates are slowly rising but political news is still causing some erratic market days. We will have no changes in the IM Bull 3x and IM Pairs 3x groups.
We do expect to eliminate the UGAZ/DGAZ pair from the MIX Bull 3x and MIX Pairs 3x groups and replacing them with the ERX/ERY pair. This change keeps the pair in the energy field but should offer greater returns.
We are also reducing the US stocks from 7 to 5 which will eliminate the Best 7 US Stks group but will retain the very popular Best 5. This group can include any of the bullish stocks or ETFs that we follow and retains the highest annual return status.
Finally, we have eliminated 2 of the 7 stocks to make way for another Volatility Pair. We still have followers who like volatility and who miss the very popular Inverse ETN (XIV) that we used to follow. We will be returning with an additional inverse pair UVXY/SVXY.
The VIX Volatility Index is a mean reversing index that always eventually returns to an average annual value. It operates as a market indicator and the derivatives, such as futures and options are important hedging vehicles in use in high volumes every day.Saturday - Sep 22nd 2018
Seasonality and Trading.
Maybe we should be pleased to see the end of summer vacations as various statistics show August and September to be difficult months for trading and for algorithms.
We did a quick sort of our ETF trades by date and found the recent high point for our algorithmic trading this year was Friday, August the 17 and the low point was almost a month later at Thursday September 13, with a slow improvement since then.
Still not back to normal but enough to confirm the widespread hope that Fall to Christmas is often seasonably good.
We have found that historical data up to about eighteen months is useful to us but anything beyond that is not. At different times, back-testing shorter or longer periods can improve results, but we have settled on algorithms for all seasons with steady results.
Initially, we often made changes, but it was too easy to fall into a trap of making too many variables that slowly became overwhelming. My Grandfather was a Spiritualist and I could have used his help, but he died before I was born.
We are always looking for the next recession and climbing the so-called wall of worry, but we have two of the best defenses against those future surprises.
The first of our defenses are the algorithms. They quickly get you out of reversals. Sometimes too quickly and sometimes too late but as we solely concentrate on what may happen tomorrow, in the long run, they make good average decisions.
For simply investing in bullish markets and trends, these algorithms will keep you in the trend or in cash until a resumption of the trend continues.
The second defense that works in your favor are the relatively new ETFs and especially, the inversely correlated pairs of ETFs. Our algorithms are direction-neutral. It makes no difference whether you are in a bullish or bearish trend, they will signal a reversal out of your trend with equal accuracy.
Consequently, when the wall of worry comes to an end, the algorithms in conjunction with inverse ETFs, will get you out of the bullish trend and put you into the opposite bearish trend, often on the same day.
With these inversely correlated ETFs, you can ride the profit on the way down, rather than sit with cash in your account.
There are statistics that show that bearish markets are steeper and faster, but once you are invested in that direction, your account will move with whatever the trend gives you. However, you are usually in the bearish trend for shorter periods of time due to the natural upward movement of assets.
ETFs that we select are a growing and much preferred asset for institutions and large accounts and the volumes offer much lower bid/ask spreads that benefit your trades.
From Chart 1X below, the IM Bull 3x group is currently running at 76% annual return whereas the IM Pairs 3x group is at 118% annual return. That adds up to a 55% improved profit from the pairs.
Also, from the same chart, the Mix 10 Bull 3x group has a current annual profit of 83% and the Mix 10 Pairs 3x has 127% which also adds up to a 55% improvement in annual profit potential.Thursday - Sep 20th 2018
Bankers – A Special Group.
Although we may concentrate on the high profit groups and their results with our algorithms, it is worth reviewing our Historical Data website page along with Chart 1X, where you will find our original and always available algorithm groups.
Look at the IM Bull 3x trading log and the IM Pairs 3x trading log.
Through 8 years of history, including 3 years of published prior-day trades, we began by selecting assets based on professional world-wide (I)nvestment (M)anager portfolios. Hence the designation IM in front of those groups for you to identify.
Chart 1x at the top of that page lists various portfolio groups that we currently make available to follow. Note the IM Bull 3x group currently has a profit of about 42% and an annual profit of 77%.
This group consists of 10 bullish-side 3x leveraged ETFs that as a group, correlate closely to the above professional portfolios including Fixed Income.
If you scroll down the page to the last but one chart, 1DC (Investment Manager Bullish 3x Booster), you will see the 6-month history and trades for this group.
We publish these charts every month with trades going to subscribers every evening for their next-day trades. Results through September 2 have about 41% current return and 83% annual return.
Scrolling back up to chart 1GC (Investment Manager Pairs 3x Booster), you see the 6-month history for that group also. This pairs group shows the same period results of about 64% current return and 131% annual return although the current annual return from Chart 1X is at 119%.
This pairs group consists of the same 10 ETFs above, plus their 10 inversely correlated partners, creating our 3x Leveraged Investment Manager Pairs Booster group.
Perhaps you could benefit from setting aside a small account for the next 6-12 months and have your account manager receive and trade our daily signals for one or both groups.
Our Broker commissions costs of $3.49 per trade are listed but may not apply to you. They currently average 14 round-trades per year per asset in both these groups. Obviously, they are fungible across different account values and the same would apply to our signal fees following our free 30-day test period.
A final comment. If you compare the graph portions of both groups, you see higher results from the inverse pairs trading, but you also see a more gradual and smoother profit performance when taking advantage of inverse pairs.Click here to add your email address to our free trial so that you can test and confirm whether our Boosters would work for you.Wednesday - Sep 19th 2018
Performance Ratios Updated.
Finding a trend in anything is done with several types of technical analysis such as Macd. The trick is then to choose the best time to get in or out of a position.
Changes in market conditions such as local or world economics can change the length or direction of the trend.
Our method of inverse pairs trading normally behaves like finding a Macd trend except we may find more of them.
By concentrating on tomorrow, we find more trends than end up coming to fruition, but the following Ratios Chart confirms our winners beat our losers.
Winners are currently close to 4.6 times more than the losses.
A good way of visualizing this may be the difference between Day Traders and Investors. They both can use the same Macd techniques but with different timelines.
The Day Trader is using 1-minute price intervals and the Investor is using 1-day intervals but they both buy and sell the same trade indicator.
Our algorithms are a little of both. They judge what is going to happen tomorrow but keep repeating the same calculation every day. The trend is measured and acknowledged every day, or it is quickly rejected as a direction change.
The consequence is we sometimes have extra blips by getting in and out because some short-term condition messes with our algorithms.
The advantages are we participate in more trends but get out quickly.
Another advantage with inverse ETF pairs is we participate in trends in both directions so most of the time, when we sell, we also buy in the opposite direction.
In addition, the rapid daily decisions enable the trading of highly leveraged ETFs because they easily overcome the rolling daily management losses that are typical with these assets.Tuesday - Sep 18th 2018
Risk, ETFs and Algorithms.
Risk is the first decision on your mind, whether you are investing your excess cash, your IRA, some money belonging to your favorite Aunt, your friend or client.
I have experienced all these situations and have usually taken the responsibility more seriously when it belonged to someone else.
These came to mind when I first started to try to use my career experiences to better invest my own personal IRA.
During the first few years, as partial successes turned up, I sometimes bent the rules to take advantage.
But, about three years ago, I first decided to find a more perfect way of selecting which underlying assets I could use to better take advantage of them. That is when I became convinced that big money was a much better source for the stocks than I could possibly do myself.
By saying big money, I am not referring to Warren Buffet or George Soros. I am talking about the money managers of large institutional portfolios for the largest of accounts, whether they belong to international bankers or individual nations.
I was able to review a few of these and produce a compilation of their general investments and boil it down to percentages of broad types of assets. The simplest division was stocks or fixed income, but it starts to get a little trickier after that.
For example, changes in anticipated trade and economies, as well as expectations for major nations and sectors, along with their expectations for future activity are beyond my pay grade. Interest rates, inflation and trends derived by their experts help them to take that middle road and make many small adjustments.
They can choose international stocks from US large cap to emerging sector small cap. They can also choose from long term floating rate notes down to short term overnight notes and everything in between.
In conclusion, I found they do adjust their holdings as indicated, but taken as a group, they seem to fall in line with many types of assets and many of the same assets. The fast rate of growth of ETFs and ETNs is becoming a preferred place to put those funds.
These Exchange Traded Funds and Notes can cut 1% off the cost of managed Mutual Funds and considering that 100-year returns are often quoted between 8% and 12%, this 1% advantage is quickly gaining favor.
So, after creating our percentage-based investment model and updating it every month, we select a set of 10 ETF inverse pairs that correlate better than 95% with our model Investment Manager Portfolio.
This now has become the source of our sets of 10 assets which all work together with our algorithms to form a well-balanced professionally selected portfolio. IM in the group names on Chart 1X below means (I)nvestment (M)anager.Monday - Sep 17th 2018
Algorithms in the Wrong Direction?
The great example of how our algorithms work is best seen on the pairs details at - Best 5 Inverse Correlated ETF Pairs.
With inverse pairs, half of them are always going in the wrong direction while the other half is going up.
Please look at the link on the left and scroll down to see 1 year of back-tested results on all 10 ETFs. You just need to look at the charts for TQQQ and SQQQ.
When TQQQ trends up, our algorithms go with the trend but when TQQQ became undecided, we increased the annual results from about 50% up to 200%.
During that same period TQQQ itself only went from about 50% to finish the year at about 80%
Now move down to SQQQ and see what happened there. While SQQQ went down for the year with a miserable loss of 60%, our algorithms managed a 40% profit. Also, impressive.
Below each graph is the history and dates with opening prices on each date that our algorithms signaled to achieve these results.
Each additional pair has similar charts to show their individual results in a one year back-test, but you can also see current results that are published every month on the Historical Data page. The same exact algorithm is being used every day to signal followers trades each evening.
Equally important are the individual charts for the Best 5 Stocks/ETFs group. They also demonstrate the action of the algorithms on a preselected bullish-trending group of assets. The difference is that these stocks were selected because they already were in a strong bullish trend.
When assets are already mostly going up, the algorithms stay with the trend but improve results when opportunities exist.
Below are samples of the new charts sent out each evening. We have added the signals for yesterday along with the new signals for today.
It is easier to see changes from current positions each day.
Friday - Sep 14th 2018
30 Days Free and No Credit Cards.
Difficult to believe so why not paper-trade for 30 days FREE of any charges.
Watch yourself making a profit in 30 days or I will give you another 30 days. Follow my trading experience.
Trade both the Best 5 Stocks/ETFs
and Best 5 Inverse ETF Pairs.
I trade them both every day.
I will add your email address to the Free list for 30 days. You can watch it happen.
Receive an email every evening with instructions what to Buy or Sell when the markets open on the following day.
You can paper-trade and see potential profits that you could have yourself.
The way to do it is to place your order with your online broker whenever you get the signals from us. There is no advantage in waiting until tomorrow morning to place them.
Do it all in 5-10 minutes in the evening and then wait until tomorrow night for your new signals and watch it grow.
We are not guaranteeing profits every day. Our algorithms are predicting tomorrow only and most of the time they pick the correct days to buy or sell. We use math and statistics so please take a look at our longer-term results. You do not have to watch the markets every day or all day long.
When you do watch the news and the experts all day long, it can be more exciting or more depressing, but far better to enjoy watching the markets at your leisure rather than watch all day long, unless of course, you are a professional trader.
As I said above, if your account does not grow to make the $29.00 monthly fee in 30 days, I will send you the signals for another 30 days until you do. This is a long-term system of profit-making and not a get rich overnight tip.
Our tips come every evening on a regular schedule, and if you look at our history, you can match our charts.Thursday - Sep 13th 2018
More Statistics for New Followers.
The Blog yesterday gave some statistics that are useful to understand and today I am showing newer versions of the charts that analyze our history.
We keep all kinds of numbers to continuously watch performance so that we can tweak our algorithms if necessary. I should tell you that no changes have been made since last year and we see nothing ahead of us.
As we said yesterday, we are constantly looking at tomorrow. These three charts continuously measure 8 different Groups and their performance. I will add some additional comments here.
First is the Ratios chart. We start all groups on the same date so that we have good comparisons and March 5, 2018 is the latest with 192 days of history for each group.
Ratios tells you the profits and losses of each group since March 5. You can see that we have a running average for all groups at almost 5 times more profits than losses. They vary considerably but each group has a different story to tell.
This demonstrates the fact that we get out of trades quickly and do not stay in losing trades.
Next, we have the UP chart. This chart looks at winning trades as a percentage of all trades and is usually above the 50% level. More specifically, it tells you the quality of the BUY signals and the average profit on the first day of the signal. It generally runs above the 2% profit level on the very first day that you place your BUY trade.
All trades are recommended for the next market day at the opening price. Tradier Brokerage calls this a market order that is placed any time before the market opens. I say this because some Brokers have different words to express the type of trade you are entering.
At Roebuck Systems, we always start a group with $2,000 in each stock or ETF and in the early days this profit would be in the $40 plus range. At Tradier Brokerage, our commissions are $3.49 per trade so we stand a good chance of staying in a profitable mode.
The third and final chart is WIN. This chart confirms that we continuously make profits in about 70% of all trades.
We know from the Ratios chart that those 70% of all trades produce about 5 times more profit than we lose on the remaining 30% of all trades.
These results have changed little in the past three-plus years and while they vary in each Group, they have time-proven reliability across different markets and varying market conditions.Wednesday - Sep 12th 2018
We Only Look at Tomorrow.
We concentrate our computers to look at tomorrow and we only start looking at 4:00 PM today, New York time, when most of the financial information for today as well as most of the news is already known.
When many trading systems and related algorithms are looking for longer term activity and economic news, we are just looking at tomorrow.
Seems a little strange if you are usually thinking of trends and economic conditions into the future but we want to be correct about tomorrow. Our average buy signals historically gain about 2.6% on the first day.
Just as important, when we first issue a sell signal, we end up with 70% winning trades.
Also, our average losses are much smaller than our gains which shows up in the individual charts on the group pages.
One good reason for these statistics is our ability to trade the inverse pairs in the opposite direction for more profits instead of holding losing trades until markets return to a bullish condition.
By concentrating on what will happen tomorrow only, we are not letting markets beat us up for long periods of time. We get out quickly if we are in single trading mode like the Best Stocks/ETFs group.
In similar fashion, we very quickly move into the opposite direction trade if we are in inverse trading mode such as our Best 5 Inverse Correlated ETF Pairs group.Tuesday - Sep 11th 2018
Commissions Listed on Charts.
Some of our algorithm groups make more trades than others and it may be helpful to compare the differences.
The bigger problem is that the Brokers charge various amounts and it can make a difference to results.
Our master accounts are with Tradier Brokerage who charge $3.49 per trade and we use them to calculate commissions listed on each chart. We show totals as well as percent of profits below each graph and listing area.
Interactive Brokers is another of the brokers that we use, and they charge about $1.00 per trade even though their site is more sophisticated and has more trading ability as well as it being an international company.
Chart 1X shows the commissions as a percentage of profits for each group with an average of 7%. The more profitable groups are as low as 1%.Monday - Sep 10th 2018
8 Pairs are Undecided.
Inverse pairs are supposed to tell which direction you are going in tomorrow.
Our algorithms look at all the data available each day and tell us which side to buy and which side to sell. You would expect them to be decisive each day.
We currently offer those decisions on 21 inverse pairs if you include volatility and 9 of those pairs are either both buys, or both sells. Can we know anything from these numbers to improve results?
Yes, but difficult to act on it. Apparently, they are close to a decision, but find it is too close to call. Very frustrating and always an irritant when you place your orders for tomorrow morning.
From previous experience, it appears that indecision can be handled in a couple of different ways.
First, if you have a buy signal for both sides of a pair, you could simply go ahead and own both. There is some evidence that although they will move in opposite directions at more or less the same rate tomorrow, in the long run, you may make slightly more profit because the gain will out way the loss.
Second, if you have a sell signal for both sides of a pair, you should just go ahead and stay out of both. Again, some evidence says that in this case, the losing side will be slightly more than the winning side and in the long run, you will lose less of your profit.
The ultimate decision, and this seems to happen a lot, is when faced with the decision to buy the second side of a pair, you run up against the T+2day Banking Rule and may not have the buying power allotted to the program.
This mostly happens if for example, you are following our Best 5 Inverse ETF Pairs group and you already have 5 positions in your account. Now here comes a signal to buy position number 6 and you only planned for 5.
In this case, it may be better to sell the side you already own, if capital restraints in the account force you to wait a day or two, instead of buying the new signal. In this case, if the account is not restrained by the Banking Rule, then it is probably worth staying in the trend and buying the second position.
You have effectively put your account in a hedged position regarding this pair and that often works out well also.
Every time this decision is required, the circumstances are different and having a plan ahead of time, is always a good idea.Sunday - Sep 9th 2018
How to Spread Your Account Value.
There is more than one logical way to spread your account value amongst stocks or ETFs.
If you have reviewed our historical charts, you would see that we invest an equal $2,000 in each asset on the same date and reinvest the previous sale value.
That decision was made because we want our followers to be able to compare each stock, ETF or group of assets, as it performs against all others over the same period.
However, in our original Investment Manager groups, we specified that an equal value should be invested in each of the 10 ETFs.
The reason we recommended that approach was first due to the way we selected the 10 different assets in the group.
Our monthly analysis of various world-wide professionally managed accounts is reduced to a percentage, allowing us to select 10 ETFs that correlate as much as possible, with their current investments. I have commented before how similar their accounts are. Often, they have large values of the same asset, especially if you compare ETFs, which are more efficient than holding stocks or mutual funds.
From the above description, you can now surmise that a more precise way of following our Investment Manager groups, would be to invest 10% in each of the 10 individual assets or 10% in each inverse pair of assets.
The 10% should be maintained as closely as possible as the account grows in value so that it retains the relative selection of assets.
Remember that we are adjusting our set of 10 recommended ETFs, to maintain what the professionals are currently buying, and you will see an occasional change in the list that we publish each month.
For instance, one change you might notice would be less quality and volume of stocks or changes in fixed income ETFs. It is not a precise selection, but with correlation, we maintain the percentages as much as possible.
A final thought brings us back to the two benefits that we offer. The first is our algorithms that keep us out of reversing markets and the second is the availability of very highly inversely correlated ETFs that allow profit in both market directions.Thursday - Sep 6th 2018
Current Market Focus . . . Part 2.
Tonight, you will see the current market focus of our followers as well as ourselves in our website simplification.
Without wasting too much time here, the most successful use of our algorithms is more readily seen in the Best 5 Stocks/ETFs and the Best 5 Inverse Pairs.
The first group is quite straight forward and consists of our best currently performing stocks or ETFs that meet our volume requirements and have demonstrated good performance with our algorithms. The current actual profit is 135% and the annual profit is currently at 267%.
The Best 5 Inverse Pairs needs some further explanation.
The traditional Pairs Trading involved the selection of two closely related assets that moved in similar ways and profits are made by trading the differences in their relationship over time.
For example, as they moved apart from each other, you could simultaneously short sell the higher valued stock and buy the lower valued stock. You then close the position as their values came back into line. No matter which side of the pair moved the most, the net difference in value represented your profit.
ETFs have simplified and expanded this opportunity due to their availability in exactly opposite versions. In other words, if ABC moves up 5%, the inverse ETF moves down 5%.
Sometimes, this relationship is with exact 100% opposite correlation and sometimes it is less. The other advantage is the leverage that can be built into these ETFs.
For example, there are ETFs that reflect various sectors that can move at 2x the value and 3x the value, in the same direction and in the opposite direction.
By trading from one side to the other, depending on the direction of the underlying sector, you can potentially profit every day by knowing the direction.
There is a daily production cost to this leverage which must also be overcome by the trading method. Our algorithms work to signal which side of these inverse pairs is likely to be the most profitable and we send out these signals every evening.Wednesday - Sep 5th 2018
Current Market Focus. . . . .
It is no secret that our Best 5 Stocks/ETFs and our Best 5 Leveraged Pairs groups are exceptionally popular as well as offering exceptional profits.
Due mainly to our algorithms quickly getting out of losing trades as well ETFs that give us the ability to trade both directions, these two groups today are averaging 236% annual returns and profit.
The concept of carefully adhering to assets that correlate closely to professionally selected portfolios, loses some followers due to irrelevance.
We have algorithms that can double and triple fixed income returns, but they also compound the same results on 3x leveraged ETFs and ETNs.
Why convert a 10% return into a 25% return, when you can turn a 100% return into a 250% return. I must admit that 8 years ago, I was seeking the lower solution and had no idea that 250% would be possible.
We now have about three years of pre-published trades with these results. The latest series that we are demonstrating since March 5 th, for over 6 months have produced the above results while the S&P500 Index has produced less than 7.7% profit. We use common start dates so that comparisons between groups can be made and followers can see the actual profits as they are being generated.
In total, we have published eight different groups of stocks or ETFs that together have produced average annual returns of 138% but we need to advertise our best groups.
Obviously to produce these Best 5 trading groups, we research and follow all of the DOW, S&P and Nasdaq stocks as well as the full range of inverse ETF pairs that meet our volume requirements.
We have also added the Brokerage Commission costs on our published charts from Tradier Brokerage. By the way, you can obtain 60 days or $200 of free trading commissions by opening an account using the code – Roebuck200.
We suggest opening a MARGIN account to eliminate short term T+2 Banking Regulations but do not recommend normal trading with margin funds. Tradier Brokerage charges $3.49 for each trade. We have no relationship to them other than running some of our own accounts with them.
To be fully transparent, we also have accounts with Interactive Brokers where commissions are less.Tuesday - Sep 4th 2018
Investment Manager Focus.
As a lifelong second job after being an Engineer, my investing was always interesting to me, intense but amateurish. Now I have the time and access to see what professionals do and they do it very deliberately and often in similar ways, all around this world.
I decided to analyze their portfolios and see just how they nurse hard won capital.
Not surprisingly, I have a current chart and I update and review it every month to see if an engineer can improve on it.
Yes, and in two different ways as follows and I will explain them very quickly.
Algorithms, just like charts come naturally to an engineer and the item that stands out in those portfolios would be to find a better way of buying and selling at the best time.
I found the best time to buy or sell more efficiently was to study tomorrow morning when the markets open. Longer periods of time complicate the issue and a single goal helps concentrate the mind.
Next, the best-informed time to make the decision is after most information is available after financial markets close today.
These Investment Managers have reams of data and rooms of computers to know about investing in every corner of the world. My analysis tells me they mostly come to very similar results, and I decided to accept their professional advice. I urge you to review how well our current algorithms work in the years of published charts.
The second way to improve these portfolios is a gift from producers of leveraged exchange traded funds. Using our algorithms with 3x leveraged and correlated funds takes advantage of the two ways I mentioned above.
First apply the algorithm and second, apply it to triple leveraged funds.
But there are benefits to this idea now you understand it. Portfolios are constantly changing, and we adjust our range of ETFs to make sure we maintain their advice. To follow exactly is not always possible, but not to worry.
To be the best follower, you would have to buy equal investments in all 10 of the ETFs but as it turns out, our algorithms are very good at getting out of assets whenever they change direction. Not only getting out but we now have the inverse ETFs that we recommend you buy. You now make profits in both directions.
By the way, the producer management losses on those 300% leveraged funds turns out to reduce our profits to approximately 250% on average trades.Sunday - Sep 2nd 2018
September Lessons. . . . .but Labor Day weekend changes to site will continue.
My personal mantra, even though I am neither Hindu nor Buddhist, has always been, - There is Always a Better Way.
September is a better way and we have TWO ways of putting the brakes on.
Our contribution to this is our algorithms but the other large contributors are the producers of inverse and correlated Exchange Traded Fund Pairs.
The evidence of both are the charts of our pairs trading groups compared to the charts of the single direction groups.
Both strongly resist negative moves, but the pairs groups make straighter lines.
It is worth comparing all graphs of the trading groups to see this fact. Look at the tendency to go up in a straighter line with the pairs charts.
But also look at the individual asset charts on the page of each group on this website and see how the algorithms do not like to go down when the asset does go down.
Not surprising that the current percentage of WINS or winning trades is 88% and highest for our Best 5 group. After all, that is how they became the best 5 in the first place.
Also, not surprising is the lowest current percentage of 60% which belongs to the new volatility pair and here is the reason why. Some math features that can move an ETF or stock do not apply to volatility.
Increased volatility can result from good news or from bad news and if I knew the math for that, I would certainly add it to the algorithm. Another indicator why volatility is different is the current first-day profit for new buy signals which is the lowest at 1.55%, when the average for all algorithm groups is 2.6%.
Many followers know that we once had a relationship with the Credit Suisse XIV until they took it away one night. Positive Roll Yield was the XIV main driver.
It is interesting to see the signals from the underlying VIX Index and we have included it for reference, but we do not currently match it up to a trading method.
Finally, note that Inverse ETFs often perform less than their bullish ETF partners, due to the historic upward direction of market values. We also get occasional minor changes to values due to after-hours trading and other late data feeds.Friday - Aug 31st 2018
A Reminder . . . work will be ongoing until Monday night!
This Labor Day weekend we will be adding the September versions of our algorithms.
The non-leveraged Investment Manager group of 10 ETFs will be replaced by a mixed set of 10 leveraged 3x ETF pairs that represent a wide range of inverse and profitable trading.
The Investment Manager leveraged 3x pairs will remain and in total, when trading all 10 pairs, they still represent a correlated and professionally chosen investment portfolio.
The Nasdaq stocks will remain as a group of 7 of the best recent US stocks. A pair of volatility ETFs are included as well as the VIX Index as a reference.
All these changes will appear before the market opens on Tuesday and normal emails to subscribers will continue as before.Thursday - Aug 30th 2018
Risk from 1688 to 2018.
Lloyds of London started in 1688 in a coffee house in London by selling insurance on ships and their cargos.
Insurance became the huge business that exists today by taking a portion of profits and spreading it over multiple repetitive occurrences.
The Chicago Board of Options Exchange, with roots back to 1973, began the move to organized Stock Options trading where a portion of existing or potential profits, like insurance, could be based on a future time and value of Stocks or marketable securities.
Call Options could be wagered on profits and Put options on losses.
Earlier in this century, by using Options and Short Selling securities, Inverse Exchange Traded Funds (ETFs) could be generated that mimicked an index or security and would trade in the opposite direction to the underlying asset.
With developed expertise and computers, these inverse Pairs of assets have now become widely traded and with many Indexes, they are correlated to move in exactly the opposite direction to each other.
Not only the opposite direction but by adjusting their make up every day after trading is finished, they begin the very next day with a precise leveraged movement relative to the underlying asset. Leverage of 200% and 300% are quite common and now 400% is offered in certain markets.
Our algorithms concern themselves with which direction the ETF and/or underlying asset is going to move on the next trading period and recommend staying in the current ETF or switching to the inverse ETF.
As you can imagine, trading both directions of a zig-zagging price chart can multiply your profits considerably and using an asset that has 300% leverage has even more potential profits.
Risk of being in the wrong direction is the greatest advantage of these algorithms because they quickly determine the direction and follow the trend wherever it may go.Wednesday - Aug 29th 2018
New September Pairs Perform Well.
GUSH and DRIP lead the new 10 inverse pairs for September and have a 100% opposite direction correlation.
When GUSH goes up 1%, we should see DRIP go down 1% and vice versa. This condition is corrected every night using Puts and Calls so that when markets open every morning, you can expect the correlation to be maintained.
This maintenance is part of the management cost that we must overcome with our algorithms and these highly leveraged ETFs.
100% correlation is not there for all ETFs.
However, all our new pairs do have this 100% opposite correlation except for TECL and TECS which are at 99%.
This is one of the reasons why they are expected to perform at a higher level, but also a reason why we do not expect to get 300% better returns on a 3x leverage ETF. As soon as you own these high leverage versions for more than 1 day, you incur this large daily maintenance cost for each additional day owned.
Our history shows that we gain better than 225% and the average is higher than that.
Option values can be quite volatile and include time value as it gets closer to the expiration date. Also, volatility of the underlying asset or index can push the price considerably higher or lower during a normal trading period. This will often happen if a news item hits the market.Tuesday - Aug 28th 2018
Why Start all Charts on March 5th 2018?
Many questions but few good answers. We modified our website to include a wider variety of ETFs and my input was to start on that day so that followers could see everything grow just like we did.
We also wanted to start all different groups on the same date so that we had good comparisons between them.
It has now become a bit of an obsession so that the newer groups that we have offered at various times use the same back-tested algorithms so that they can also be compared to all previous groups.
We recently celebrated our 8th birthday when we started first with stocks and then volatility and finally to ETFs and ETNs. Finally, we will be including volatility again next month.
The most surprising results that we have found is that our basic algorithm concepts over the years, have worked well with many different assets and seem to be most suited to inverse pairs.
Any asset that is performing well also gains from the algorithms but often not as much as a relatively flat one.
Most surprising is their ability to stop trading relatively quickly when any asset reverses in the opposite direction. To that end, inverse pairs that are correlated at 100% opposite direction perform exactly equal in both directions.
No doubt we will have to change the March date soon and one thought we have is to renew the start date each month on a continuous basis. Six calendar months seems like a good way to go, but 3 or 4 months would be easier to manage.
One thing is sure. Our latest September groups represent the very best that we have put together and future changes are likely to be less often. Perhaps back to 1 to 4 asset changes each month.Monday - Aug 27th 2018
September Additions Will be Ready.
When we begin publishing the September additions and changes next weekend, there will be several enhancements to our complete program.
I am somewhat hesitant to make too many claims. However, if you look at our individual charts for ETFs and stocks, you will see that considerable safety is built into them if reversals in direction occur.
That provides the opportunity to either stay bullish with the Nasdaq stocks or some ETFs but also makes the Inverse Pairs Trading a further profit maker by trading in both directions.
You may also notice that ETFs and their inverse partners that are based on indexes, often turn on or about the same day, whereas inverse pairs that are based on assets that are not so well defined may have different cycles.
Volatility is an example of a pair that moves by different rules. Gone are the days when we had a positive roll yield when trading XIV before Credit Suisse removed it.
Both SVXY and UVXY have management costs that must be overcome by our algorithms, but we will be including them next month. For those that like to follow it, we will also include the VIX Index in our signals charts for subscribers. Although the VIX cannot be traded itself, derivative traders may find it useful.
The addition of 10 more 3x leveraged inverse pairs, chosen solely for their profit potential will also be a part of the new month and included in our website Historical Data page. The back-test data will be available on the Historical Data page each month as well as the individual asset charts.
Nasdaq stocks will be reduced to 7 instead of 10 but their profitable inclusion continues as before.Friday - Aug 24th 2018
For my British Followers.
The news this week reminds me of the days when I left Alfred Herbert Ltd in Coventry to take up Mexican Citizenship for the Bristol Aeroplane Company.
The news was all about The Profumo Affair but more realistically, it was about Christine Keeler, a Russian Diplomat and John Profumo, MP. This was the biggest scandal until then in the 20th century.
Little did I know back then that a year later, we would hire a man from London who lived down the street from Miss Keeler.
The names change but life goes on.Thursday - Aug 23rd 2018
Planning for September.
We almost have all the new selections completed for our September Groups and these modifications and additions will enhance our offerings more than any previous time.
Volatility was our specialty prior to stocks and ETF pairs and we will be introducing a new pair as well as some interesting data concerning the VIX Index.
As mentioned previously, we will drop the non-leveraged Professional Investment Manager group but will concentrate on our 3x leveraged version of that same selection and concept.
That means a continuation of the 3x Investment Manager group as well as just the bullish side of that same 10-pair group.
This helps us to offer new opportunities and to introduce a completely new pairs group consisting of the best potential ETF Pairs that meet our requirements for trading. This selection will be in addition to the above pairs. We will also add trading data on just the bullish side of these new pairs.
Our Nasdaq group will be shortened slightly to 7 or 8 of the best Nasdaq opportunities and we expect to continue that group as before.
We then will continue our Prime 5 group, consisting of the top 5 performing single stocks or ETFs based on recent activity.
Another new addition will be a Prime 5 Pairs group which will also be based on recent activity.
The icing on the cake will be a pair of volatility ETFs along with the VIX Index data previously mentioned. Altogether, the groups will represent some of the best and safest potential opportunities available and we very much appreciate your continued support.Wednesday - Aug 22nd 2018
3x or 1x Investment Manager Portfolios.
No surprise that the 3x leveraged Investment Manager Group is preferred over the non-leveraged 1x Group.
The annual return is currently about 82% versus 24% but this is still way above many investment returns. Both groups include fixed income ETFs which are not the most exciting thing to watch.
While we will not abandon this non-leveraged group as our base, we do intend to take up less space with it next month and introduce more exciting pairs trading opportunities that are preferred by our followers.
With our algorithms applied, we get out of positions that reverse direction very quickly. We then use Inverse Pairs Trading to profit from the opposite direction.
The new pairs will represent across the board industries with good returns but will not duplicate the Investment Manager Group concept.
There will be no new fixed income pairs because the IM Pairs x3 Group will still be available in our total daily selections.
We will still be adding our new Prime 5 Pairs group next month. This offers greater returns while reducing risk through the inverse pairs method of trading.Tuesday - Aug 21st 2018
Is it Fundamental or Political?
We sure did some trading recently and some of that seems to be weekends.
One traditional problem is to go home with cash on a Friday or a holiday weekend. Sometimes you can see that with enhanced volumes and price changes and I think it has been getting a little more evident lately. Is it political?
I also know that too much trading is a problem with many people and we are working on some changes, but I want to confirm some ideas that may be helpful to some Followers. You may be aware of these but worth mentioning.
First is the T+2 (Trade + 2 Days) Banking Rule. Eliminate this problem by changing your account to a margin account. Assuming you are not normally buying your borrowing limit, this makes it possible for you to buy on a day that might not have enough settled cash and the 5% loan rate for 1 or 2 days is almost negligible. IRA accounts cannot be margin accounts.
Next, I do also have an account with Interactive Brokers and they have very low commission costs. It is a more developed website for traders but can be simple for simple trades. However, I do like Tradier for their simplicity of operation.
Another question that crops up is – Why buy both sides when Pairs Trading? The answer is the algorithms are not confident of the next direction. However longer term, they tend to make more on the upside than they lose on the downside. This is not a major advantage and some Followers avoid this by selling their current position instead of buying the second position.
Finally, I want to confirm our position on RISK.
I have explained that if you participate in all 10 positions or pairs, you have a balanced account that reflects a professional portfolio. One or more of those positions is for Fixed Income and represents safety in changing market conditions. This is true in the Inv. Manager groups but not in the straight bullish groups. Picking and choosing amongst the 10 positions changes the balance between large cap, emerging markets and fixed income etc.
I do realize that the above point may not be relevant to some traders, and we do offer less balanced opportunities such as Premier and Prime 5 Groups.
It is natural to select the more profitable potential as long as you realize that the lower performing pairs tend to be fixed income and would be helpful in a falling market. However, our algorithms will tend to get you out of bullish positions as seen from the individual charts.Monday - Aug 20th 2018
Algorithm Birthday – 8 Years Old.
We are celebrating our 8th birthday today. This was my official retirement date and move to Anacortes, WA where I started testing the original algorithms.
Back then I was just using stocks and options and quickly moved to ETFs and ETNs because of the variety being offered.
Initially, I was very concerned with the buy/sell spread and started with the SPY with the huge volumes and good trading statistics.
Options were my favorite, but the time values were messing up my numbers.
I soon latched onto the VIX Index and liked the fact that it always reverted to the annual average value.
Mathematically, that seemed to be a great advantage, giving some upper and lower limits to the movement over time.
While volatility produced a range of ETFs that trade with the VIX Index and inversely to that Index, much of the early work on our algorithms was done with various of these assets. Sadly, to many traders, Credit Suisse cancelled XIV overnight, after a drop of 84% on Feb 5, 2018.
We had started the algorithms on stocks and had continued with all 30 of the Dow Jones Industrial stocks because they offered a good cross section and variety of trading conditions. We had decided to move back to our home in Chicago in late 2015 and develop Roebuck Systems Inc. as a vehicle to further the algorithms.
The last few years have seen the advance into a much wider range of stocks including the London and European markets.
More importantly, our decision to concentrate on selections of stocks developed by professional money managers and matching those selections with reduced risk techniques.
This directly leads us to Pairs Trading of inverse ETFs that are close to 100% correlated to professionally selected portfolios.Friday - Aug 17th 2018
Pairs Trading Versus Straight Buying.
Taking a closer look at Buy Trading versus Pairs Trading is worth your consideration.
The first chart 1DC below is from our recent straight buying in our Investment Manager Booster and ends up with a profit to date of 10.9% since March 5.
The second chart 1GC is taken from our IM Pairs Booster which trades the same ETFs but switches to the inverse ETF according to the signals given by our algorithms. This version ends up with 10.8% or roughly the same as the first chart at present.
The added commissions for Pairs Trading would be $185.
I am showing these 2 charts because they nicely demonstrate the more gradual increase in profits by the Pairs Trading during this 6.3% Bull market when trading the same ETFs.
Without the use of numbers, these charts show that while each group made exactly equal bullish trades, the additional 53 trades in the inverse direction, helped to provide a steadier income.
They also display the available insurance that exists when this 6.3% Bull market turns into a Bear market.
That is a main benefit of Inverse Pairs Trading when it becomes an investment for all seasons. Short term risk is minimized by the reduction in volatility of current profits and longer-term risk will also be eliminated due to their ability to trade the opposite direction without short selling and profits will accumulate.
Perhaps the only negative is the 39% extra trades, but this is a small sacrifice to pay for such a highly improved method of trading.
Of course, I am not going to miss this opportunity to point out that the current 10 ETFs if owned for the last year would have earned 10%.
If however, you had used our algorithms to trade in and out, they would have earned 23% and using the Rule of 72, your investment would double about every 3 years.Thursday - Aug 16th 2018
Professional Investment Managers.
We put great emphasis on our choices for investment. It starts with Professional World-Wide Money Managers.
We consistently analyze many of these accounts and search for ETFs that they currently include or that correlate almost 100% with their current investments.
In recent months, we have also selected ETFs that have inverse partners. They must also have enough volume to allow Non-Leveraged Inverse Pairs Trading as well as 3X-Leveraged Pairs Trading.
If we have a goal, this would be it, and we constantly seek to improve.
Our algorithms are now 7 years old with a well proven track record, but we do this for several additional and excellent reasons.
Experience tells us that Professional Money Managers around the world have the expertise and the depth of research to consistently provide potential profits of 6% to 14% for their account holders.
Many of them include a broad range of ETFs, some successful individual stocks and bonds and we emulate 100% of their selections with a range of 10 ETFs.
If you invest in all 10 of our selections, you are effectively invested in a Professionally Selected Portfolio because it correlates closely with their total positions. For example, 65% stocks, 15% fixed income and 20% developing markets plus cash could be their current mix.
We then correlate this mix with 3X Leveraged ETFs to add more potential additional profits. From their 3X leverage, we historically gain better than 230% leverage to our results but are currently higher than that.
Finally, we add the benefits from our algorithms which typically add 200% to 300% of additional profits to each group. ETFs that are moving up well on their own will not get as much parallel profit whereas others will benefit more.
As we have developed this Professional Manager approach to our selections and improved on that by emphasizing the much lower risk of Pairs Trading, our algorithms have continued to improve results.
We have reduced our coverage of individual stocks due to the minimized risk in Pairs Trading and hope that you give that a try.
We will introduce a Top 5 Pairs group next month which will not entirely correlate to the Investment Managers but will be taken selectively from existing positions in these portfolios and will represent the highest recent returns.Wednesday - Aug 15th 2018
The Nature of Pairs Trading.
NUGT, the 3x ETF for Gold Miners took a hit today of minus -18% but our algorithms knew all about it. We are in the inverse DUST and we went up 18% today.
I do not normally follow the fundamental aspects of the stock markets and tend to leave that to the experts, but I do think this news seems a little drastic and is most likely telling us something.
Turkey managed to get into the news with currency problems that are being created but US politics still took most of the news.
World financial news used to move markets along with tragic earthquakes or major economic gains and losses.
Today and for a couple of months now, politics seems to be moving markets with equal importance.
Algorithms are not built for politics and we should not be surprised if we get some miss-directions but perhaps gold is the universal tell-all and is not reading good news today – at least early today, because markets tried to get back this afternoon, even though gold miners ended in the dumps.Tuesday - Aug 14th 2018
The Nature of Pairs Trading.
Watching the various charts each day of the various groups that we follow, demonstrates the reduced volatility of the pairs groups relative to the none-pairs groups.
Whether we are in an extended bull market or a volatile market, the slopes of those charts typically show less variation and more straight-line growth.
This is a good indication of the overall benefit of using inverse ETF pairs as a strategy as well as a way of reducing potential risk from a purely buying bullish assets.
This type of investment was not available before the introduction of so many ETFs a few years ago.
With a method of switching between upside and downside moves, we can stay in the market most of the time and be making profits most of the time.
With this kind of strategy, then it pays to be in assets that have more than average movement, so that we benefit from the swings in both directions. Hence, our use of leveraged ETFs.
The Investment Manager group has huge volumes invested and traded every day and moves a lot slower than your average stock. However, it remains a great source of information as to where the great wealth of the world is being held.Monday - Aug 13th 2018
Explaining Some Averages.
I am going to eliminate some numbers from the charts because they are giving a false result.
Example: - On charts where we show the average results from a Buy and Hold strategy and compare them to After Our Algorithms, the average number at the bottom of the chart reflects both sides of our pairs strategies.
This makes no sense because in pairs trading, one of them goes up while the other one goes down.
The other way that it makes no sense is trying to put a percentage gain from a negative number.
You can see several of these negative numbers in the Buy and Hold columns.
The more interesting numbers can be found in the Gain Using Algorithm columns where you will see no negative results. That shows that the algorithms create a gain even if the ETF or stock went down during the past year.
This very notable fact shows that our algorithms are very selective in picking out the up moves but generally staying away from significant down moves.Sunday - Aug 12th 2018
How to Minimize Risk.
One great advantage of our algorithms is their ability to work well with any ETF or stock. But that is only part of the story.
If you study all the inverse ETFs, along with their bullish partners, we occasionally end up being invested in both sides of the trade or in neither side of the trade. Why is this?
The algorithms work independently on each side of the trade and calculate the strength of each potential move and profits that can be made.
One of the most common questions is why be in the bullish trade and the bearish trade at the same time. The answer lies in the potential of each side of the trade.
You are likely to make more profit from the side that may have historically worked best, and the net difference will be a smaller gain than normal, but still a gain.
The opposite is true when both sides indicate a sell, and in that situation, we are better to be out of both positions.
However, these conditions generally only last for a day or two and any cash should be retained and ready for the next buy signal.
Sometimes, if you have an IRA or none-margin account, and do not have excess cash in the account, you could decide to sell your existing position instead of making the second buy into a pair.
Doing this may avoid the T+2day Banking Rule and we are all limited to 3 of those warnings each year. The bigger problem is that your order is automatically cancelled before the market open and that always annoys me. I suppose that is the price we pay for cheaper online Brokers.
Further to the notation on chart 1X this weekend, we do have a strong move to lessen risk soon with something I am calling - Prime Pairs. We realize that holding all 10 positions from a group is not always possible or preferred by our Followers.
With that in mind, we are in the middle of testing the best 5 pairs and will introduce it by September. This will lower the investment down to 5 positions if you want to cover them all.
Often noted by us is the reduction in risk when following a pairs strategy such as our inverse leveraged pairs. While we use mostly 3X leveraged ETFs, we end up more than 2X the potential profit but less than 3X. The reason is the excessive daily management costs that the producers have in maintaining the daily leverage.
In adding this new group, we will replace the Premier group with the Prime Pairs group, but it will still be available to Subscribers through our normal publication of the bullish side of the Pairs x3 Group and our complete list of all 50 algorithms.Thursday - Aug 9th 2018
Simply Follow the Signals.
Had a good question today about the best way to use our algorithms.
I have some of this problem myself as I have sometimes switched between the groups and regretted it the next day.
The answer is to first pick the group you are comfortable with. This is likely dependent on your experience and risk level with trading.
From our current results, all groups are profitable even though the individual risk for each ETF or stock is different.
This is why our whole program is defined around 10 completely different assets in each group and our basic Investment Manager group represents assets that broadly represent current professional portfolios of Stocks, Bonds and ETFs.
Whichever group you choose to follow, you will receive signals on all 50 of our ETFs and Nasdaq stocks every evening. You can then simply follow the signals to place your orders with your Broker anytime before the Markets open on the following day.
See details of each group on the website ranging from the basic Investment Manager group of 10 ETFs to the Prime 5 group of 5 top performing Nasdaq stocks.
Both of the pairs groups each cover 10 pairs of inverse ETFs that always trade in opposite directions. This means that you will normally only be in one side of each pair. On a few occasions you may be in or out of both sides of a pairs trade.Wednesday - Aug 8th 2018
What Happens if You Choose 5 Pairs.
I am always looking for an edge and the following chart shows what happens if you select the Top 5 of the - Pairs x3 - performers instead of all 10 pairs.
Say you invest a total of $5,000. This RANK chart indicates what happens if you just invest in the Top 5 performing pairs according to their recent profit.
As you can see, we ranked the top 5 according to their combined pairs profit and then invested in each pair according to that same profitability.
Now look at the results.
The right hand three columns tell you that when selecting the top 5, you should increase your profit potential by an additional 41%.
We do not recommend this but if you just selected the single top performer and invested all $5,000 in it, you would increase your profit potential by 422%.
Sometimes the math makes it all look very tempting and that is why I got into card counting some years ago, but the shuffling machines put a stop to that.Tuesday - Aug 7th 2018
Subscriber Suggestion on SUB Chart.
Some very positive numbers have been added to our SUB Chart based on one of our Subscriber suggestions.
The 2 right-hand columns on the SUB chart now display new very interesting information not previously available.
First is the profit for each current Buy since March 5 2018 and the average at the bottom shows about 89% winners.
Second is the profit for each current Buy since the latest Buy Signal and the average at the bottom currently shows about 79% winners.
I very much appreciate this suggestion and regret that we did not include it before. I do get complaints that there are too many numbers to follow and choose from.
The 89% winners since March 5 should give confidence to anyone but a minimum of 3 positions and preferably a minimum of 5 positions is my suggestion.
By applying our mathematical algorithms to ETFs that correlate with professional money managers, we can get these results.
Inverse ETF pairs trading with these same selections is best reviewed over extended periods of time. In any established downside market, we will see the benefit of the algorithms in both directions.
Thanks again to our Subscriber for this addition and short of sending you a copy of our algorithms, we do appreciate any questions you may have.
You can use the – Contact Us – page to get an answer from us.Monday - Aug 6th 2018
Numbers You Need to Know.
You would think that our Pairs 3x group would make 3x the basic Inv. Manager group due to the leverage of their ETFs.
Currently our algorithms are making over twice the profit but not three times the profit.
This is further evidence of the large costs that we are paying every day to the producers of the leveraged ETFs for their daily re-shuffling of options to re-value and start each new day with 3x leverage.
It is impossible to use a buy and hold strategy for these leveraged assets.
The good news is that our algorithms make approximately 225% based on current results.
Alternatively, you could say that they are losing or charging approximately 75% for providing the instant 3x leverage every morning when the markets open.
Of course, we do not hold these ETFs all the time so the 75% is the loss only for the number of days that we own them. However, we can project that the same average percentage loss might be for the whole year. We can also say that we would make the same percentage of 225% gain each year also.
One additional number you should also know is that we use the ETF with the symbol SH twice in our none-leveraged IM pairs group. The reason for this is a shortage of suitable inversely corelated ETFs to make up the group. This causes us to start trading it with double the initial investment to balance the bullish ETFs with their bearish partners.Sunday - Aug 5th 2018
August Changes to Nasdaq and ETFs.
10 Nasdaq Stocks are removed. (Sell) -
ALGN, ASND, BZUN, FMI, GDS, LOXO, MTCH, NFLX, NTNX, SEDG
10 None-Leveraged ETFs are added to create Pairs Trading Manager selection -
DOG, EUM, EFZ, SJB, RWM, PSQ, SH, TBF, UDN, SH (added twice)
14 ETFs are replaced -
DRIP, FAS, FAZ, FXI, GUSH, IEFA, IWD, IWF, LABD, LABU, VWO, XLF, XLI, XLV (Sell)
14 New ETFs are added -
DIA, EEM, EFA, HYG, QQQ, SPY, TLT, UUP, SSO, SDS, UCO, SCO, UDOW, SDOW
Also, here is the full selection of all 50 ETFs and Stocks. Blog continues after Chart 4A
Why are these changes being made?
First, we are adding the opportunity to Pairs Trade the original selections that represent the professionally selected portfolio of 10 ETFs. To achieve this and maintain close to 100% negative correlation, we had to exchange 8 of the original 10 ETFs with matched pairs that meet daily volume requirements.
You will see that this provides less risk with more even profit potential. Please review our back-test charts (Old) 1DC and (New) 1GC displayed here.
Second, we had to remove 10 of the 20 Nasdaq selections to make room for the added ETFs listed above. This improves the profit potential for the Nasdaq selection as the Top 10 reflect better performance. It also removes the trading problems with having too many selections.
Third, we have replaced 3 of the 10 leveraged pairs with 3 new pairs that maintain better alignment with our professional Portfolio concept and will also maintain better inverse correlation.
Finally, in line with our instructions, ETFs and stocks that are no longer being followed by us, should be sold at the next market open and replaced with new selections that have a signal to buy.
Normally, new monthly portfolio changes involve just a few assets, but this August represents many more than normal. We are confident that these changes offer less future risk and will be well worth this initial change.Saturday - Aug 4th 2018
Investment Manager and IM None-Leveraged Pairs added
Corrected Prime 5 chart due to only 5 stocks at maximum of $2000 each = $10,000 max investment. Review and send signals out tomorrow evening.
Changed name and added Inv Mgr 3X Leveraged pairs page. Includes historical back-tested charts.
Just added new page for Inv Mgr None-Leveraged pairs page. This will allow inverse pairs trading of the basic selections that we make based on professional world-wide Investment Managers.Early Friday - Aug 3rd 2018
Several additions to the Blog will be added this weekend
The August ETFs and Stocks will appear this weekend and some explanations will be necessary. You will now be able to Inverse Pairs trade the Investment Manager selections with a new set of inverse none-leveraged ETFs.
You will also be able to Pairs Trade this same Investment Manager selection with leveraged ETFs.
This will necessitate that we reduce the Nasdaq whole market selection back to 10 stocks.
Changes will run through the weekend until the Sunday night signals are distributed. Thanks for your patience - MalcolmThursday - Aug 2nd 2018
Can I Trade my IRA Pension Plan?
The simple answer is yes, assuming your Broker offers IRA accounts.
The obvious advantage of IRA accounts is that the profits are not taxable until the funds are withdrawn from the IRA account at the taxable rate at the time of the withdrawal.
There are also disadvantages. First and foremost, any Pension Plan generally invests long-term savings for many years to provide income for retirement. If this will be a primary source of income, then our conservative investments may be more appropriate.
Another disadvantage is that IRA accounts cannot be Margin accounts, and regular accounts occasionally bump up against the T+2 Banking Rule. This rule requires 2 days for cash to be settled and can sometimes prevent a trade if rapid reversals in trades are required.
Most of us have careers that do not include investment knowledge but have educated ourselves to varying degrees because Pension Plans have become self-directed. We have been forced into this arena due to necessity.
I began developing our algorithms to work with established professionally selected assets that would take the stock selection out of my own hands. We specifically research these managed portfolios and find they often move together as though some themes are common to their work.
For some of us and I put myself in this category, this was an interesting second job and we have become broadly knowledgeable if not always successful.
I have always involved myself in investing but also had my career to take up most of my time. It wasn’t until retirement became a close reality that I realized my background could be complementary to investing.
I really enjoy it just as I enjoyed my whole career and spreadsheets, formulas and statistics are in my personal wheelhouse.
Remember this. If you could make 18% annual profit, you will double your retirement fund every 4 years.Wednesday - Aug 1st 2018
Why we Missed GDS.
A problem exists when we design our algorithms for the anticipated direction tomorrow and then the daily news cycle reports a possible fraud case against one of our selected assets.
As you probably noticed yesterday, GDS took a large hit for this same situation and it traded below recent lows on the day before that.
Unfortunately, this situation is not built into our algorithms and the odds of it happening are so low that it would be difficult to include it, as we rely on mathematical and statistical facts.
It appears also that much of the trading may have been insider selling and certainly unusual enough to eventually trigger a sale.
Our sell signal was given last night, and the only good news is that GDS opened today at $27.36, up from yesterdays close at $21.83. For odds makers out there, a bounce most often happens after extreme moves.
On the other hand, earlier this month we sold another of our Prime 5 stocks permanently because the news had announced a takeover bid of $137.00 for FMI. After a previous close of $106.45, FMI immediately moved up for an increase of over 28%.
So, the news is going to continue giving us unpredicted surprises in both directions and 2 surprises out of our Prime 5 group will probably never happen again.
This is precisely the reason why we recommend followers to invest their funds in at least 3 assets and a minimum of 5 assets if possible. This way, with the returns from our algorithms, a 28% loss in a surprise attack would be limited to less than 10% of 3 investments or 6% of 5 investments. Obviously, upside takeover surprises will always counter-balance losses.
Fortunately, there seems to be more takeovers than there are fraud announcements and the statistics listed on our charts far outpace these occasional news items.
This is a good place to emphasize the nature of our selected groups.
Our basic selection of Investment Managers represents 10 ETFs that reflect these major professional portfolios and would represent the least risk.
Pairs Trading using none-leveraged inverse ETFs that also reflect the above professionally selected ranges of assets are the next safest risk group and we plan on making these available this month.
Pairs Trading using leveraged inverse ETFs would generally be like the previous group but will have more volatility due to daily management costs that create the daily 3x leverage of each ETF.
From here, we go one-sided in the groups and are therefore relying on the algorithms to be in cash when negative directions are signaled. Here, it should be noted that our algorithms specifically look at potential direction for tomorrow and have demonstrated their ability to participate in upward trending moves.
The current Premier Group only participates in the bullish side of the leveraged Pairs group and goes to cash during downside moves.
The Nasdaq group and the Prime 5 group both potentially have the greatest risk but also have the greatest potential reward. They both only participate in the bullish upward side of stocks or ETFs.
However, the Nasdaq selection which includes the Dow and S&P stocks is created from thousands of assets that have back-tested very well with our algorithms. They are also over 4 years old in their current iteration.
They have demonstrated at least one year of exceptional results compared to their competition and the Prime 5 represents the best of the best from our various selections.
Whichever group you personally prefer, our algorithms will always make their decisions as to which direction they will go tomorrow.
If you review the actual back-tested historical graphs and charts displayed on our website pages, you will see the proof of the algorithms doing their job.
Generally, you will see that they improve the performance of traded market assets by 150% at the low end to over 300% on the high end.
When you add the Professional nature of our selected assets, on top of the leverage minus costs of some ETFs, these improved percentages are the result of good selection, good ETF management and strong mathematical and back-tested algorithms.Tuesday - July 31st 2018
Old or New Pairs Trading.
Question – Why inverse ETFs? An explanation of how Pairs Trading has progressed. The popular method before ETFs was to find 2 assets that could be seen to follow each other very closely in the same general direction.
A continuous chart would show them to move apart and back together again in a series of moves over periods of time.
A major requirement is that the 2 assets are available through your Stock Broker to be sold short. This involves your Broker having these stocks available from another of his clients.
You can then borrow the stock through your Broker and sell them on the open market but while the stock is loaned to you, all costs and Dividends payable to the original owner, are personally assumed by you.
Now back to the chart; when the 2 assets are apart, the weaker asset would be purchased, and the stronger asset would be sold short as described above.
As the 2 assets move back together, the combined changes in value will amount to a profit and you simultaneously close both positions. The borrowed stock is then returned to the original owner.
Variations of this method can be conservative low-risk trades or speculative high-risk trades.
With the rise in popularity of ETFs, a more recent method of Pairs Trading is possible. Some Exchange Traded Funds are designed by Producers to move in similar directions and can involve the previous method of trading. For example, 2 different Producers could design different ETFs that contain assets that tend to move in the same direction.
Alternatively, with the use of Call and Put Options and/or short selling, these producers can create ETFs that move in opposite directions. They can also leverage their ETFs to move faster than an underlying asset such as the Dow 30 Industrial Average. To complete a pair of ETFs, they can produce a similar asset that moves in exactly the opposite direction to the Dow 30 Industrial Average.
Unlike Mutual Funds, these producers create ETFs to meet most requirements and are rapidly growing in subjects and types.
Normally, when created to act like a Mutual Fund, such as owning all 30 of the Dow Jones stocks, the management fees are lower than their predecessor Mutual Funds.
However, when leverage or direction is involved, they must be recalculated every day after the market close, to re-establish their underlying commitment and value, ready for the opening of the next trading day.
This calculation and modification every day can be expensive. Due to the use of options, which can gain or lose value very quickly due to perceived value or due to time constraints, expenses mount rapidly.
Our method of Pairs Trading involves our exclusive short-term algorithms that calculate the potential change in direction of a stock or ETF for the next trading day.
We select a pair of ETFs that are produced to move in precise opposite directions based on their underlying design and commitment.
We simply buy the upward or bullish ETF and continue to hold it until the algorithm tells us to sell. We then buy the inverse ETF with the proceeds of the sale and continue to hold it until the algorithm tells us to sell. Continuing this process, we then buy the original position back and hold it again with the proceeds from the previous sale.
Simply put, this pair of ETFs are produced and geared to move in opposite directions. We use our algorithms to switch sides and continue to hold each side as it moves in the upward direction.
We start with a fixed amount of cash and re-invest the proceeds every time we switch sides. All sell and buy orders are placed with our Broker for the next market open.
Trade signals are received by our Subscribers every evening before the next trading day open.Monday - July 30th 2018
Shortage of Inverse Correlation.
With all the Exchange Traded Funds available today, there is a shortage of ETFs that are inversely correlated to professional Investment Manager selections.
These needed selections are entirely made up to provide none-leveraged ETFs that trade up when the markets trade down.
They must have excellent inverse correlation to the Investment Manager selections that we originally research, and one excellent ETF is named the Proshares Short S&P 500 with the trading symbol SH.
SH trades about 3 million shares every day and is inversely correlated to many of the bullish ETFs and funds at -90% and many of them closer to -100%.
My reason for bringing this to attention is that it would be the preferred opposite in a pair to several of our bullish ETFs and we will most likely use it in several pairings at the same time.
For example, it could be paired with IWD at -97% inverse correlation and also paired with XLI at -90% inverse correlation. In this case, it would become a buy at the same time for both pairs, and we would need to buy twice as many shares as we would normaly buy if it were paired only once.
In the same way, if it were paired with 3 bullish ETFs, we would need to buy three times as many shares and so on.
Once again, this would only become necessary in order to maintain the highest inverse correlation, and there is a limit to the availability of these inverse ETFs when none-leveraged positions are traded.
There are many more alternatives in the leveraged ETF pairings and this may be due to supply and demand. We usually want to maintain as close to a negative 100% correlation to aim for the highest potential profit.Friday - July 27th 2018
August Changes and Re-arrangement.
With frothy markets and the likelihood for continuing volatility, we are re-arranging our groups to allow for a better mix of selections.
As before, our research into Investment Manager portfolios is playing a large part in our groups and individual asset choices.
Secondly, our algorithms for ETF Pairs groups are expanding to continue the provision for upward leverage as well as safety when reversals occur.
Pairs trading with virtually 100% inverse ETFs is made possible by the creation of these specialized and high-volume Exchange Traded Funds.
With our algorithms signaling changes in direction for each individual ETF, we can enhance the returns with both none-leveraged and with highly-leveraged assets as well as with stocks.
We will maintain coverage of the Nasdaq stocks but will return to a selection of 10 stocks in this group.
While our algorithms signal a change in direction, we recognize that few people like to take advantage of short-selling stocks and many brokerage houses do not offer this service. Often, the stock is not available for short-selling whenever needed to all traders.
The August selections will be available for all Followers and Subscribers after Friday 3 August. This reset is more of a re-arrangement and most of the ETFs will be familiar as well as the top 10 Nasdaq stocks.Thursday - July 26th 2018
How Many Trades per Year.
We have an unofficial statistic that we look at for the number of trades during the previous year of back-testing and the number is 35 buys and 35 sells.
There is one stock that is constantly breaking this rule lately with the symbol SRPT - Sarepta Therapeutics, one of our Nasdaq stocks.
It has been doing well but had a sharp rise on June 19 and has trended down since then almost back to the 50-day average. It is well above our 35-trade number now but unlike FMI, is not subject to a takeover bid.
We will be modifying our selections slightly in August but have not yet finalized them.
We always stick with the algorithms unless a takeover or unusual fact comes to light and we see no reason to invent too many rules to override them.
Our 35-review number is something we have recognized over the years that certainly creates a lot of trades but sometimes has shown to be profitable. Now that I have mentioned it, I don’t have anything more interesting to say about it, but it is a part of our process.
The Nasdaq group went back to number 3 today with the Pairs holding on at number 2.Wednesday - July 25th 2018
Always Looking for Indicators.
The adjacent chart 1TPC showed some strength for the S&P 500 Index today.
If you count the position relative to all 50 assets on the chart, yesterday the S&P 500 arrow was in position 15 from the left and today it is in position 18. A more than usual shift.
I did see the strong move for the Index and am always looking for unusual blips. Perhaps it tells us something or not but yesterday I was further explaining some of our statistics and old habits die hard.
I also noticed that the Nasdaq took back its position 2 in the performance chart 1X and the Pairs group went back to position 3.
Small changes but we did see the poor performance of Nasdaq stocks yesterday and maybe this is a correction back to normal or maybe the strength in both signifies further moves to the upside.
I like to strictly follow the algorithms but with the S&P Index now up 6.2% since March 5, we are seeing indications of some strength.
Even the Investment Manager group is seeing strength up to 8.8% now with annual profit around 23% after using our algorithms.Tuesday - July 24th 2018
Nasdaq Took a Beating Today.
90% of our Nasdaq stocks paid a heavy price today while the Dow was up nearly 200 points. We have participated in the boom of the more speculative Nasdaq recently, but the tax cuts will not go away. Nerves were hopefully to blame.
Sometimes I get ahead of myself in explaining some of the numbers we generate, and I am happy to provide better explanations.
What is the 55% on the UP chart today? We count all the trades in every group since March 5, and today I am looking at a total of 454 individual trades.
Next, we count how many of those 454 trades were up by the time the market closed on that first day that we signaled subscribers to buy them.
For that number today, I am looking at a quantity of 248.
As of this writing, 248 is 54.6% of 454 and we round it off to 55%. Over the weeks and months this percentage will change slightly but it remains as a positive long-range number.
Note that it changes throughout the day because we generally have about 30 open positions and a few of those were opened each day.
Now, this is important. As we recalculate all the algorithms every night, we will also have 55% tomorrow and the next day and the next day and so on.
It is a continuing positive statistic and compounds the results over time. The past average return of those first day correct decisions is up 2.1% today.
The second day and third day and so on, will not match this first day statistic, but it demonstrates that the algorithms are making the correct decisions over time.
Another chart called WIN tells us that today, looking back at all the trades since the same date of March 5, an average of 69% of them made a profit and therefore 31% made a loss or made nothing.
Once again, this chart tells us that the algorithms are continuing to make the correct decisions in the long run and that out of every 100 signals, 69 of them end up making a profit.Monday - July 23rd 2018
More Data Supports First Signal Day.
This improved new Chart named UP, keeps a leger on the performance of our algorithms on the day they give a signal to Buy.
Now it also tells you the average profit made on that first day and supports our instruction to Buy or Sell on the first day you see a signal.
The group first day performance remains at 56% of them being profitable and the amount of profit ranges from almost 1% to almost 3% per this chart today.
We explained previously that the 56% move up repeats each following day and supports the continuous day-by-day nature of our algorithms.
The first day profit does not continuously repeat but a previous chart named WIN tells us that each first day signal goes on to produce profits about 70% of the time. Losses are produced about 30% of the time.
We have been asked to add the current profit for all open positions and we are planning to introduce this by the end of this week to the subscriber email each evening.Friday - July 20th 2018
Profit UP on the First Signal Day.
This new Chart named UP, keeps a leger on the performance of our algorithms on the day they give a signal to Buy.
As you can see, the 5 groups are listed, and they are made up from all the different ETFs or stocks that we have used just since March 5, 2018.
A total of 443 Buy signals have been given since then and 247 of those signals made a profit on the first day that they were bought. This represents 56% and is the reason that we urge followers to accept signals on the first day that they are issued.
We do not wait to establish trends before giving signals as the algorithms are geared to look at tomorrow and what will happen then. I sometimes wish that there were no weekends or closed Markets with news that can interfere with the outcome.
Tomorrow the algorithms re-calculate and take another look at the next day. The same statistics then apply, and they will again make a profit 56% of the time.
I suppose it is like betting red or black in a casino. If we continue to win an average of 56% of the time and buy back the position with the money from the previous sale, we have a winning streak going. In the casino, we call this money management.
That really explains what we are doing. By putting the odds in our favor and selecting assets generally picked by the experts, we are fishing where the fish are.
Equally, by inverse Pairs trading, we have a willingness to invest in either direction.Thursday - July 19th 2018
Today’s Top 5 Results.
We have all kinds of statistics about our algorithms and their performance and perhaps you should see which ETFs or stocks lead today. See Chart TOP5.
This selection contains 4 Nasdaq stocks and 1 ETF and together they have produced 85% profit since March 5, which equates to 228% annual profit.
I am encouraged that our previous July Prime 5 selection as described on Chart 1X, has the same results with 85% current and 228% annual profits even though the selection is different. Continuity of statistics is important.
I am mathematically driven and so are my algorithms. I have been crunching numbers all my life and enjoy doing it. This is a condition or a disease.
We are constantly aware of numbers and the shapes that they produce. We can always learn something from a lot of data and it educates us about the present moment but can also educate our future.
For example, I have concerns that the Nasdaq high flyers are doing way better than the leveraged inversely traded Pairs. Logically, it is saying we are speculating with those future tax benefits and I look at this un-paid-for huge tax cut and reason that is where those profits will come from for a year or two.
We hear that investors always talk of bullish markets climbing a wall of fear and that is certainly present on the 6:00 o’clock news. We also hear them say - take what the market gives you.
I think that is what we are doing now. We should be well positioned with those inverse Pairs trades, if or when these markets turn down. I always find it difficult to be constantly expecting profits because the fear seems to shout louder.
I have often referred to the reasons why I like to base my stock picking on those professional Investment Managers. They have bigger and better computers than me and they can study minutia that I cannot.Wednesday - July 18th 2018
Corrected Graph Percentages.
I regret some recent errors on the graphs, but they are now corrected. When we started these graphs and began publishing charts on March 5, 2018, we calculated profit as a percent of invested cash. We did this due to each group using cash differently.
For example, the Inv. Manager group began with our standard $2,000 for each ETF for a total of $20,000 maximum.
Due to the different start dates and signals from the various algorithms plus the profits as we progress, this group still has not invested the maximum.
On the other hand, the Pairs group has 20 ETFs, but we usually are only in one side of each pair. So, we still used the standard $2,000 for 10 expected positions, even though we are switching sides from bullish to bearish with each algorithm signal. In this case also we have not quite reached our maximum investment.
The Nasdaq group changed from the previous 10 stocks to 20 stocks in July. At $2,000 each with the new maximum investment of $40,000 for the group, we still have not reached that maximum either.
The same situation exists with the Premier group and with 10 ETFs, they have not reached the maximum of $20,000 today.
The group reaching the maximum is the Prime 5, which at $2,000 for each of 5 stocks or ETFs, reached the maximum of $10,000 quite quickly.
When the Markets turn or stay positive for a week or two, we expect to be at or close to the maximum original investments for each group. When this occurs, comparisons between groups will be even more interesting as we will keep everything going with the same original capital.Tuesday - July 17th 2018
Nasdaq Group Continue Up.
Even though we are operating without FMI in the group due to the takeover bid, our Nasdaq group is holding on to second place on Chart 1X.
As this group includes stocks that are growing fast, it tells the story of hope for the future and the confidence of investors to invest there.
I like to read the future in these terms even though I invest strictly based on the algorithms but maybe they represent that same future if I look at my recent comments.
The Investment Manager group gives the story of where the smart money in large portfolios is going and I have commented recently with the PAIRS chart showing the opposite directions for stocks and bonds.
The Pairs group recently had fewer positions, but they were all on the bullish side. Fewer positions tells us that more positions are on the cusp and are struggling to decide which direction they prefer.
The Nasdaq group is the only group we have of individual stocks even though they are all high growth and their risk level is higher than the previous examples.
The Premier group has high individual risk as they are just the bullish side of our Pairs group and they are all leveraged ETFs. Some of that risk is negated by the bond and gold pairs and to a small degree, the oil services but that assumes they are included in a portfolio selection of pairs.
The Prime 5 group is strictly a measure of where we recently made high profits and is in the expectation of that trend continuing.
We are working on ideas to offer the performance and leverage along with the wisdom of the professional portfolio managers to further round out our selections.Monday - July 16th 2018
Better to Watch the Graph Slopes.
Once again, a look at the Pairs group at the close today. If you watch the Markets, you must also watch the News.
At these times, my first look is at the graphs for each of the groups on their various Booster pages and they continue to show predominant upward slopes.
It always helps to look first at the professional Investment Manager group where you would see a reflection of their efforts. Bumpy as it is, they are the basis of our stock and ETF picking but more than any group, they must look around the world for information.
I added the Pairs chart to show that all the Pairs bears were up once again except for the Financials this time which were bullish. We continue our algorithms without modification where Followers have seen performance in both Market directions over the past three-year period.
Our selections cover US Treasury Bonds all the way to Emerging Markets and many investment opportunities in between.
We are seeing an increase in daily trades from our back-testing of the fixed income ETFs, TMF and TMV. This compares with all other ETFs that we follow and can be interpreted as greater activity towards or away from safety. Increasing interest rates lean towards the former.
However, all graphs continue their upward general trend. We did remove FMI from the Prime 5 group due to the takeover price jump. This action reduced us to Prime 4 for the balance of this month. It also stands to reason that the Nasdaq group might well be a prime indicator of a future change in direction.
Another supporting result over the weekend was although the total number of Pairs showing a buy signal was down to 5, they were all on the bullish side.Friday - July 13th 2018
Our Algorithms are 70% Winners!
This WIN chart shows you our batting average since we started giving you daily predictions the day before we made each trade since March 5, 2018.
It currently represents over 400 trades in more than 50 different assets and has produced an average profit of 42%, which equals an annual profit of 117%.
These numbers are taken from all the daily signals that we send out each evening and can be viewed on our History Data page through July 1, last.
If you like them, please read on.
Our profit is also detailed on chart 1x which is usually published every evening along with the Blog.
I have sometimes referred to our algorithms being 60% to 65% accurate in their decision making and I am pleased to have enough solid pre-published evidence to back up my statements.
I do want to explain some facts. The Prime 5 group has the highest performance but also has the least trades. Obviously, these are selected each month and it is not surprising because they are generally expected to be going in the right direction.
On the other hand, the Investment Manager group has the lowest WIN percentage but represents a rounded portfolio selection of conservative investments.
My advice is to seek your own preferred investment style and find that match within the 70% average at the bottom of this WIN chart as some of these assets are included in more than a single group. All groups have exceptional short-term as well as long-term profits.
Each one of these trades started with an available investment of $2,000 on March 5 and has produced a total profit of over $41,000 since then. Our brokerage fees at $3.49 per trade amount to less than $1,500.
By March 5 of 2019, we expect to have $216,000 from our gradually invested $100,000 and the reason I say excess, is that these results have been obtained while the S&P 500 Index has gone up just 4.5%.
I always enjoy questions from our - Contact Us – webpage. We are excited now at this 7-year project with 3 years of publication behind us and we offer 47 years of previously proven Customer Service and reliability.Thursday - July 12th 2018
What to do with 2 BUYS.
So, the question arises: if you are looking at any Pair of ETFs, and you already own one of the pair due to a previous buy signal, what do you do if you get another buy signal for the second ETF.
If you have sufficient cash available or you have a margin account, you buy the second ETF, because the cost of ownership for a few days is insignificant.
The main reason to buy is that both algorithms are close to a decision point and the odds favor the side that is making the most profit for you.
In the long run, this will be the best strategy and the calculations that you could do are not worth worrying about.
The most likely concern is if you do not have sufficient cash available in your account and you do not have a margin account, such as an IRA or other pension account, you may run into the T+2 Banking Rule.
You could decide that it is better to sell the side that you already own. This action will use up one of the two days of the Banking rule to increase your settled cash one day sooner.
This really gets into the calculation weeds beyond this point, but I have had these warnings in my own IRA account and sometimes the algorithm signals come fast enough to be almost unfathomable.
The rule is you can buy a stock with the proceeds from a sale, but you cannot sell that new stock until the original funds that you used to buy it, have settled into cash in your account.
This drives me crazy. The Broker software could easily warn us ahead of time, but their software only helps them to give you the message after it is too late. Why not go the extra mile to help us avoid the warning? Some Brokers may do this.
That is most likely the price we pay for taking advantage of low Brokerage fees.Wednesday - July 11th 2018
A Demonstration of Pairs.
At about 11:30 this morning I was checking the Markets and saw a great demonstration of why I like Pairs Trading as a system for all seasons.
Look at the attached screenshot of our 10 pairs at that time. The Markets were down about 0.05% and just look at the 10 bullish ETFs and the 10 bears.
I just want to show how you will make money when the Markets decide to go in a sustained opposite direction.
We will have just as many bears when that happens as we have bulls today.
Alternatively, you can sell short-stock or perhaps trade the mis-alignment of correlated stocks. You could also sell covered calls against your stock and minimize your losses, or you could throw the Hail Mary and buy some puts.
Notice that the Bond TMF was going in the opposite direction at 11:30 this morning, so you could also sell all the stocks and move into bonds hoping for a substantial change in direction.
Of course, you need to know the direction of the Markets for these to work well for you and we all know that is not an easy decision.
That is why professional Investment Managers try to have a piece of every pie and make a moderate return on a more sustained basis for their clients.
This is also the reason why we keep an eye on what the professionals own for our Investment Manager Group which is aimed at conservative followers.
But take another look at the screenshot. If you have a method (an algorithm) for generally getting the correct short-term direction, it makes a lot of sense to trade inversely correlated ETFs.
The more inverse the better, assuming you can overcome the management costs of creating these 100% inverse and leveraged ETFs.Tuesday - July 10th 2018
Eliminating a Nasdaq Stock - FMI.
A proposed buy-out of FMI has caused the stock to trade around the offer price and any future gains are questionable. We will eliminate it from our Nasdaq list today by putting a SELL on the stock and will replace it next month.
We are approaching the point at which our – Profit since March 5 – chart 1TPC may have to be changed to a more recent date.
This is one of those decisions that has no perfect answer and we continually check the statistics to find the best date to use for best performance. We used the date of March 5, 2018 because that was the first date in the past 3 years that we offered these group selections.
From Chart 1X, our average profit from March 5, on all 50 positions is 43% giving us an annual profit from all 50 of 123% and a best annual profit of 257% from the Prime 5 group. All our trade positions were published to followers on the day before the trade was made.
My preferred group is the ETF Pairs group at 118% annual return, simply because of the minimized risk factor. I think this is a perfect selection for IRA and longer-term accounts.
I always use the – Rule of 72s – which tells you if you divide 72 by your annual interest rate, it gives you a projection of how many years it will take to double in value. This method tells you that 72 divided by 118% would double in value every 7 to 8 months. A worthwhile goal for everyone including me!Hello UK – Hello Hong Kong.
I was born in Coventry, England and my wife in Hong Kong but that has nothing to do with how pleased we are to have many followers in both countries.
Our website lights up every day from both places.
Knowing that UK residents have 0.5% tax to pay on trades, I am not sure if overseas trading can eliminate that. Fortunately, we have interested followers around the world and I am very pleased to see them.
I think it is more to do with internet reach and the ability to trade from wherever we happen to live.
I am also a Mexican Immigrant as I first migrated to Mexico City from England in 1963 for Bristol Aeroplane Company, after applying for Citizenship, and eventually migrated a second time to the USA after another job offer.
Changing the subject again, one of our Company accounts is with Interactive Brokers and they are well represented in many countries. They also have very low brokerage fees here in the US, but I believe they are higher in other countries.
I recently tested RobinHood.com, who advertises free trading, but I found that they did not trade American Depository Receipts and decided not to proceed with them. However, anything FREE is good.
Monday - July 9th 2018
PUMP UP your PROFITS - FOLLOW ME.
We have demonstrated two important facts and if you have followed us, you know how this has performed in the past.
The first is that our Algorithms provide easy signals to follow.
The second is signals perform well in the short-term, mid-term and long-term.
So, pumping up profits is demonstrated with our Prime 5 Group of 5 top performing ETFs. Now, we will show you how we do it with Pairs Trading.
First, look at our Rank Chart above and then decide how much of your money you want to apply to this method.
To keep this simple, I am going to assume for now that we will use $10,000 and all 10 of our pairs in this example. We will show some further examples later.
Make a 7-column chart and enter the 20 Pairs symbols and current prices in the first 2 columns.
From my Rank Chart, enter the Recent Daily Profit which is currently calculated for approximately 90 days, next to each ETF or add current values from the last column of the daily SUB Chart if you are a Customer.
Add Pairs together to give combined Profit and add to Combo Profit.
In the 5th column, calculate the Account Percent by dividing each Combo Profit by the total profit at the bottom of column 3. This tells you what percentage of the $10,000 you should assign to each Pair.
In the 6th column, rank the highest results of column 5 from 1 to 10.
In the Account Value column, multiply your Account Value (say $10,000) by the Account Percent value.
You now have your total investment value for each Pair based on recent profits. Divide this amount by the Price per Share to give a BUY quantity.
When you eventually SELL these shares, put that amount into the Value column and use that same amount to make a BUY when the next signal comes.
If you really want to PUMP UP your account, you could limit your Account Value to just the top 5 RANKED ETFs. This Chart can easily be set up on an Excel spread sheet and updated automatically.
Another tip is to make your account into a Margin Account which eliminates the T+2 Banking Rule when buys and sells come in rapid succession.
Note that occasionally we get a situation where both ETFs of a Pair have the same signal to buy or sell. This happens because the algorithms operate individually, and the signals are trying to make the right decision. When that happens, and you get the second buy signal, you could decide to stay out of both sides until only one of them has a buy signal. There is little to be gained either way, but we wanted to explain it.Friday - July 6th 2018
Our Look at Professional Investment Manager Portfolios.
(Note - Nasdaq chart is corrected to include 20 stocks instead of 10 at $2,000 each.)
It may be helpful to see the results of our research during June. The following chart gives you numerical results, but we also got some comments that we would like to pass along.
The tax cut is seen as a reason for earnings growth to continue through 2020 and mid-sized companies seem to get most of those votes.
Large companies are using the opportunity to buy back their shares and individuals in the general population are not seeing their expected wage growth.
We have reflected our findings into our Inv. Manager Group by using the ETFs that they own. We have also followed through with similar offerings in our Pairs Group. It should be noted that there is little change since the previous results in May.
Pairs are not as critical to world popularity due to our method of trading them. We also try to include strong movers where available. Some are closely correlated but this is mainly due to accounts of investment managers having 65% invested in Total US Stocks from Small Cap to Large Cap.
The Nasdaq stands alone as a collection of current top performers but obviously, due to their growth prospects, they do fit into currently popular trends.
I am also very conscious of the needs of conservative investors who prefer to follow a solid investment theory that matches our Inv. Manager Group. With that in mind, we are looking at a future change that will move the Nasdaq Group back to their top 10 rather than the current 20.
We would then offer a more conservative Pairs Group that takes advantage of the Inv. Manager Group, but also offers equal and opposite ETFs that could return an annual yield in the 40% to 60% range.Thursday - July 5th 2018
Pairs Trading the Roebuck Systems Way.
The old way of Pairs Trading used to involve 2 stocks that generally traded in a similar well correlated way except that the distance between them would expand and contract over time.
The trick was to trade that difference by buying one and short-selling the other when the distance between them expanded. The position could then be closed when the 2 assets traded back together again.
It is like watching paint dry but can be low risk and profitable. However, we have a much better way with ETFs.
Our algorithms trade equally well in both directions and with all the new and leveraged ETFs available, we can choose a Pair that are correlated to move in the exact opposite direction.
By using our algorithms, we don’t need to wait for them to trade apart or trade back together again. We simply trade them almost 100% of the time in either direction according to the algorithms and short-selling is not required.
We also select Pairs that are triple-leveraged to gain the maximum movement and profit from each trade.
Our algorithms are perfectly tuned to work with ETFs that move 100% in opposite directions because they specifically work to detect a change in direction for tomorrow.
You will find a complete selection of high volume ETFs on our website and the signals when to buy and sell either side of the pair is sent to you each evening.
Try it, you will like it. . . !Tuesday - July 3rd 2018
How to Make YOUR Decision.
What type of investor are you? Here I try to give you guidance on making your decision based on the information and signals that we send to you each day.
Rule 1 for BEST results. BUY or SELL at the next Market Open after we send a signal change.
Rule 2 for SAFE results. BUY or SELL on any other day that you see a signal.
Rule 3 for GOOD PRACTICE results. BUY at least 3 to 5 positions and limit yourself to 11 positions, unless you want or need extreme diversification.
Before going to rule 4, I need to point out that all the following back-tested numbers are for 1 year and the current actual results are since March 5, 2018 when the S&P 500 Index has produced a return of 1.2%.
I will add that I have been publishing these algorithms for more than 3 years and the only thing that beat them was Credit Suisse removing their ETF Volatility symbol XIV from the marketplace overnight.
Rule 4 requires YOUR JUDGEMENT. Some of us can make aggressive risks and others do not choose to take those risks. We offer different levels to suit everyone.
The least risk is the method we use to make our initial selections. Each month, we research what professional investment managers are currently owning and try to match our Investment Manager Group to their portfolios.
We select unleveraged ETFs that best correlate to their professional choices and produce our portfolio of 10 Investment Manager selections. Our current back-tested algorithms improve our Investment Manager group by about 358% to produce a relatively safe annual return of 19%.
The highest risk is probably the method we use to select our Prime 5 Group. From all the algorithms that we run and publish every day, we currently take the profits of the 5 best performers since March 5, 2018 up until the end of the previous month and put them in the Prime 5 Group each month. Our current back-tested algorithms improve this Prime 5 group by about 157% to produce an annual return of 244% assuming similar Market conditions.
We have 3 other groups that may fit your needs better than those described above.
One of these is our Nasdaq Group of 20 top performing Stocks. Minor changes to this group occur each month. Our current back-tested algorithms improve this Nasdaq group by about 143% to produce an annual return of 122%.
Here, you should look at all the back-test charts on our website for all selections and notice how well we manage to stay with the uptrends and get out of the downtrends.
The second of these groups is our newer ETF Pairs Group of 20 leveraged ETFs. This group consists of 10 pairs of ETFs that broadly correlate to the Investment Manager sectors. Each pair trades inversely to its partner and operates uniquely. Consequently, they are jointly in the market about 100% of the time but move in opposite directions. Occasionally they are both in or out of the Market, creating an approximately neutral position. Our current back-tested algorithms improve this ETF Pairs Group substantially to produce an annual return of 109%.
It is worth mentioning here, that our algorithms work equally well in both directions with ETFs and stocks and this type of pairs trading with 3x leveraged ETFs removes downside risk substantially. It also overcomes the large daily management costs associated with providing the leverage.
Our final Premier Group consists of the 10 bullish ETFs from the above Pairs Group and therefore does not trade the Market reversals. Our current back-tested algorithms improve this Premier Group by about 413% to produce an annual return of 89%.
Personally, when I was younger, I would have chosen the Prime 5 Group, with the hope of large profits and great results. Today, I choose the ETF Pairs Group, knowing that it is relatively safe and low risk. One thing that will hurt me is flat motionless Markets and I am not planning on that today. This paragraph is my opinion and not my advice.Monday - July 2nd 2018
We Hope July Changes Went Smoothly.
This was a larger change than we like to do at month-end, but the potential profits will be higher with the changes.
The S&P 500 includes all the Dow 30 stocks and the Nasdaq includes about 90 of the S&P 500 stocks.
Our Algorithms work equally well on all stocks and ETFs, so it makes sense to go with the maximum profit potential and expand the Nasdaq list to cover a wider range for interested Followers.
You can choose your own selections or potentially use the SUB chart to help.
Subscribers can see the SUB chart each evening where the last column gives historical - Daily % Gains - from the Algorithms and could be used to help make your selections.
Concentrating on top performing Nasdaq stocks, gave us the space to expand the Pairs Trading selections. Trading in both directions with maximum leverage gives you maximum potential with the least risk and fulfills the interest of many current investors.
Conservative investors will still like our Professional Investment Manager group which remains a correlated group of ETFs matching professional selections and we have included all aspects of their portfolios in our selections of Pairs.
This includes fixed income as well as ETFs that represent different world Markets and sectors.
Only ETFs give us easy access to trade in both directions.
However, the individual performance charts on the website are worth reviewing to see how well our Algorithms stay with a profitable trend and get out when circumstances indicate a reversal.
This works well for Nasdaq stocks. However, it gives us the ability to profit by trading the reverse direction as well by using inverse ETFs.Friday - June 29th 2018
Improved July Changes.
We find no changes in our underlying Professional Manager Portfolio of 10 ETFs and it remains the same for July.
As you may recall, the S&P 500 Group swallowed up our initial Dow Selection. The same has now occurred to our S&P 500 Group just like the Dow Group and there will now only be one expanded and combined Nasdaq Stock Group of 20 top performing stocks.
Our other popular Pairs Trading Group is also being expanded to include 20 ETFs or 10 Pairs that reflect different sectors of the Professional Manager Portfolio.
In theory, by following and correlating with Professional Manager Portfolios, the least long-term risk would be with these unleveraged ETFs. Long-term results from these tend to be in the 9% to 13% annual return. However, we expect our algorithms to provide approximately a 250% to 300% gain on those professional portfolios, based on over 3 years of results and more years of back-tests.
The best performers are generally the Nasdaq and Pairs Groups and that is why we have expanded them. The Nasdaq selections can have some spectacular results especially with the gains that our algorithms add to their normal Market performance.
For those investors that follow Pairs Trading, this can be the most rewarding because our algorithms perform with 3x leveraged ETFs in both directions. Using ETFs that are uniquely designed to operate in exactly opposite directions, they quickly recognize the best direction to follow.
Normal maintenance costs for the 3x leveraged ETFs can be considerable but these are easily overcome by the gains from our algorithms.
The Bullish side of our Pairs Trading selections now becomes our Premier Group of 10 ETFs.
Finally, our Prime 5 Group consists of the best 5 previous month-end performers.Thursday - June 28th 2018
Nasdaq Gives Way to Pairs.
We have seen a dramatic change in recent days between the Nasdaq group and the Pairs group.
Exactly as expected, the Pairs group has taken advantage of the opportunity to trade in the opposite direction and seems like it just kept going.
On the other hand, the Nasdaq has been taking a break along with the other single direction groups.
This is where you can see the danger of trading 3x leveraged ETFs with the wide swings they can make in a few days.
The safety position in single direction groups is first of all related to the professional portfolios that we research and follow.
This is amplified by our Algorithms that are just as capable on the downside as they are on the upside and will tend to get out of positions quickly.
Finally, it is good to look at the S&P Index compared to our average results and we remain up about 20% while the Index struggles at 1.3%.Wednesday - June 27th 2018
How Far Does an ETF Move?
Some interesting comparisons can be seen if you add the day-to-day price changes for each asset for one full year and then divide the accumulated change by the average price.
For example, our Investment Manager selections move about 160% of their average price. They are conservative high-volume assets with less risk.
Next are our S&P stocks at 417% and then our Premier ETFs at 435%.
The Nasdaq selection is at 705% but the winners are the Pairs Trading at 800%.
Why do we care about these numbers? Because our Algorithms are based on Mathematics and numbers always seem to reach expected results.
The first result you may notice is that the two selections that tend to rank the highest are the Nasdaq and Pairs Trading groups. Not surprising, since they move the most and the opportunity to clip profits from those moves is higher.
Alternatively, the lowest movers are the Investment Manager selections which correlate to huge portfolios of professionally managed wealth around the world. So much wealth that it moves more slowly but also has less risk.
Then comes the Nasdaq with all the up-coming businesses and ideas that investors pay higher prices for, with the expectations of making that fast dollar.
Finally, we get to the winners with so much movement to clip those profits.
If we could make these into a conservative investment, could we have the best of both worlds? The answer is YES.
We do it by alternatively investing in both directions in ETFs, that by themselves are very risky assets, but we change horses when we see a change in direction.
Obviously, the 3x leveraged ETFs are the risky end of the spectrum, but by changing direction reasonably well, using our Algorithms, we get to ride the faster horses much longer.Tuesday - June 26th 2018
Pairs Trading Becomes the Advantage.
Further to our Blog yesterday, the 100-year long-term Markets are going up and we addressed this situation by using professional Investment Managers.
We have often remarked that our Algorithms are solely geared to tell us what the stock or ETF is going to do tomorrow only. Not the day after that. Their daily prediction is correct over 55% of the time.
Pairs Trading then takes care of in-between trend changes and you will like our July selections and here is why.
If the Markets begin a short-term trend of more than one day in the opposite direction, they will soon change their signals to the opposite direction. This can be from a Buy to a Sell or a Sell to a Buy.
In the old days and I mean more than 5 or 10 years ago, when the Markets turned down, you would have to sell borrowed stock in a short-sale, or perhaps get involved with the Options Markets. Not anymore.
ETFs have solved this problem by producing INVERSE assets that immediately go in the opposite direction, so when our Algorithms begin signaling a Sell, we can simply sell our existing position and buy these Inverse products. No more short-sales.
Now there are some limitations that we need to consider.
Leveraged ETFs lose value daily due to the daily maintenance and management of retaining the leverage. They use options to create the leverage which lose time value as they approach their expiration date and strike price.
The other result of having this leverage is the speed at which they can change value and hence, have added risk.Monday - June 25th 2018
The 200-Day Moving Average.
Once again, we went down through the 200-day moving average and are close to the 50-week moving average.
I mention this because I used to watch all this technical stuff all the time and it became the reason why I developed Algorithms nearly 8 years ago. Will we bounce off it and go back up or will we go through it and look for whatever comes next?
The advantage of algorithmic trading is when you know it works, you follow the signals when issued and go back to whatever you like to do for fun.
We are well over 3 years of publishing signals every evening and have no reason to go back to Technical Analysis again.
Our July versions are almost complete, and we are continuing the concept of letting the professional Investment Managers of worldwide portfolios do the selection for us.
In July we will continue to include our correlated ETF version of these professional portfolios.
We also will include an expanded 10-ETF selection of our 3x leveraged portfolio and have added the 10 most INVERSELY correlated ETFs to create a Pairs Trading selection of 10 Pairs that reflect the professional portfolio.
Plainly speaking, we will have 3 sets of Exchange Traded Funds.
1. A none-leveraged, correlated and balanced set of 10 ETFs matching professional portfolios.
2. A 3x leveraged, correlated and balanced set of 10 bullish ETFs also matching professional portfolios.
3. A 3x leveraged, correlated and balanced set of 10 ETFs that INVERSELY match the professional portfolios. (This creates 10 natural sets of leveraged ETFs for Pairs Trading).
Adding to the above, there will be an expanded selection of 20 Nasdaq stocks which are proving to be the most popular and successful group. The stocks that are also in the S&P lists may appear as a part of the Nasdaq selection.
Finally, we will continue with our Prime 5 selections of ETFs from the entire list.Friday - June 22nd 2018
Where Are the Best Stock Picks?
The answer is in the portfolios of large Professional Investment Managers or on Roebuck Systems website. We research them continuously and choose our selections to correlate with them.
We do it because our Algorithms work on good investments just as well as they work on bad investments.
Conservative Investors can follow our – Investment Manager Boosters - and know they are investing with these professionals in mind rather than some lesser known source. Most of our selections reflect their portfolios.
As a starting point, they may have 70% in stocks or funds and 30% in income producing bonds and they adjust those percentages up or down according to their future expectations.
Their stock portfolio is further adjusted with mixtures of North American, European, Asian and Far Eastern stocks or Emerging Markets. Finer adjustments can be made with specific countries.
Major Industrial Sectors are another way of tuning these portfolios by being specific on Technology, Healthcare, Finance or other major categories.
Bonds and interest rate portfolios are also adjusted to include mixtures of Federal, State, Municipal and Corporate sources as well as short or long-term maturities.
Mutual Funds also allow some fine tuning but ETFs and ETNs, (Exchange Traded Funds or Notes), are relatively new and cheaper ways to create baskets of assets. The huge growth of ETF/ETNs can produce savings from 0.5% to 1.5% or more, depending on the added loads and fees that can be associated with Mutual Funds. This difference produces critical savings to major investors and/or critical income to major producers.
Beyond these critical decisions, there could be smaller specialty investments in precious metals or volatility. There is competition to deal with and every Manager is looking for that extra percentage point over their competition.
So, we research these portfolios and try to accurately correlate our selections of Exchange Traded Products and stocks so that our Followers will be where the smart money is being invested.
We try to follow this concept through all our selections and always look at volume as an important factor.Thursday - June 21st 2018
This Drives Me Crazy.
I had a quick look this morning and since March 5, 2018 the S&P 500 was down over -0.5%.
Our average since March 5, 2018 is up 19%. Again, our AVERAGE is up 19%.
I often wish that I had chosen a different start date for all comparison charts, but it is way too late to change my mind. I wanted to be able to compare everything going forward and this is where we are.
Professional Investment Manager Portfolios are another key factor and are very important to us.
As you recall, we started with our DOW group, S&P 500 group and Nasdaq group along with various ETF selections.
There is no doubt that the Nasdaq selection is earning a permanent place with well over 100% annual returns even in these flat markets and we do not have any plans to eliminate that group.
By checking the various individual asset charts and back-test charts, you can also see that we do a very good job of staying out of down Markets. There are a few that occasionally synchronize with our Algorithms and take a while to detach themselves but overall, the record is good. UGAZ and DGAZ are good examples of this. That is one of the reasons why we suggest following a minimum of 3 assets and a maximum of 11.
ETFs however, offer remarkable results and keying them to professionally selected assets as we do will always be key to our selections.
We research PROFESSIONAL portfolios and CORRELATE with them.
We LEVERAGE and stay with the UP markets and get out of the DOWN Markets quickly.
With ETF Pairs Trading, we also INVEST in the DOWN markets as well as the UP markets.Wednesday - June 20th 2018
UGAZ and DGAZ not Performing.
We mentioned the Pairs as being a preferred group in terms of performance, but gas is hurting our results this month and will be removed and replaced in July.
Too many trades lately causing us insufficient time to get into a trend.
Between the two of them there are about 220 trades per year which is way too much switching direction.
My advice would be to stay away from gas until it comes into favor again.
We will have some great Pairs replacements for July and more positive changes.Tuesday - June 19th 2018
We Begin Looking for July Additions.
Before looking forward to July additions, we should take a look back at which results have been good for us.
Our average Group investment from chart 1Y has been $15,624 with a profit of $3,309 giving us a profit in 106 days of 23% or an annual profit of 77% so far.
All this while the S&P500 has made a 3% profit for an annual profit of 10% for the same 106 days.
We have Boosted the general market results nearly 8 times over this same period using 50 different assets.
I like those numbers very much but am always looking for a better way so that everyone who follows us will do better than the average of 77% annual return.
If you were following our lowest group, the same chart shows the professional Investment Manager portfolio would have returned 7% so far with an annual return of 23%. My comments from earlier days suggested that 14% average annual return over a long period for this group would be very good.
If you were following our highest group, ETF Pairs group has produced 38% so far with an annual return of 131%.
This gives you the hint that July may well see some new ideas in the Pairs arena.Monday - June 18th 2018
Nasdaq Group Remains Popular.
It stands to reason that the faster growth companies are in the Nasdaq range as many of them are newer and growing their operations.
We get to select from this group which also tends to have higher volatility and produces greater returns through our Algorithms.
They persistently stay at the top of our groups and compete well with the Pairs selections for the number one position in back tested returns. This brings to the forefront one of the features of the Algorithms and their annual results.
The net results obtained in our live accounts are a compilation of the underlying asset gains plus the arithmetic gain from the buy and sell trades specified by the algorithm.
If the underlying stock or ETF is doing well by itself, there is less meat on the bone for the algorithms. You can see this in the Chart 1x column under -BACKTEST Potential Gain. Nasdaq gains as a group, are in the range of 137%.
Comparisons with the Pairs group are not appropriately accurate because we switch sides in those trades and that complicates equal comparisons. That being so, we prefer not to attempt to put a value for the Pairs gain even though their performance is very high.Sunday - June 17th 2018
ETF Pairs Trading Decisions.
When we added the ETF Pairs Trading selections, a deciding factor at the time was to include both sides of the pair so that we could publish the entire story.
As we are mostly invested in only 5 ETFs because one of each pair is moving inversely to the other, it seems like a waste of opportunity.
However, we have seen on recent days that we are occasionally in both sides at the same time or alternatively, in neither side at the same time. Either way this puts us in a neutral position, assuming equal cash investments.
This tells you that the algorithm is thinking but not sure of the next move. Perhaps the best decision when you see the second side signaled as a buy is to sell your existing position and be neutral in cash.
If you buy the second position instead and then sell one of them later, you still pay 2 commissions either way, so you are probably better off being neutral in cash.
I would choose that in my IRA account because the T+2 Banking Rule can become a problem if I don’t have the required settled cash for a trade if the next buy will use the balance of my account value.
This is where margin accounts become useful because the cost of using borrowed money for one day is very small and your Broker avoids annoying you with one of those Good Faith Violations.
A margin account avoids all these Banking Rule problems as well as our own 98% rule.
When we are making a final buy to use up our last available capital, we always use 98% of the capital and leave 2% so that overnight price changes will not cause our Broker to cancel a trade at the next open. Paying interest for a day on a small amount is preferable to missing a buy and it avoids doing that 98% calculation.Thursday - June 14th 2018
Investment Managers Portfolios.
We continue to refine our derivative selections from professional Investment Managers because we want our Algorithms to have the best source material to work with.
Having confidence in the underlying funds and ETFs is important when moving from an unleveraged account to one that is highly leveraged like the 3x and Ultra ETF selections that we include.
However, it is also important to look at the back-tested charts for each group to see how we manage to stay away from down markets.
Looking back at these charts as well as following them into the future with us, shows that in most cases we quickly get out and stay out of steep declines.
This is all part of the Algorithm nature to add together most of the up-moves during the year and avoid hanging around during the down slides.
We are also aware of the daily volumes needed to keep the bid/ask spreads as close as we can. Our average trades are currently running at about 17 buys plus 17 sells per year per stock which is less than 3 per month.Wednesday - June 13th 2018
Trade on the First Day of a Signal.
Always trade on the following trading day after the first signal change occurs.
Our Algorithms are designed to Buy or Sell on that next Market Open and unless you have some unique knowledge of your own to override the signal, it is strongly recommended that you stay with the signal.
There are lots of flashes of brilliance for you to want to change your mind and some of them on some of the days will make you wish you had. There are always improvements to be had and we are looking for them every day.
As stated, we have been looking for a long time but remember the main advantage was the ability to carry on with a normal activity during the daytime and avoid watching the Markets all day long.
There certainly are other systems that can follow open trading and may signal the exact time for you to make your trade but ours is not designed to do it.
We prefer to look for what the Markets can offer us and then decide which are the best odds that we can find.
Stock prices tend to move around facts that are either positive or negative and are not randomly distributed. They tend to cluster around the same price when there is a lack of information to move them.
Adding or eliminating a stock or ETF from our main crop of 50 opportunities has become a month-long job for us. We take it as an opportunity to adjust the portfolio to the longer-term changes in the daily news cycle.Tuesday - June 12th 2018
Why Comparisons Begin March 5, 2018
Although we began working with these Algorithms in 2011, we previously published data for volatility for 3 years, through early 2018 and stopped doing that when Credit Suisse took their inverse ETF, XIV off the market.
We then continued with common stocks and ETFs early in 2018, and we publish results going back 12-months for those that we recommend.
You will find these 12-month charts on the pages of the various Booster groups, along with the current history of all trades beginning on March 5, 2018.
As all signals within the Booster groups did not occur on the same date, we wanted to provide live signals as they occur before the actual trade date. We wanted to start publishing these new signal recommendations to build at least a 12-month record for Subscribers to see them in action.
When we reach one full year, we will then decide how best to proceed.
It is worth repeating that back testing beyond 18 months is of little use to our results even though we have gone back as far as 1990 in some cases.
Live comparisons between the Booster groups are important for Followers and Subscribers to judge the best way to proceed for their own investment decisions.
Different styles and risk levels are available ranging from a conservative Investment Manager portfolio to a leveraged and fully correlated Premier version of the same portfolio.
We also offer Common Stock selections from S&P 500 and from Nasdaq as well as leveraged Pairs Trading recommendations.Monday - June 11th 2018
NASDAQ Stocks Remain First.
We continue to have great success with the Nasdaq Boosters which are up at 98% annual profit while the S&P 500 Index remains at just 14% annual return. That is a 700% gain on the Index.
You can see from the chart 1Y that the average gain ratio is 5.3 to 1 today or equivalent to 530% gain for all 6 groups of Boosters compared to the S&P Index.
Considering that 20 of these stocks are either from the Nasdaq or S&P 500 and have no leverage, we are getting much better than a 200% gain from our Algorithms even in poor Markets.
Although we are doing well with regular stocks, we will see a larger benefit from the leveraged ETFs when we get a positive direction for our Markets.Friday - June 8th 2018
Investment Manager Portfolios - Part 3.
2 days ago, we used the current Inv-Manager Boosters result of 14% annual return, which we then boosted to 31% annual return. Continuing with results as of yesterday, our Premier Boosters were at 41% annual return which we then boosted to 105% annual return. These numbers vary slightly each day.
Then we said – If your 70% in an ETF portfolio currently makes 14% annual profit and you take one fifth of it and run it through our Algorithms, your new annual profit jumps up to over 17%. That is (14+14+14+14+31)/5 = 17.4%.
Now, we can move up the leverage ratio ladder. We said that our initial selection comes from professional world-wide Investment Managers. Then, using correlation formulas to maintain better than 95% correlation, we found the 3x leveraged ETF products that best represent the exact same portfolio.
We now have our Premier Boosters which you can find on our website.
Next, we can repeat the calculation for the Premier Boosters. We will also use actual pre-published trades based on 7 years of research and published since March 5, 2018.
Please note that this period has not been good for the Markets and has produced an annual return for the S&P 500 Index of only 3.7%.
Our Premier Booster group has produced 39.3% annual return as seen in the Buy & Hold column whereas the base unit Inv Manager group has produced 13.7% annual return also from the Buy & Hold column. That is a 287% increase (39.3%/13.7% = 287%) and a correlation of almost 96%. (287%/300% = 96%).
Suppose your 70% of your portfolio in ETFs is currently making 39.3% annual profit as published in our Premier Booster Buy & Hold column. Now look at the actual potential annual Algorithm Gain at the bottom of the Premier Booster chart. This group has a gain of 265% and an annual profit of 104.3%.
Finally, look at these results. If you take one fifth of your portfolio and run it through our Premier Booster Algorithms, your new annual profit jumps up to more than 52%. That is (39.3+39.3+39.3+39.3+104.3)/5 = 52.3%.
Once again, suppose you increase the portion through our Algorithms to two fifths of your investment, your new annual return jumps to over 65%. That is (39.3+39.3+39.3+104.3+104.3)/5 = 65.3%.
As previously stated, for each one fifth (20%) of your portfolio you invest in Premier Boosters, your annual profit jumps by one fifth of the difference in the annual return rates; in this case 13%. That is (104.3% - 39.3%) = 65%/5 = 13%.
The point of these Part 1, 2 and 3 explanations are that you start with 14% annual return from the expert Investment Managers and jump to 31%.
Alternatively, in the leveraged and correlated portfolio, you start with 39% return and today you arrive at a potential 104% annual return. This is using expert managers all the way through: -
1- Professional Portfolio Creation
2- Correlation and Leverage and
3- Roebuck Systems Algorithms.
All the above data is taken from actual published results and may vary slightly every day, but it can be verified at any time from actual data. Future results will also vary daily but we will continue to publish our trades on the previous day to all subscribers.Thursday - June 7th 2018
Investment Manager Portfolios - Part 2.
If you read the Blog yesterday, you will better understand where we are going with these added comments today.
Correlation of stocks is a designation used by many investors to find assets that move in a similar pattern.
If you laid the chart of one asset on top of another and they perfectly match each other, you would say they have a 100% correlation.
Correlation used to be a difficult thing to find in stocks.
Perhaps the first attempt at trading opposite directions was switching from Long to Short. Insurance policies, which became known as Options, then gave you the choice of Calls or Puts.
Now we have ETFs with the leverage given to them on a daily re-calculated basis using Options. In theory, when the Markets first open in the morning, they have a leverage factor of 2x or 3x the movement of the base unit and are reshuffled every night after the Markets close, to return to this published leverage value.
So, here we have an ETF, leveraged to go at 3 times the speed and distance of the base unit and reshuffled every night so that it correlates 100% with that same base unit!
Have we arrived in Heaven, or am I missing something?
Here is what we do. We take the Investment Managers professional selections and then use the ETF Managers professional mathematics to find something that has 100% correlation to the base unit and then it triples the movement.
Not finished yet. Now we use Roebuck Systems Algorithms to tell you when to buy and sell the ETF to increase the profits by an average of about 225% for this particular group of assets. What could possibly go wrong?
Our Algorithms look at long-term and short-term factors individually for each different asset and group. They then work to keep you out of the market when it goes down but will keep you in the market when it goes up.
So, if the Investment Manager experts make 13% and the ETF experts multiply the 13% by 3 to make 39% and we then multiply the 39% by 225%, then YOU end up with 88%.
From all of our selections, this one has the least potential but also has the least risk.Wednesday - June 6th 2018
Investment Manager Portfolios - Part 1.
Large portfolio Investment Managers are the source that we study and use to provide our Inv Manager ETF selection and you will notice it has had a steady but upward movement.
This group probably has the least risk as they are none-leveraged ETFs, but they are not balanced to equal the percentage of ownership by these managers. Also, they represent only the ETF portion of their accounts.
Our Algorithms currently move them up an additional 17% from an average 14% up to 31% of annual profit.
The long-term inflation adjusted return from the stock markets is usually quoted at about 7% and before inflation that is about 10%. The above 14% gained by our selections from these major portfolio managers seems to fit the numbers when you consider that they also have a major portion in Bonds at lower rates.
So, in longer term theory, if you adjust your percentages year by year and put approximately 30% of your portfolio into Bonds and the balance in our Investment Manager ETFs, you are a long way to meeting normal and average Market returns.
These numbers vary slightly each day.
Now suppose your 70% in ETFs is currently making 14% annual profit from above and you take one fifth of it and run it through our Algorithms, your new annual profit jumps up to over 17%. That is (14+14+14+14+31)/5 = 17.4%.
Once again, suppose you increase the portion through our Algorithms to two fifths of your investment, your new annual return jumps to over 20%. That is (14+14+14+31+31)/5 = 20.8%.
As you can see, for each fifth (or each 20%), that you run through our Algorithms, you gain one fifth of the difference in the annual return rates; in this case 3.4% for each fifth. That is (17%/5).
Obviously, we are using the widest held none-leveraged portfolios from our research, to arrive at this 31% annual profit. This is the most risk-free selection that we offer and based on our published results, would produce an additional EXTRA income of $17,000 each year from every $100,000 that you invested.
All you must do now is watch our Algorithms until you convince yourself that they are real and how well they work.Tuesday - June 5th 2018
Available or Maximum $2,000 per Stock?
Complicated charts but we do have a reason for it. It became necessary when we began all investments on the same date, March 5, 2018, and then found it beneficial to list assets in alphabetical order.
The problem was everything was giving us a BUY signal on different dates and to top it off, the signals didn’t come in alphabetical order.
So, to show profits as a percentage of investments, we had to accumulate them until we reached our maximum of $2,000 per stock in each group.
So, why $2,000 per stock? No good reason other than it seemed like a good average number at the time. We knew we wanted to use a constant amount, the same constant start date and put everything in alphabetical order.
The problem now is we hesitate to change anything because the history and comparisons are easier to show and compare.
It probably makes little difference now as we almost have the maximum $20,000 in each group of 10 assets. It does make it easier to start new groups such as the ETF Prime 5 or the Pairs Trading because of these standards. We can replicate them all back to these standards, so I hope you can live with our methods.
Looking backwards, it probably would have been better to use $1,000 per stock but we already had to eliminate Amazon because the price is close to $1,700 per share.
We also often receive questions about the minimum investment necessary and we determined that $2,000 divided into 3 stocks would be ok, especially if the better performers are selected. Even with online commissions and subscription costs, this would make a workable minimum, but profits should be put back in and perhaps double that amount is a better number.Monday - June 4th 2018
How Many Stocks to Own? Suggest you read all of the comments for today.
If you want to go crazy, just google this question and everybody has their own best solution, but it can help to answer the question for your personal situation.
My opinion on this subject is colored by my history from an early age when I first borrowed money to put into the stock market until today and my reasons to develop our Algorithms.
That is why I look at risk now as an older investor and why my absolute minimum would be 3 positions. One of them could be a Pairs position as you might only be in one side of the Pair at a time.
I would move to 5 positions as soon as possible and that would nicely line up with our new ETF Prime 5 group or any other selection from the entire 50 selections that we cover with our Boosters.
Of course, you could find 2 or 4 other systems and just use 1 from us and that might satisfy these minimums, but from my old experience, do not borrow money and put it into wildcat oil wells in Australia. Did that and lost it all.
So, the risk factor is first on my list, but you can also have too many positions.
My personal limit is a maximum of 11 because you can begin to duplicate your sectors and especially when you have all these ETFs available, you are already covering multiple bases with them. The earliest example is SPY which represents all 500 of the S&P 500 stocks. That one is like watching paint dry, but you can now select almost anything in vertical channels and ideas.
I do want to emphasize that we attempt to give you a well rounded and thought out selection starting with current world-wide Investment Manager favorites. Your own personal preference can be affected by the percentage of your investment account that you apply to each position. I explained recently that currently many of these Investment Managers have approximately 25% of their accounts in Total US Market ETFs.
Another 20% to 30% of their accounts are in bonds of various types and they select where the best returns are found.
We have looked at these bond ETFs as well and not surprisingly, our Algorithms also work very well on those ETF offerings. You can expect something in that category in the future from Roebuck Systems, but you may be disappointed with the returns. After all, few people invest 100% into bonds but bonds with an algorithmic kicker are a lot more interesting.Friday - June 1st 2018
Some Useful Updates in June. Suggest you read all of the comments for today.
The 6 main groups of assets to choose from begin with the Investment Managers and Bankers Group which are updated to match large ETF portfolios held by Investment Managers. In the past year, they have produced 12% and our Algorithms have produced 30%, a gain of 248%. These are not leveraged ETFs but are widely held.
The second group are selected from the S&P 500 and have produced 77% in the past year alone and our Algorithms have produced 135%, a gain of 175%. These are all stocks.
The third group are 5 new ETF Pairs which together as a group, lost 8% but our Algorithms have produced 125% profit. Many investors like to trade long and short and here we take advantage of the leverage available in ETFs so that no short trading is required. Although they do not exactly switch positions on the same day, they sometimes remain in both positions effectively trading in a neutral position.
The fourth group are selected from Nasdaq and these are plain stocks. In the past year, they produced 242% with a buy and hold strategy and our Algorithms have produced 349%, a gain of 144%.
The fifth group are selected to represent Investment Managers and are leveraged ETFs that gained 33% on their own but our Algorithms have produced 97%, a gain of 290%.
The sixth and final Prime Group is a smaller selection of 5 from the above 50 that we publish every day. By themselves they produced 35% during the past year, but our Algorithms produced 89%, which is a gain of 257%.
The above percentages will change every day because our Algorithms are run every day after major US Markets close to provide the very latest information available. The daily Blog keeps you up to date on the exact results.
The two new groups named ETF Pairs and ETF Prime 5 are designed to offer smaller selections and more specific selections for Followers. These may be helpful for you to test our system of signals every evening. They provide powerful results that represent trading since March 5, 2018. We use this date as the initial publishing date for these specific Algorithms especially so that comparisons can easily be made.What to do with the New Month Groups.
The same rules always apply. If the stock or ETF is no longer on any of our lists, you sell it at the next market open and replace it with any stock or ETF that is on our lists with a greater potential annual return.
If you want to try Pairs Trading, you could decide to add one of the Pairs as replacements to the next 2 sales.
Alternatively, what I do is continuously change to a different asset or group when sales occur, whether it is the end of a month or not. I am constantly trying to improve my portfolio every day and like to be an active trader.
As far as how many to own, my preference is at least 3 assets in any account for safety and no more than 11 assets, depending on your personal situation, your preferences or your retirement plans.
Tax exempt accounts are always handy and preferred. If it is available to your type of account, I would modify or open it as a Margin account for 2 reasons.
First, there are occasional situations when our Algorithms buy and sell on alternate days and you could run up against the T+2 Banking Rule which prevents you from using cash that has not settled yet. The use of Margin or borrowed money for 24 or 48 hours prevents all these trading problems.
Second, I have found that the Margin Interest Rate at your Brokerage is usually lower than any other form of loan or credit card, so it is a good place to borrow money. Unfortunately, you are not allowed to do this with an IRA or tax advantaged account.
One final point. We use a standard of $2,000 initial investment and a start date of March 5, 2018 for all assets so that easy comparisons can always be made between groups and assets.
One point to remember is that with Pairs Trading, you can assume that you will only be in one side of the pair at a time, although some overlapping does occur.Thursday - May 31st 2018
Statistics Worth Looking At.
It is often difficult to see where we are going when the DOW goes down 250 points and the S&P goes down 19 points but there are numbers in our charts that you can look at for better information.
For example, at the top of each graph, you can see the current annual return of that group of stocks as well as the S&P 500 since March 5, 2018.
If you divide our return by the S&P you can easily see how much better, we are doing. You can also add all the groups together to see an average annual return and divide that by the S&P 500.
The answer today is 64% average annual return for all Algorithms and 3.8% for the S&P. This gives us a number (just for today) of 64 divided by 3.8 or about 16 times better than those 500 stocks.
This number is going to get better as time slips away and I need to explain that. If you look at the History Data page of the website and check the Maximum Investment number just above the trade log for each group, you will see that only 4 of them today have reached $20,000 maximum investment or $2,000 for each of the 10 stocks.
This means that we have not yet invested the maximum in some of the groups, but within a month or so, we will reach that maximum for all calculations. We will then be counting all profit as a percentage of our fixed maximum investment and the final annual returns will be a higher and correct representation of the annual return.
However, after March 5, 2019 we will reach 365 days and another variable will become fixed and we can then ignore this whole subject.Wednesday - May 30th 2018
How NOT to Trade your Account?
My lazy way to trade our Top-10 groups of accounts is a little different but offers a simple solution. It works if you are usually pushed for time, or perhaps if you are new to trading a group of stocks in a common account.
As you have seen, we many times have less than a full house of stocks due to some of them having been sold.
An example is trading all 10 of the Nasdaq Top-10 as I do in my IRA. We often own 7 of the 10 possibilities with 3 of them having been previously sold. This is where I have used a time saver.
If my cash from these 3 sales is $3,600 and I get a signal to buy one of them tomorrow, then I just divide my cash by 3 and buy $1,200 worth of the next stock. This is not my recommended system.
We normally suggest that when you buy back into a stock, you should use the same amount of cash from the previous sale of that stock to get back into your position. In this way, you are putting that same amount in to your winners as well as your losers.
This would be our recommended method of trading and I am wrong to ignore this principal. After all, when we make our selections, we always look at them in a best to worst order.
The large portfolios of investment managers that help us to make selections are divided into categories with surprising differences in values. Last month we found a couple of managers that are holding 60% of a multimillion dollar account portfolio in ETFs and 40% of that ETF total was in a single asset.
That represents about 24% of the entire portfolio was in a single ETF. So, if the big guys are going with their winners, we should do the same thing.
My quickie system will eventually spread my winnings equally but, I am wrong in mistreating my IRA this way and will go back to the preferred system ASAP.Tuesday - May 29th 2018
Inverse PAIRS TRADING with ETFs.
We have done considerable pairs-trading going back to our days with volatility before Credit Suisse took XIV off the market place.
The great benefit is the issue of all the inverse ETFs for most popular Indexes and segments and the great opposing correlation between the positive and the inverse trade.
The disadvantages are the management costs of the leveraged versions that are otherwise tempting to use, if those costs could somehow be overcome. Well, guess what! Our Algorithms produce profits from positive and inverse ETFs.
We have scanned and back-tested 100’s of pairs and as expected, our Algorithms performed as previously demonstrated. On bullish assets, they quickly tend to get out of strong negative moves and stay with the positives.
The result is with good correlation, even though it is in opposite directions, we can take advantage of the diversity in their moves. The net in many cases is profits from both sides of the trading.
We are starting with a selection of industries from Biotech, Natural Gas, Semiconductor and Gold Miners with a final pair from the Russell 2000 stocks.
You will see these ETF Pairs in the ETF Booster slot in the June selections as several of them are already in that ETF published data.Monday - May 28th 2018
New Ways to use our Algorithms.
Following the world of large investment managers is proving to be a great way to confirm selections of assets to form our Algorithm groups.
One of the great benefits is they represent high daily volumes which minimizes the bid/ask price spread when we make a trade.
Secondly, they represent broad universal opinion when deciding between large, mid or small-cap assets. This also helps the USA versus Europe or Asia decision that large portfolio managers need to know.
Our back testing has confirmed these advantages and has also pointed us towards broader uses of the Algorithms that we will begin to make available next week in the June selections.
The first benefit is in response to requests received to more specifically define a smaller selection of assets for you to follow. To achieve a new smaller ETF group of 5 assets, we have analyzed these managed investments to see what percentage of their portfolios is dedicated to which type of investment.
Consequently, you will now see this smaller group of 5 that we call our - ETF Prime Booster. We back tested the group but started the published data on March 5, 2018 so that easy comparisons can be made to all other selections. We will continue this trading forward from here.
I have added a chart here to show how well this Prime selection has performed with better than a 46% return in just 84 days. This translates to an annual profit of about 200%.
What you are seeing here is the wisdom of large portfolio managers made much more efficient by trading their positions through our Algorithms.
I keep mentioning this fact because it is extremely important to consider. During this period since March 5, the S&P 500 Index has gone nowhere.Thursday Special - May 24th 2018
How to Invest in Our Algorithms.
Yesterday I wrote that $500 investment in 10 average stocks selected from our entire range since March 5 this year, would have produced a 59% annualized profit so far.
Of course, if you had chosen the 10 Nasdaq stocks, your profit would have been more than 50% higher or greater than 90% annualized profit.
In either case, at our published monthly fee schedule, you would have also paid $1,140 to us from this $5,000 account so profits would have been 36% ($1,800) or 67% ($3,350) on the $5,000 investment.
Of course, larger investments would still pay the exact same commissions and fees, thus allowing much greater profits.
It is sometimes difficult to make the best selection of stocks from the 5 or 6 Top-10 groups, but I want to emphasize how easy it is to switch around from group to group or just select a mixture from several of the groups.
I reported earlier that I switched my entire selection in my IRA during May from the Total Top-10 group into the Nasdaq Top-10 by taking Sell signals in the Total group and Buy signals in the Nasdaq group. Loyalty to an investment is not required here.
All our published trades and results have been obtained in this lousy market for the last 3 months with the S&P Index going virtually nowhere. If we had started 6 months sooner, we would all be dancing in the streets, but we don’t know when the great markets will occur.
I am encouraged by our annual returns in lousy markets and really looking forward to better opportunities tomorrow or next month, whenever they return.Wednesday Special - May 23rd 2018
FTSE Replaced by Premier Selection.
Our new Premier Selection will replace the London FTSE Top-10 in June.
Added taxes do not help trading in London programs such as ours and we find UK investors often prefer to trade in overseas markets.
Our new Premier Group of Algorithms provides investors with a highly leveraged set of widely held as well as currently popular ETFs.
Equally important is their diversification, which comprises of a popular current range representing broad portfolios.
We recently received a complaint that commissions are not calculated in our Algorithms and here are the reasons we do not include them.
Our average stock or ETF trades are less than 15 buys and 15 sells in a back tested 12-month period. At Tradier Brokerage, 30 trades at $3.49 per trade would cost $104.70 in an average year per stock. It should be noted that Tradier is offering new accounts $200 or 60 days of FREE trades if you use the code – Roebuck200.
If you make a profit of $1,000 in a year from trading one stock, you would pay less than 11% in commissions. There are many different Brokers with many different fees.
We also have accounts with Interactive Brokers where commissions are much less but Tradier is a well-designed and simple online brokerage site and that is why we use them. We do not receive any financial benefits from your choice of Brokerage and we have no financial benefits or agreements with anyone.
We do recommend that you find a Broker suited to your needs, but it would be unfair to most Subscribers for us to include a commission that does not represent their situation. You can simply multiply by 30, your commission and the number of stocks that you follow to see your estimated total cost per year.
If you wanted to follow any of our current Top-10 selections with a total of $5,000 or $500 per stock, your commissions at Tradier would be 30 x 10 x $3.49 for a total of $1,047. This is about 21% of your initial investment and the average annual profit on all of our published Algorithms since March 5, 2018 is currently 80% profit. This leaves an average of 59% potential profit on a $5,000 investment.
As you have seen, the average annual return has been rising since March 5, as expected, and any larger account reduces the significance of commissions as well as our fees.
Our fees are roughly equal to the Brokerage Commissions on the smallest account.Tuesday Special - May 22nd 2018
Reading Our Charts – VTI.
I see these every day and probably take them for granted as they have changed and improved over 7 years.
VTI is a great example because it is one of the widest held ETFs in managed accounts today. It is described as a Total Stock Market with about 98% USA equities.
The red dots represent the Buy and Hold profit if you held it since May 23, 2017 and the green line represents our results after using Algorithms. We kept making profits while VTI lost much of the previous gains during the past 5 months.
This is one example of what Algorithms can do but if this only worked on one stock over a particular period, then it would be easy to duplicate.
I urge you to look at all the stocks and ETFs that we publish to see the excellent record that has been established. As you have seen, we publish ahead of our trades and have no way to offer tricks and make believe.
I have also disclosed that our Algorithms are run every day without fail. We take the very latest information into consideration and drop off the oldest date at the same time.Monday Special - May 21st 2018
Necessary Changes for Sectors.
GKN-LON is involved in an acquisition and had to be replaced over the weekend. AHT-LON has been added in place of it.
While we are making changes and due to low volumes, we are replacing FINU with FAS in the new Premier group. In this case FINU is a sale for tomorrow, so we will not buy the replacement FAS until we get a BUY signal.
Any Followers who may have a position in either of these should sell and replace them at the next trading day open. These are treated just like a normal exchange at the end of each month when we occasionally adjust the sector Top-10 groups as necessary.
By way of explanation, we estimate that an average of 1 or 2 stocks or ETFs in each Top-10 sector will be replaced each month because they no longer perform or need replacement for some other reason.
This process means that most of the selection could be replaced within one year. In volatile sectors, this is more likely whereas in more stable sectors, it may not be the case.
Month-end is the likely time that changes occur, and it just takes a simple sell and replace on the following trading day open.Friday Special - May 17th 2018
SEE the ENTIRE PROGRAM.
If you look at the History Data page right now, you will see every trade on every Booster since March 5, 2018.
It is 74 days or 11 weeks since we began publishing our trades ahead of time to demonstrate our Algorithms and their success rate.
During these 74 days, the S&P 500 is up 1% and our average stock from over 50, is up 18% with a current and improving Average Annual Profit of 89%.
Let me say that again to be clear – Average 89% Annual Profits.Thursday May 17th 2018
What are Premier ETFs?
Money Managers around the world are looking at the same data points that influence their investment conclusions.
How is Europe doing compared to the USA or compared to China?
Is China following the whole of Asia or is Asia more generally following China and who is manipulating their currency?
Morgan Stanley Capital International is often used in the name when you see MSCI in a description because Morgan designed many of the Indexes that specify a particular segment.
You often see EAFE associated with MSCI because Morgan also used it to stand for Europe, Australasia and Far East. It basically includes all these areas excluding the USA and Canada.
When Mutual Funds were the game in town, these standards from the giants in the investment community were useful in delineating trends and financial activity into various segments.
We search data to find what Investment Managers are doing but take advantage of the rapid growth of Exchange Traded Funds. They generally have the advantage of being cheaper to manage than your typical Mutual Fund, but they have the added advantage of leverage.
We find that using a broad consensus from Money Managers in choosing financial and/or geographical selections is an excellent basis for investment. Couple that with some leverage offered by ETFs and some Algorithms offered by Roebuck Systems and you have a great model for investing.Wednesday May 16th 2018
ETF and Banker Top-10 Selections Up.
All 10 of the Banker and ETF selections went up today which tells us that the smart money as well as the risk takers were investing.
There is a rule for every Market and you can go crazy trying to adjust your investments for whatever is the latest theory.
The reason I have ended up with Algorithms is precisely this fact. They take away those greatest and latest theories on where to put your money. Just give me the facts as Sgt Joe Friday used to say on TV.
I have added a preliminary chart to show you how we intend to break our Algorithms down to make useful and investable decisions from a smaller selection of opportunities.
We often hear that there is too much data on our website or too much daily information out there and it makes it difficult to decide what to invest in for the best results. I found that it was impossible to make the best decision because tomorrow brought some new fact or new idea that I needed to know more about.
Algorithms make all that decision-making jargon a lot simpler once you see consistent results and can logically believe in what you see. That is the reason for us to offer precise investment programs that are built on a long history of known factors.Tuesday May 15th 2018
Striving for Profits.
We started all current Algorithms on March 5, 2018 on the same day that we introduced them to the public.
Since then, 71 days ago, the S&P 500 has gone virtually nowhere for an annual rate of approximating 6%.
We introduced 50 Algorithms and traded them daily, representing a wide range of stocks and investments.
In those same 71 days, they moved up an average of 14% or an annual rate of 71% profit with the best selection of Nasdaq stocks near 150% annual profit.
We certainly chose a poor starting date based on Market activity, but it has been a great opportunity to demonstrate how our Algorithms keep us in profits during poor Market conditions.
The slowest group are the Banker Top-10 but they rose at a 26% annual rate of profit. At that rate, you would still double your money in less than every 3 years or about 830% in 10 years.
Yet, I said yesterday that we are going to introduce something better than we have seen in the past 7 years. I have great confidence in this statement because it represents a formula change that repeats itself in a range of assets.
I have already back tested and run these new Algorithms on real time data with great results and have a goal of June 1 for their introduction along with the regular monthly updates.Monday May 14th 2018
NEW Top-10 Fund Coming Soon.
Apologies for no Blog yesterday but I do have a couple of excuses. Mothers’ Day would be one of them and working on Algorithms when I should have been enjoying Mothers’ Day is the other.
Suddenly, there was no time for the Blog, but a new and improved fund will be the result in the coming weeks and I am anxious to bring the results to you.
I like the idea of someone more capable than me making some of the decisions and we plan on putting that into action in the next month or so with some very exciting results.
We are back to my argument that there is always a better way and the nice thing about mathematics is the numbers do not lie.
I fully expect the new Algorithms will produce greater results than we have experienced during the past 7 years and at this point, I intend to include it as part of our existing set of Top-10 selections.
It will most likely replace one of the current selections and I will give notice if that proves to be the case. It is difficult to replace something that is already making profits but when the technology and methods simply outdate previously published data, we just must use it.
One of the great advantages of all our Algorithms is the simplicity in following them and switching in between different Top-10 groups. I personally moved to the Nasdaq Top-10 recently by taking the SELL signals to get me out of previous stocks and the BUY signals to get me into the Nasdaq selection.
I also ran into the T+2 Banking Rule on a Corporate account and was restricted in trading for a day. I quickly changed the account to a Margin account which provides the extra cash on the few occasions that the rule kicks in.
It costs very little interest for the day or two that the extra cash is needed, and I prefer to trade on the signal day rather than stay out of a position.Sunday May 13th 2018
No Blog Today.Thursday May 10th 2018
A COUPLE of DAYS DIFFERENCE.
If you remember a couple of days ago, the ETF Top-10 was struggling due to the difficulty of owning them in down and flat markets.
What a difference a day makes! They are now #5 in the ranking and suddenly, they have a desirable annual profit and may catch up very quickly.
It always comes back to portfolio choice and your decision of what is best for your goals. A younger person has the time to be wrong (for a while), but if you are already retired, that luxury may not be available to you.
The middle of the road portfolio could be a selection of 2 from each group to get that spike that comes from leverage in strong markets. Obviously, your location may keep you in or out of the London markets.
20 years ago, or more, that leverage factor may have come from Options or perhaps Warrants or Futures but that required a set of skills that a lot of us didn’t perfect.
Another portfolio might be 5 from the Banker Top-10 which are also ETFs and is a selection from Fundamental Investment Managers together with 5 from the leveraged ETF Top-10. This could give you the confidence of expert selection advice combined with some of that leverage that looks so good.
Whichever method you choose, keeping an eye on that Banker Top-10 is always a good way of following the money.
By reading up on those symbols in the Banker group and the sectors they represent, you could then give expert commentary at your next Family Gathering!Wednesday May 9th 2018
GAMBLING or COUNTING CARDS?
My best session as a Card Counter was in the 1980’s in Monte Carlo when I walked away with about $7,000.
That is just about the time that shuffling machines began to come into favor and people like me had to rely on our careers. I am an Engineer with an inner risk computer and I use numbers and art to figure out solutions.
What you get with my Algorithms are fact-based calculations from many millions of iterations, which are always repeated every day, for each asset that we publish each evening.
So, what is the result? A better chance of being on the right side of an investment than being on the wrong side.
What I can tell you is you will have on average each day, somewhere between a 55% to 65% chance of being right in the long run. In fact, it is probably more like Card Counting in that I can only guess which card will turn up tomorrow, but I can calculate which cards are more likely than others.
I am risk averse and my inner computer told me to give up Card Counting when it was no longer a winning strategy.
What else should you know? GIGO is a computer term that I first heard early in my career when I worked on production scheduling. Garbage In – Garbage Out was a very simple warning to avoid Garbage.
If we feed the wrong data in, then we will get wrong answers, so the key is to find as much relevant data as you can and let the computer make the decision for tomorrow. I cannot currently tell you if it is a 51% chance or 65% chance, but I can tell you whether it leans to a Buy or a Sell and in the long run, I will be correct.
Finally, you should note that these basic Algorithms, with small changes, are producing positive results from all trading assets that we publish. They range from conservative to highly speculative assets. Tomorrow will be different than today but so far, we have not found a back test that does not benefit from our methods.Tuesday May 8th 2018
There are ETFs and there are ETFs!
The ETF Top-10 Booster is struggling to stay ahead of the Markets these days and quickly gives up any gains it makes in these volatile times.
The reasons are explained by the 2x and 3x leverage that these types of ETFs are designed for. This would be great if there were no severe penalties for us to pay for that leverage.
The use of Options to get the leverage introduces extreme time decays every day by them having a fixed strike price and date of expiration in the future. This becomes a cost of ownership and a daily loss.
In addition to this daily loss, there is a large management cost involved after every market close, to re-adjust the quantity and variety of options so that they will open on the next trading day with their particular leverage value and contract.
All these costs are overcome in a trending market but become more difficult to overcome in a flat or volatile market.
This is not true with none leveraged ETFs that are represented in the Bankers Top-10 Booster and many Investment Managers prefer to use these ETFs rather than Mutual Funds because the management costs are about 1/2% cheaper and can give them an edge in competition.
This 1/2% gives all of us the same advantage. Remember that Mutual Funds have annual management costs in the 1% to 2% range and this expense can make a big difference in large portfolios.
These savings are one of the main reasons for the fast growth of the ETF industry over the past 10 years or so and why we see them represented in major portfolios. An earlier version of them is the SPY which represents the trading values of all S&P 500 stocks in real time values.Monday May 7th 2018
How to Begin.
We suggest you start with the “Bankers Top-10” because they are the investment of choice by many International Investment Managers around the world. This group of assets trade more than $10 Billion dollars every trading day.
We also suggest you start with a minimum choice of 5 assets with $800 in each of them. Otherwise, if possible, available capital should be equally invested in 10 assets and profits from each re-invested in itself at the next BUY Signal.
On the first day, you should BUY only those “Bankers Top-10” assets that have a BUY signal and from that day forward, BUY or SELL at each new signal change that you receive from us.
These trades should always be placed at the “Opening Price” on the next trading day. Your Broker may call that a Market Order which can normally be placed any time before the Market opens for the next business day.
As you gain experience with our Algorithms, you can move further up the potential profit list of assets.
That’s It.Saturday May 5th 2018
CHANGES for the BETTER.
Always looking for a better and simpler presentation, we added the Total Top-10 selection to the bottom of the 5 basic sector groups, putting everything on our new Chart number 4A.
Also, Chart 1X has been simplified by eliminating the gain over the local Index.
We now simply look at the Booster profits over the Buy and Hold strategy for each stock and group and rank their current results.
I do want to caution you that some of these leveraged ETFs can be stressful.
On the other hand, the Banker Top-10 are also Exchange Traded Products, but at the opposite end of the spectrum.
Having spent so much time with these Algorithms for 7 years now, I think our decision to leave the DOW in with the S&P 500 and then to create this Banker Top-10 Booster has looked good to me from the start.
It combines the knowledge of these top-level Investment Managers with their need to compete. Our Boosters offer a unique new ability to stay out of down moves and sharp reversals. They combine their skills, creating huge volumes with every known fundamental analysis method to stay at the top. They then look for an edge to make that extra percentage that can set them apart.
Our Algorithms can be that edge. Their potential gain based on back testing is currently 242% or 142% profit from Chart 1X with an actual annual profit since March 5, 2018 of 25%. This profit from a Market with an S&P 500 that has moved down -0.7% during the same period.
These are dazzling results for an industry that struggles to get 8% to 12% longer term annual profits for their clients. Not so dazzling when compared with the Nasdaq annual profit of 136% for this same period but so much less risk for moderate to conservative investors.
What I like to see is the strait line graph of this Banker Top-10 Booster which could be a strong indicator of future performance.Thursday May 3rd 2018
IMPORTANT INDEX REFERENCES.
London stocks according to the FTSE Index at Plus +6.1% are doing far better than our S&P 500 Index at Minus -1.9% since March 5, 2018.
All our published Sectors were started on March 5, just 59 days ago and you would expect USA stocks to be doing far worse than their UK cousins, but not so.
The Nasdaq selections are performing at an annual gain of 139% which is over 4 times that of our S&P 500 selections at 32% which itself is a great result. This is during this past 2-month period when markets here have gone down.
We have reported on the high tax that investors pay when trading stocks in London and one of the surprising aspects is the Electronic 0.5% Stamp Duty Reserve Tax payable on purchase of shares. When added to Brokerage fees, this puts a damper on any trading accounts.
At Tradier Online Brokerage where we keep accounts, we pay $3.49 plus a few cents tax on each trade and then I assume we all worry about income taxes after that.
Our new Chart 1X is a recent addition to make it easier to select which stocks or ETFs might be preferred investments. This is where you see the above sector performances.
Conservative investors will see and should consider the new Bank Top-10 selections from the Investment Bank world. This selection is showing a potential improvement on a Buy and Hold strategy to be more than 200%.
Current performance since March 5 for the past 59 days is 5.0% or an Annual Return of 18% and I need to state once again that we are in a negative market since that date.Wednesday May 2nd 2018
INVESTING and SPECULATION.
Recent interest by Followers spurred our change to add strong investment opportunities to our Top-10 lists.
Although the DOW stocks are also listed in the S&P 500, they did represent a very popular group of assets even though only Boeing currently survives in the S&P 500 selection.
However, the improvement of replacing the DOW by the Banker Top-10 offers Conservative Followers more and great longer-term opportunities in well-chosen assets by experts in the field. This Banker list trades over $10 Billion daily.
As many of you know, the ETFs that work so well with our Algorithms over the longer term, do fall into a more speculative category and our goal here is to offer something at the conservative end of the spectrum.
For about twelve years, I have had the opportunity of working with several of the major money management Banks through my relationship with an ESOP or Employee Stock Ownership Plan. This is precisely where this Banker Top-10 idea comes from and it is surprising how many of these Money Managers are selecting the same assets in their portfolios.
My $10 Billion per day value comes just from the major USA listed stock market trades each day but our selections are made from major investment managers around the world.
This is a good time to repeat the Rule of Seventy Twos which I learned many years ago. If you divide 72 by your annual interest rate, the result is how many YEARS it will take to double your money.
Conversely, if you divide 72 by the number of years to double your money, the result is the annual INTEREST RATE that you need to accomplish your goal.
Of course, you young folks can keep doubling up this number to become extremely rich by the time you retire.Tuesday May 1st 2018
BIG CHANGES TONIGHT.
I think everything was updated by tonight, but a few stock charts may take until tomorrow.
One correction to make is my comment yesterday that the new Bankers Top-10 would trade less than other groups and I should have said more. They will average 4.5 trades per stock versus the average of 3.2 trades per month.
The graph of trades of the Banker Top-10 since March 5, 2018 does appear to be a smoother rise and that may well be associated with the huge volumes of those investment manager favorites.
Our Subscription Service begins today although all Subscribers will receive our FREE 30-days before billing at this time.
Today is also the day that we make any changes to the Top-10 selections in each group for the current month, but few were necessary, and we expect changes to be approximately 10% or an average of one change per group in future.
Followers will sell any stock that they own if it drops off their portfolio and replace it with another preferred asset. These changes should be made at the Market Open on the next trading day.Monday Apr 30th 2018
BANKER Top-10 REPLACES DOW.
The Banker Top-10 replaces the DOW Top-10 tomorrow. As indicated, the DOW are now included in the S&P 500 Top-10. Final selections for each group will appear tomorrow for the month of May.
There were a couple of changes during April, but our goal is to leave each selection at least for the entire month.
Even though our selections are made based on the statistics alone, there are situations such as price spikes for takeovers that have caused glitches in the groups.
The new Banker Top-10 is designed for those Followers who tend to stay with Asset Manager choices and we expect that group to stay more consistent.
Our Algorithms are working well with the Banker group with above 116% improvements on average for all ten.
Because of the extreme high volumes in this selection, the charts will show a more common ability for them to stay with trends and eliminate downtrends. With about 20 round turn trades each year, the recent activity shows about an 18% or 65-day average cash position for each of the 10 assets.Saturday Apr 28th 2018
CHANGES and IMPROVEMENTS.
Remember me saying there is always a better way? Well here it is . . . .
Although I began these Algorithms by testing the DOW 30 Industrials, it has become evident that they no longer serve our current goals.
As the DOW 30 Industrial stocks are also in the S&P 500, they are already included as part of the S&P Top-10 selection and are a part of our monthly sort. We think we can offer a better service and variety.
Their replacement will be a group of the world-wide Top-10 favorites from the largest and best money managers. So, if you want to do better than your favorite Money Manager you should check these out.
One of our sources from these Money Managers is JP Morgan Asset Management and they currently manage more than 1.64 Trillion Dollars and have offices in more than 30 countries.
According to Paul Merriman and Richard Buck in a Market Watch article, the past 80 years have produced average returns of 9.7% to 12.7%, depending on your choice of Small-Cap to Large-Cap stocks.
Liz Davidson reported in Forbes Magazine that 11% return is difficult to maintain over a long period. It all depends on timing, fees, trading costs and of course, Uncle Sam will want as much as 35% of your profits.
That is where our Managers Top-10 Booster Algorithms can make the difference. These are 10 of the most widely used assets in the professional management of large and institutional portfolios and they appear in many of these portfolios for long periods of time.
Daily turnover is about $10,000,000,000 each day.
Our Algorithms average about 20 round turns each year for each of the 10 assets and our 1-year potential return currently stands at about 26% or better than double their current return.
We will include this new Top-10 group from major Asset Managers in the next few days.Thursday Apr 26th 2018
ADDED Columns to 4T Chart.
We added 2 additional columns to the 4T Chart at the bottom of the Total Top-10 Booster Page.
This puts more data in one place for Followers and the first addition is the potential Days in Cash for each individual stock.
The second Daily % Gain represents the potential gain each day that the stock is owned.
These are calculated from the Algorithm projections and do not come from any additional data or input.
All input to the various charts is derived from statistical evidence even though it may be from different time periods. It is combined to find the best day to buy and to sell.
We determine that based on the evidence that we analyze over the past approximately 6 to 18 months, that best day is tomorrow at the Market open. We then calculate and show the evidence with precise results obtained over the past approximate year.
Years of testing shows us that we can effectively use that evidence today and into the future, but we recalculate everything again after Markets close every day. It is not surprising that a few changes do occur since yesterday but relatively few and that is why our lists of Top-10 will only be changed every month.
In the past, we have made changes during the month, but only special situations will cause us to do that. If it happens, we advise to sell when a stock is removed from the selection and the replacement stock or some other stock in the group be selected.Wednesday Apr 25th 2018
WHY BUY or SELL on the FIRST DAY.
Yesterday I referred to some comments about the new T+2day Banking Rule that replaced the T+3 Rule last September.
Unusual volatility and higher turnover of stocks can still run into this rule.
Today I want to emphasize some facts about our Algorithms that may help your choice of when to buy and which assets to buy when a signal is given.
Our Algorithms are designed around the best day to buy or sell assets. Historically, the day they change their signal, produces the highest result.
Also, these signals have produced profits at about 65% of the time on that first day and all other days are less.
This is the main reason I mentioned yesterday that if you need to buy 3 stocks and you only have available cash to buy 2, I personally would buy all 3 of them in smaller quantities. This is solely based on that 65% number.
If you want to further refine this decision, you could look at the number of potential trades listed for each stock to judge the average length of ownership. Longer ownership could indicate a steadier rise rather than a more volatile rise. You could also deduct the Days in Cash to try to be more mathematically correct.
This is not a precise science but a stock showing fewer buys and sells is likely to be moving up on a more regular basis than a stock which relies on many trades to achieve a similar annual return.
It always helps to look at a chart of the stock to determine whether the recent gains are by a steady upward performance rather than a sudden spike that may indicate some actual or rumored activity such as a takeover or positive news item.
Finally, we changed our format to listing stocks of each Top-10 sector to alphabetical rather than the performance of each individual asset.
After receiving comments about this, we have added a new Chart 4T at the bottom of the -Total Top-10 Booster- page showing all sectors in order of potential results after using our Algorithms. The background colors identify the sector that they come from.Tuesday Apr 24th 2018
T+2 RULE & OBSERVATIONS.
This volatility in our Markets may well have you worrying about the T+2 Banking rules when you quickly buy and sell stocks and find a shortage of cash in your account.
We were discussing this today and thought it probably affects a few Followers as well.
Basically, if you don’t have excess cash in your account and if you sell a stock today, you can use the proceeds to buy another stock. However, the money from the sale today is not settled cash for 2 more business days.
That means you cannot sell the new stock that you bought today for the next 2 business days because you did not use settled cash to buy it.
Put another way, the cash from the sale is not in your account for 2 more days because it must go through the Federal Banking System before you can receive the credit for it.
If you were to try to sell this new stock within those 2 days, you would be selling something that you did not theoretically own yet. It can get a little confusing at times and usually when you want to sell something quickly.
The problem is leaving extra cash in your account for the few times this happens is not helping you to maximize your annual gains as it reduces your percentage annual gains.
Along these same lines of discussion, if you need to buy 3 stocks and you only have available cash to buy 2, I personally would buy all 3 of them in smaller quantities.Monday Apr 23rd 2018
LONDON UP AGAIN.
The London FTSE 100 is making much better progress on the upside than the US Markets.
Now up over 8% since March 5, this equals the return of our S&P 500 Top-10 but less than half of the NASDAQ Top-10 which currently stand at 18.4%.
The Total Top-10 Booster is slightly ahead of the S&P 500 at 8.4%. All these gains are happening while the S&P 500 Index is still in negative territory for the same time period. With world leaders heading to the White House this week perhaps we will see some gains.Sunday Apr 22nd 2018
CHART 1C is WORTH LOOKING AT.
The new Chart 1C at the top of the Home Page and here is worth looking at for anyone comparing our performance.
I had this question this week and Chart 1C is a good item to watch every day.
Check the performance of our average profits compared to the performance of the S&P 500 Index over the same period.
As of Sunday, in the past 48 days, we are up 53.6% while the Index is down 3.1% and only the ETF Top-10 slowed us down.
This certainly gives you a warm and fuzzy feeling in this slow bear market, but the ETF selection needs some further explanation. We include 3x and 2x Leveraged Exchange Traded Products in the ETF group and they certainly are risky but offer superb performance in more normal times.
You just have to look at their Group Potential of 227% Annual Gain after our Algorithms to appreciate the relatively small negative return today.
At the end of April, we hope to publish a complete set of charts for all our selections and you will then see how their individual performances behaved in periods of negative movement.
I also commented that our Algorithms have been back-tested to 1990 which was the start of the VIX Volatility Index. This period covers the Financial Crisis of 2008 onwards.
Finally, I just must comment on the statistical nature of our selections. By themselves, they represent the Top-10 selection in each group that we offer. In turn, the selection is made from a basic number of 30 stocks in each group. This came about because the first group we tested was the 30 DOW Industrial Index.
We kept up the statistical selection of 30 stocks in all groups and have then selected the 10 that best fit our Algorithms and screens.
It is highly unlikely and statistically unreasonable, that our methods have produced 5 groups of 10 stocks that are below average, and I think the data that we publish ahead of the trades each day is convincing.
Free access to all trades continues until the end of April, and a further 30 days of free membership after May 1, 2018 applies to anyone who signs up at any time.Thursday Apr 19th 2018
No Blog Tonight.Wednesday Apr 18th 2018
HOW WE MANAGE OUR ACCOUNTS.
Newcomers to trading a managed account may benefit from these tips that we use on our own accounts.
First, we establish our total commitment to invest in a Roebuck Systems group of stocks. We will use an example of $10,000 and 10 stocks, so that we invest $1,000 in each stock.
Assume we have 8 buys on the first day, then we buy $1,000 worth of each of the 8 stocks at Market Price on the next trading day open. We use the closing price of each stock to decide how many to buy.
We also round out the number of shares we buy to the closest number above or below the $1,000 unless we are at our maximum of 10 stocks.
In this case for the tenth stock, we use 98% of remaining cash available in our account because the value of the share can change overnight and this gives us a 2% buffer in case the price goes up before the next day open.
We hit the Trade Button to place these orders and wait until the next weekday evening or Sunday evening when we receive the next Buy and Sell signals.
Different Stock Brokers deal with placing orders in different ways and Tradier has a large Green button to place your orders. However, if you are simply selling a stock that you already own, you can click on the Button to the right-hand side of the - Stock Positions - which says – Close Position.
So now, we place the sell orders. It is possible that one or more of the stocks you must sell are those that you bought today so do not be surprised by that.
Now we must consider the T+2 Banking Rule which tells us we must wait 2 business days before the money from stock sales is available to buy more stocks. This is due to Banks having to move money through the Federal Banking System.
Tradier Brokerage handles this rule for us when we click on – More Balances – and it tells us how much - Settled Cash - is available. Assuming we have sufficient cash available, we next look for any Buy Orders that must be placed.It's easy!
- Signals arrive each evening and should be taken on the NEXT TRADING DAY OPEN.
signal should always be taken the FIRST day it appears but may be taken anytime.
signal should always be taken the FIRST day it appears but may be taken anytime.Tuesday Apr 17th 2018
Advertising has Started.
Now that we have the Algorithms tuned and operational, we have started a more aggressive advertising schedule.
We plan to remove signals from the various charts on May 1 and continue sending signal details to our Subscribers after that date.
Many Followers are still with us from our volatility days and I know these new Top-10 groups will continue the quality of signals that we have previously published. Please keep the questions and suggestions coming as we always learn from them.
Subscribers should sign up a day or two before May 1, when subscriptions will begin in order to get your details onto the Email and/or Text lists.
A question came in concerning how the various Top-10 lists are chosen.
Using the S&P 500 as an example, we run lists of all 500 stocks and look at their details and performances over two years of history in as many as four different time periods and we then make our first selections.
This results in a short list of thirty stocks which are then run through final Algorithms to ascertain the Top-10 for the S&P 500 group.
This is repeated every month to add or eliminate any changes that occur and that is when you may see a slightly different selection at the start of each month. A change can occur on any day of the month, but this is usually on the My Top-10 Chart or the newer Total Top-10 Chart that includes all Selections including London FTSE 100 stocks. This is when you would immediately SELL a stock on the next trading day OPEN and replace it with another choice.
At this same time, you can choose to add the new replacement stock or a stock from higher up one of the groups. You could also choose a stock with a new BUY signal. This obviously depends on your own choices and portfolio decisions.
At Roebuck Systems, we are buying and replacing every stock in each Top-10 group without making individual decisions that various Subscribers might choose.
You may decide to invest in the top 5 each month or some more traditional way of making your decision. This could most likely and hopefully produce better results than our published Top-10 portfolios. Many of you are choosing a selection from more than one group or from all the groups according to personal preference.
Our goal is to find a small selection of 10 stocks out of each group and with the help of our Algorithms, enhance the performance as much as we are able. By checking and sometimes changing our choices twelve times each year, we fully expect that the portfolios will be different from year to year so that we stay with current performers.
We are excited at the results being achieved with the past 2 years of our selections. We find that history beyond 2 years has little performance or predictive value to our methods of research even though we have done back-testing to 1990.Monday Apr 16th 2018
DOW, S&P, Nasdaq, ETF & FTSE.
Finished with the updates after correcting a couple of errors this morning. You can now see a wide range of currently trading Top-10 selections from the above assets including London FTSE stocks.
As it turns out, the Nasdaq Top-10 has performed very well for us in this mostly down Market since March 5.
I certainly hope that this range of 50 stocks gives you the broad range and diversification that you seek for adding to or creating a great portfolio.
In every case, the Top-10 is continuously selected from the highest performing stocks in their group looking backwards up to a maximum of one year. If changes occur, they will be made at the start of each month.
In our accounts we will sell any asset as soon as it drops off the list of 10 and replace it with another stock from higher up the lists. In this way, we will actively maintain a maximum of 10 stocks in each portfolio for all 5 groups.Friday Apr 13th 2018
Preparations for NASDAQ and FTSE.
We have completed our preparations for adding the NASDAQ and London FTSE stocks to our Top-10 Booster selections.
Our Friday texts and emails are now distributed on Sunday evenings ready for Monday trading. However, as we progress over the weekend, you may see additions to the website.
Those Followers who trade in the London Markets will know that prices are quoted in Pennies or Cents in the UK and we will follow that practice, even though USA traders are used to Dollars.
Just remember that 2,000.00 pennies or cents looks very expensive, but it is really about $29.00 in US money.
Another quirk to note when looking at the NASDAQ Boosters are the high gains both before and after trading with our Algorithms and this also applies to any asset that has a high normal annual rate of return.
An asset that is returning 100% or 200% annual return or more is likely to be improved less by our Algorithms. It may only be improved by a 40% or 60 % increase. It will most likely still be a better overall investment when you compare your potential annual returns but the stock itself is contributing a larger percentage of the gain.
It comes down to that old problem of looking for low priced stocks and deciding they have further to go whereas an expensive stock may still be the better investment.Thursday Apr 12th 2018
NASDAQ and LONDON Top-10.
We continue with this volatile Market and today was UP. I have mentioned in the past how placing all orders for the next day Open can work against us.
Not always so! When the Market points down and our signal indicates a SELL, quite often, with this Up-Down volatility, when we place that order tomorrow, the Market reverses at the open and we SELL at a higher open.
The opposite also occurs when the signal tells us to make a Buy for tomorrow, and we end up with a great lower Buy.
I have often mentioned the old calculation that we lose about 15% per year by ordering tomorrow as opposed to watching the Markets all day long.
That is in fact an old calculation and goes back over 2 years when we were concentrating on trading volatility using the now defunct XIV as well as VXX and UVXY.
The exact percentage lost importance when it became obvious that we could easily beat my first goal of a 30% annual return and quickly moved beyond 60% and subsequently now, well over 100%.
The heading today refers to a recent question I received about the NASDAQ stocks and why did we not include them. I was deeply involved at the time in working towards the London Markets and indicated it would come later.
What changed was this 0.5% Tax question for traders in the UK on top of generally higher brokerage fees. I am no longer confident that many Followers would be trading them as this fee is significant. However, having almost completed that work, my intention is to add a FTSE-100 Top-10 and then add a NASDAQ Top-10 at the same time.
Unfortunately, due to the larger quantities of NASDAQ stocks, the selection will be from the large and the midcap stocks and will not include those with smaller capitalization.Wednesday Apr 11th 2018
S&P 500 Top-10 Stays Ahead.
The S&P selection is staying in first place these days and probably will continue there until we see a few more days string together on the upside.
Very little help from the Indexes today but there is evidence of individual stocks making their own headway and not being distracted by the news that we discuss all the time.
Good stocks will always do well and beat the news cycle in the long run. Our Algorithms for the S&P 500 confirm this and are offering much better than average returns.Tuesday Apr 10th 2018
A Good Day at the Races.
The DOW came racing back today and we quickly moved into a positive result, as did all the Algorithms.
Today was a good demonstration of how fast this can happen, and we do not have to reach previous highs in the Indexes to demonstrate great returns for our Followers.
I had a good set of questions today and one of them related to the London Markets. The factor that moved that idea a little lower on our schedule is the 0.5% tax on trades. It surely takes a slice out of profits for London accounts.
I have not figured out the pain that 0.5% would put on an average account but it seems like enough to open an account elsewhere if possible. I believe that would only apply to a sale of stock and not the purchase, but it still adds up on top of brokerage fees.
Perhaps somebody from the UK could send us a more complete picture of these affects. We are fortunate in the USA to have very low brokerage fees and small taxes directly on trades and perhaps investing with a retirement account would limit these costs.Monday Apr 9th 2018
High Daily Volatility Favors S&P 500.
This elongated period of daily surprises does not fit with leveraged assets or small databases, but it does fit the S&P 500 with a wide range of assets.
ETFs suffer initially by the delayed signals to trade on the opening of the next day. Secondly, their high Leverage works against high daily volatility unless the signals are in real time.
The DOW only has 30 possibilities and lacks the benefit of the S&P 500.
We have back-tested a full S&P 500 Top-30 and offer it here for you to confirm.
500 choices give us the benefit of a selection that includes stocks that have good current performance immaterial of political periods of high daily changes in direction. How many times have you heard that the Trend is your Friend.
Yes, our timing was not the best to start a new service and yet the performance of Mathematical Algorithms is measured by the difference between our trade signals and the INDEX that represents them, so let me demonstrate a good way to see that.
I assume that our signals and the S&P 500 Index started on March 5, 2018 with zero difference. The Index opened on that date at 2,681.06 and closed on Friday April 6 at 2,604.47 for a loss of 76.59 for the period. That is a 2.9% loss.
Our S&P 500 Top-10 closed on Friday at a 2.7% gain giving us an increased performance of 2.9% plus 2.7% or a total of 5.6% improvement over the Index in a down Market in 1 month. That is the equivalent of 67% annual return.
So, what is a reasonable conclusion?
The entire list of 500 stocks on average without any choice have lost 2.9% in the last month but we don’t invest in average stocks. We first select statistically, from the better performing stocks and then statistically again, signal what they will do tomorrow with about a 60% to 65% accuracy.
ETFs will do better in the long run because they have 2x and 3x leverage and Markets have been generally pointing up for several 100 years but that same leverage is painful on the way down. It could change tomorrow, and we will eventually catch on to that fact.
For the different reason of lack of choice, the DOW 30 stocks are underperforming the S&P 500.
So, we are back to the Trend is your Friend. We ran the S&P 500 Top-30 over the weekend to give support to these findings and it closed on Friday with a gain of 4.6%. That is a 7.5% improvement over the Index in one month or a 90% annual return in a down market.Friday Apr 6th 2018
Trade Wars and Markets.
European Markets lost about 0.3% and Chinese Markets went up about 0.5%.
American Markets lost more than 2.3% showing that the general investing public here are not thrilled with trade wars today.
Hope is not a winning strategy, but we must live with hope for the present.
Our profitable S&P 500 Boosters ended yesterday 4.8% ahead of the Index and they ended today about 5.0% ahead of the Index so we moved in the right direction, but the Markets did not.
We invest in those things we can control and try to ignore those that we leave to others. Timing is a difficult problem and starting the current accounts on March 5 turns out not to be ideal.
However, 5.0% ahead of the Index in one month is a great place to be when the Index moved down 2.8%. As noted, the S&P 500 gives us a wide range of stocks to consider whereas the leveraged ETFs have given up ground.
Even the DOW 30 is not enough stocks to withstand this current spell of volatility and Index losses and leaves the S&P selection as the one outstanding area of investment. Since March 5, the S&P 500 Top-10 Booster is currently showing a 27% annual profit which itself is well below a normal projection.
The Booster Next Day Trades will in future be sent out to Subscribers and Free Trial Members on Monday, Tuesday, Wednesday, Thursday and Sunday evenings.
This Sunday it will show 10 Sells, mostly in the Leveraged ETF selections, further indicating a good time to step back to the sidelines.Thursday Apr 5th 2018
Shear Volume Favors S&P 500.
500 of the most well-known Companies in the S&P Index have a large numerical advantage over the 30 DOW Industrials.
We get to select only ten from each group which gives us a much larger number to pick from. Not surprising then that the S&P 500 Top-10 are the best performers so far, simply due to the large number of available stocks.
ETFs are going to behave differently because of the high leverage that affects most of them. Their construction methods use large numbers of Options for each stock to obtain the leverage.
Balancing takes place after the close each day so that the next day opening price will move at 2x or 3x the movement of the underlying stock.
Options at set strike prices will move much faster than the stock price depending on how far away the option strike price is from the underlying stock price. Calculations are then made to represent the leverage needed for the ETF but those calculations only last for a short period of the next trading day.
It becomes extremely complicated to follow exactly because many options at different strike prices change values at different rates.
On top of the pure relationship change between strike prices and underlying stock prices, there are 2 more factors that will affect the leverage ratio as the day progresses.
The first of these is the Volatility of the underlying stock or on the overall Market, which can pump up prices or reduce prices significantly in just a few minutes or hours.
The second of these is the Time-Value of each individual option. The value of an option which is set to expire next week, will move much differently than the identical option that may have 3 or 6 more months of life before expiration.
The calculations and adjustments that must be made for each ETF every day, just to produce the advertised leverage, bogle the mind. Even if the underlying stock were to close at the exact same price as the open, a completely new set of options would be needed to produce that leverage for the next day due to the Volatility and Time-Values.
With all that said, leverage in either direction can be good or bad, but it introduces a level of risk that must be considered. This recent down move produced greater losses in this group just as it will produce greater gains when the market turns up again.
Finally, the My Top-10 Booster contains a few none-leveraged stocks from the S&P 500 Top-10 group and this will place a smoothing factor on losses and gains compared to the pure list of ETFsWednesday Apr 4th 2018
A Question on Duplicates.
All 30 DOW Industrial Index stocks are also in the S&P 500 stocks and duplicates will occasionally appear in our Top-10 selections.
An example of this was ADBE which moved up into the bottom of My Top-10 selection in April when we already owned it because it was already a buy in our S&P 500 Top-10 selection.
Confusing – yes, but some traditional as well as statistical based followers could read that as a positive for ADBE, whilst some followers might see it as needless duplication.
BA (Boeing) has been a duplicate for some time as a good performer but was also affected greatly by the sudden tariffs on Aluminum in early March. As stated yesterday, our selections are strictly based on the potential annual return after applying our Algorithms.
A stock that is performing well with a gradual increase in price such as Boeing, may not always be improved as much as a slowly rising stock but the final return of Boeing PLUS the Boost by our Algorithm can still be the best position to hold.
Our selections are based on the best overall performance which includes the stock price plus the added potential that our Algorithm improvements offer.
We see a lot of losing stocks turned into profitable stocks simply because we tend to remove down moves and stay in while they are moving up but not many of those appear in the Top-10 selections.
One of the great benefits of a small monthly change in our Top-10 selections each month is our ability to move with the times and with popular trends. Just one new addition each month can completely offer a different selection as a year goes by and that is what keeps our statistical choices in the best potential performance areas.
How many times have we all looked at lists of best growth or lowest Price-Earnings Ratio stocks, only to be disappointed by our own personal selection from that list.
Our purely statistical selections can find those stocks that have in fact already delivered some good performance and show a likelihood of following their path for a while longer. If they do not perform, they soon drop from the list and we move on to more fertile selections.
Our stocks from DOW and S&P are reported all day long in the Market Statistics given out by almost every financial news source and have been there for many years.
We add to that, a selection of the new ETFs that offer the more risk-oriented investor a place to invest. We then offer My Top-10 which is simply a compilation of the 10 best all round potential performers from other lists.
These last two groups will perform poorly in a down Market but offer much greater performance in up Markets simply due to their built in Leverage and longer-term risks. Whereas Corporate stocks most often have an Investor Page on their website, ETFs have a Prospectus Page detailing their management methods, construction and risk levels.Tuesday Apr 3rd 2018
A Conversation Worth Repeating.
Sometimes I am not seeing the obvious and questions are very helpful to me.
My Algorithms are the result of a purely statistical background based on many years of trying to invest in almost everything. I do not do traditional analysis, PE ratios or industry selection.
Everything is a numbers game for me.
However, you can apply your own ideas and select which stocks or ETFs to follow or you can be a statistical animal also.
For instance, we have a great selection of opportunities to choose from.
Whatever your method for selecting assets to follow, some knowledge of stocks that offer a better future is certainly a benefit to feeling good about which Algorithm might work for you.
On the other hand, 2 or 3 selections from each group could also be a good statistical way of rounding out a personal portfolio that is more to your liking.
The important piece of information for you to know is that we have used pure statistics to make our selections and we do not read the Wall Street Journal every day to influence these choices.Monday Apr 2nd 2018
New Booster Algorithms.
Welcome to our Booster Algorithms and to our daily service and free 30-day trial.
Not the best day to start although it is better to begin when Markets are down rather than at their highs.
You will receive our signals every evening with all the Buys and Sells on the three groups of Top-10 DOW, Top-10 S&P 500 and Top-10 ETF products together with My Top-10, which is made up from the 10 potential highest returns from all three groups.
The Top-10 S&P 500 is performing
well in the current Market and the leveraged ETFs are struggling below the S&P 500 Index. This is typical of these leveraged ETFs and should make up the difference as Markets become more related to performance as opposed to the daily news cycle.
Our number 2 charts detailing the real performance since March 5 will be found on the History page of our website and we always take all trades on all assets as indicated by the daily signals.
The 12 months back test for each asset selected can be found on the individual Top-10 page.
Finally, the number 1 chart has the current Top-10 selection from each group and is sorted by the potential return after applying the potential gains after applying our Algorithm.Sunday Apr 1st 2018
New April 2nd Trades at the Open.
Following a large number of Sells recently, it looks like we are reversing that position on Monday morning with a large number of 23 Buys and just 4 Sells.
Leveraged ETFs tend to be very volatile and they are a significant portion of the trades.
Our FREE 30-day trials start tomorrow evening and these signals will in future be received by our Email and Text Lists of Followers each evening.
Notice the color coding to more easily follow the 4 main groups of Top-10 selections.Saturday Mar 31st 2018
Revised Top-10 Selections for April.
As previously mentioned, we expect to review and change the selection used in each Top-10 group every month if appropriate to our Algorithms. You will see any changes today.
If a previously listed stock or ETF is no longer in the Top-10, we will Sell it and BUY the replacement if a buy signal is indicated.
Our Top-10 trading logs take all signals from all listed selections with no preferential choice and you may well have different results depending which of the selections you choose to trade.
You will also see some new numbers on our trade logs representing the Investment. First is the total amount Available for trading the 10 selections. In most cases we currently show $2,000 for each with a total of $20,000 for the group.
The next number is the Maximum Invested from the $20,000 total. This allows us to calculate the Profit from that Maximum Investment so that our Profit Percent can be related to the investments made to date.
You can also see the results on the graph along with the relative position of the Index that best describes the Markets.
Finally, My Top-10 Booster is a selection of the highest returns demonstrated by the other three Top-10 groups of Algorithms. In other words, it is the top 10 of the other 30 selections in the Top-10 DOW, S&P 500 and ETF groups.Thursday Mar 29th 2018
FINALIZED MANY DETAILS.
Bounced back today staying well above the Market Averages.
It probably is a good idea to mention our Broker again even though we have no financial relationship with them other than having a few trade accounts.
They are offering 60 days or $200 of free trading to any new accounts that use our code of ROEBUCK200.
I mention this because my brother in the UK reminded me of the tax that is levied on every trade which really punishes short term trading.
Tradier charges $3.49 per trade and is a very friendly website for followers of our Algorithms, especially as we make all trades at the next trading day opening price.
On their site it is classed as a Market Order that can be placed any time after the previous day close and the next day open.Wednesday Mar 28th 2018
I MADE AN ERROR.
These up and down again markets have problems of their own and we are dealing with them, but start-ups have their problems too.
In the D2, S2, E2 and M2 charts my formula that creates profit percent and the trading log each day had an error and we were regretfully reporting incorrect numbers. The real numbers are not so bad so that makes me feel a little better. They are now correct.
Tonight, since Mar 5th the DOW is down 2.5%, the S&P 500 is down 2.8% and our combined accounts are down 0.27%.
While we are cleaning up glitches and getting ready for the opening day next week, we had an email outage for the last couple of days due to a GoDaddy outage for some of our employees.
Our S&P Top-10 is leading the pack as of today and we are a little closer to offering a FTSE100 Top-10 for my London friends and relatives. I wonder if they will ever switch to Pounds instead of trading in Pennies and fractions of a Penny?
However, it does remind me of when my brother and I used to get a Sunday Penny after the war to get some Lemon Sherbets.
A lot of selling at the open tomorrow and many of you will remember that our best assessment is that we give up about 15% of profits because we place all orders at the opening of the next day. We calculated a few years ago that if we watched the market all day waiting for signals we could improve returns by approximately 15%. We next decided that by doing that, there are so many intraday false and maybe signals that we are better off not staring at a computer all day.Tuesday Mar 27th 2018
SERVICE STARTS APRIL 2.
Finally, we are ready to go with daily signals to all our Followers with free service for 30 days starting on the first trading day on April 2nd.
We very much appreciate all those who have followed our progress and especially pleased that our Booster Algorithms are working so well across most asset classes and types.
Now with 30 selected stocks and ETFs in 3 groups of Top-10 DOW, Top-10 S&P and Top-10 ETF categories, we believe this service is a winner.
We have also added a new feature we call My Top-10 Booster, which provides my selection of the top 10 Booster Algorithms. This may be just for those seeking exceptional results but most of the assets we follow trade at least 1,000,000 shares each day and represent many different industries.
To make it simple, each Booster shows a current Buy or Sell, and all trades should always be made on the FIRST
day the signal switches from Sell to Buy or Buy to Sell. All trades should then be placed at the next trading day opening price with your Broker.
We started trading all these Algorithms on Monday, March 5 th. and you will see that a few have not yet provided a Buy signal. We are staying with our selection which does not change much but will generally only be changed at month end. If a stock disappears from any selection, it should be sold and replaced with one that is higher up on your preferred list.
For new Followers or Subscribers, the Buy or Sell signals can be taken at any time but the first day of any change is always recommended.
Monday Mar 26th 2018
Ways to use these Algorithms.
My experience in choosing where to invest for the opportunity to increase wealth has spanned almost the entire list of opportunities. I need to first list a few for relevance.
Stocks, Warrants, Options, Bonds, Futures, Funds, Real Estate, Antiques and Stevengraphs make up my short list. Also, I have used Managers, Advisors, Brokers, Banks and Casinos. (I used to count cards).
What do I choose now? I am older, I have time, I am good at Math, I know Computers and I create Algorithms.
Previously, I was an Engineer, but I have made anywhere from a loss to about 8% annually from investing, so I decided to try to make 30% with Algorithms.
Today, after more than 6 years, I can nearly double the annual return of an average exchange traded stock and with choice, I can do better and that is what you must do now.
You must choose from an array of DOW stocks or S&P 500 stocks or a range of the relatively new Exchange Traded Funds.
I have already pre-selected my Top-10 in each group and you can carefully select your own portfolio. The selections you make are from groups that represent 60% or more of US Traded assets.
If you have $1,000 - $2,000 to invest, you might select 2 or 3 Symbols that appeal to you from news stories.
If you have $5,000 - $10,000 to invest,
You might select 3 to 5 Symbols that appeal to you.
If you have $15,000 to $30,000 to invest, you are probably in the range of 5 to 11 Symbols in order to spread your risk.
I was once advised that anything above 11 Symbols puts you into your own unique category.
The final point I must make refers to each preferred Risk/Reward personality. As I said, I used to count cards at Blackjack and made a good return in Casinos both here and overseas, but then some Engineer designed automatic shuffling machines, making me happy that I had a regular career. That puts my type at a high Risk/Reward and my selection has a Top-10 page all to itself.
Most people I know do not fit this group and might select a mixture from the DOW, the S&P 500 and the ETF selection. We provide the signals and you must choose which ones to take.Sunday Mar 25th 2018
BE CAREFUL WHAT YOU WISH FOR!
Thinking that I alone had the Golden Egg, I was of course following the Top-10 of all the Algorithms in all the three groups of DOW, S&P 500 and ETF selections.
My math is ok, but maybe my stock selection needs a little work.
Algorithms are amazing things, as are Computers, but I have received another reminder from the old days called GIGO.
Garbage In – Garbage Out.
It turns out that during the last couple of weeks since we started on March 5th, the Dow 30 Index has lost -4.0% and the S&P 500 Index has lost -3.6%. We probably can assume that any Index of ETF selections would have lost more than that due to leverage.
So how have Roebuck Systems Algorithms performed.
DOW Top-10 went down -2.9%
S&P 500 Top-10 went up 4.3%
ETF Top-10 went down -0.2%
Malcolm Top-10 went up 3.4%
The S&P 500 has performed better than everything else at plus 4.3% in this market while the S&P Index went down -3.6%.
So, be careful what you wish for because my Top-10 list made 3.4% which was worse than the S&P 500 which made 4.3%.
This looks odd until you take a closer look and remember the leverage which is associated with most of the ETF products. They are geared to move lower or higher than the assets they proport to represent.
With that said, GIGO can be at rest until the next scare and I for one am pleased that for now, the average DOW and S&P 500 stocks went down -3.8% while the average DOW, S&P 500 and ETF Top-10 choices went up 1.2%.
In fact, if you look at chart M4, which is currently on a new page, you will see that none of the DOW stocks are represented in my Top-10 selection. Of course, there are only 30 stocks in the DOW Industrials, so no surprise is appropriate.
Also, let me share a little secret. Down below, you will see Chart A1 which for now, shows the current date and the Booster Next Day Trades which are not currently official.Wednesday Mar 21st 2018
YOU MAY HAVE NOTICED . . .
We are progressing quickly and will shortly announce the beginning of our complete program for distributing these DOW, S&P and ETF signals.
All previous Followers and new Sign-Ups will be receiving those details first and I have received many favorable comments so far. I hope you will find the Algorithms and their signals to be helpful and can use them profitably.
As I noted previously, we are following all signals from all 3 groups of assets in our own Account Log. While we will run this as a free program for a while, we will continue to announce changes as they occur in the coming weeks.
One of the changes will be the selection of 30 Stocks or Exchange Traded Products that we follow. These changes will be minimized as much as possible but will change over time as particular assets lose usefulness or as better assets replace them. Larger than normal changes will appear this coming weekend.
Obviously, the DOW 30 Industrials will remain constant until Dow Jones needs to make changes due mainly to acquisitions.
With online trading becoming popular, Brokerage fees are not a major factor and as a rule, we will sell all assets that leave our lists of 30 and wait for signals to buy their replacements. We do not include Brokerage Fees in any of our calculations as there is still a wide range being offered. However, we do list our estimate of annual trades for each asset in the charts if you wish to take this into consideration.Tuesday Mar 20th 2018
NEW BUYS and SELLS TODAY.
This chart shows the new buy and sell signals to be placed at the open for the Wednesday Open tomorrow.
They are highlighted in red.
This is the latest chart with all positions being kept in alphabetical order rather than in date order.
As initially noted, we are following all 30 positions that appear in our three groups of DOW, S&P 500 and Exchange Traded Products but many Followers will have different total results depending on your choice for your own accounts.
The new graph shows actual results to date and the averages from each of the three groups can also be seen.
Note also that we show how many current positions we are holding as well as the average percentage of days that we expect to be in cash. This condition can improve your returns if you choose to invest all or a portion of these cash days into stocks.
Profit on invested cash is currently running at $3,583 with an annual return since March 5 th. 2018 of 197%.Sunday Mar 18th 2018
A FEW POINTS of NOTE.
We currently have three Top-10 asset groups selected from the DOW 30 Industrials, the S&P 500 Index and various Exchange Traded Products.
Generally, we have eliminated low volume assets which could present a problem with multiple traders. Higher volumes tend to produce smaller bid-ask spreads when trading.
Our selections are based on improved potential annual return AFTER APPLYING our Algorithms over a period and therefore may not increase a high performing asset as much as a lower performing asset. However, this is not a general rule as seen from the individual performance charts.
For example, we have cases within the groups that perform well, even though the underlying asset may have made a loss when held for the same period. One of the facts surrounding our Algorithms is that they stay out of almost all assets that enter a declining pattern and often make a profit just from the short periods when the asset turns positive.
For these reasons, it may be helpful to glance at the individual charts for all listed items to see their ability to handle high performing assets whilst also handling low performing assets. In a similar way, they also perform well when a sudden change in direction develops in their own market or in general market reversals.
It is true that our original Algorithms were developed to perform in the areas of volatility. The newest and most exciting aspect is their use within almost any market that we select and due to the interest proving to be almost 50% outside of the US Markets, we plan to extend to foreign markets within the next year or so.
As I was born in Coventry in the UK before ending up here in Chicago, it may well be London and the FTSE 100 calling me home.
As always, if you open a new account at Tradier.com and use the code ROEBUCK200, we will receive nothing, but you will get 60 days or $200 of free trading. We are not associated in any way with Tradier, but we do operate some of our accounts with them.Saturday Mar 17th 2018
HOW WE TRADE THESE ALGORITHMS.
We have been trading and publishing all 30 stocks and ETFs from March 5 th. in our Roebuck Systems Account Log when we first see a BUY signal and selling when we first see a SELL signal.
All trades are placed at the Opening price on the next Market Open Day.
Trades can be placed after receiving our daily evening email signals. Duplicate Phone Text Messages are also available to USA followers and Others who can receive them.
The full program will begin within the next 2 weeks and initially, all Followers will receive all signals. A Charter Member starting date will be announced later when subscription services will be available.
There are many ways to select how you wish to follow the signals depending on the amount of risk/return you choose. We are trading all 30 selections on a continuous basis to demonstrate the ongoing results.
We trade at Tradier.com Brokerage and you may receive 60 days of Free Trades up to $200 if you open an account with Tradier using the code ROEBUCK200. They charge $3.49 per trade.
Beginners could invest $1,000 in just 1 stock from 1 of the Top-10 groups to test the program. For myself, I would probably select 1 or 2 from each group or perhaps choose from the S&P 500 or ETF selections if I chose to increase the risk/reward.
Larger accounts might choose to buy the top 5 from each of the 3 groups. There are many ways to balance your investment style as you go forward and you can always look at our performance Account Log shown above and see at the bottom how each group is performing.
Another interesting number at the bottom of the Account Log tells you how many OPEN positions we have and what average percentage of our account is invested at any time.
You should also note that our log is invested in all 30 assets whereas higher results may be achieved if selections are made from the top of the lists.Friday Mar 16th 2018
END of WEEK UPDATE.
We have updated the Algorithms for the end-of-week positions and signals. These are as of the close on Friday, but it should be noted that some changes may occur over the weekend.
You can see that all Algorithms are based on the Top-10 selections of assets in each of the three categories that we currently offer. That is our selection of the Top-10 DOW stocks, the Top-10 S&P500 stocks and finally the Top-10 ETF and ETN products.
Our current selections may change slightly over the weekend while we input the latest information available to the Algorithms.
It is highly recommended that a last check of this BLOG and charts be made before any signals are assumed as final for the next market opening.
There is still work to be done on the website and you will still see changes before the end of the month.
Thursday Mar 15th 2018
Early Account Results.
We started trading the 30 Algorithms on March 5th and these are our current results. As usual, they are based on trading at the opening price following the signal. We currently have 21 positions.Wednesday Mar 14th 2018
SAMPLE of ALL 3 BOOSTERS..
Having now completed samples of all three DOW, S&P and ETF Booster Algorithms, here is a first look at the results.
Obviously, we are extremely pleased with the ability of these Algorithms to sort out their best results from a range of investment assets.
We started with the DOW 30 Industrials as a trial of a broad but well-defined group of stocks that are widely held in many portfolios and they offer the opportunity to fine tune and boost the annual returns that can be achieved by every investor.
Having seen those results, the natural move was to a much broader range as defined by the S&P 500 Index and we also select a Top-10 group to offer daily signals.
Finally, today you can see the last group of Exchange Traded ETF and ETN products that have been applied to our range of Algorithms with even greater potential.
This puts us much closer to offering daily support in these three ranges of assets and we are progressing towards a better-defined website as well as more description on how these can be traded.Sunday Mar 11th 2018
Current DOW and S&P500 TOP-10s.
Here’s a look at the current TOP-10 candidates and the increase in annual profitability after using our Booster Algorithms.
We started traded these results last week and as always, we will soon publish the results for all to see ahead of any trades.Saturday Mar 10th 2018
DOW and S&P500 BOOSTERS.
Making great progress in aligning our Booster Algorithms to the DOW and S&P Favorites.
The idea behind these charts is to select the DOW 30 Industrials and also 30 of the best performing S&P500 stocks and apply our unique Booster Algorithms to greatly improve profit performance.
We began trading the Top-10 of each group with very positive results. The concept has not changed much from previous Algorithms other than needed modifications but we have tweeked them to resist negative turns slightly.
We will soon demonstrate a sampling of the charts with very accute ability to accept positive moves but resist negative moves. I am posting today a group of charts for the DOW and for the S&P500 selections.
Early days but exciting progress.Tuesday Feb 27th 2018
TEST Booster UPDATE.
More testing and some very interesting results.
We tested some more high volume ETFs and ETNs across the board to see what kind of results we would obtain. Some of these were also suggested by followers.
What keeps surprising me is the fact that we turn negatives into positives - how great is that?
We also tested ZIV in our forthcoming Volatility group as we would like to get into VIX derivatives as there are quite a few to choose from.
We cannot do a daily run on any particular stocks but if you have suggestions for singles or industry groups while we are in the testing stage, they would be welcome. When we do get started again we will offer daily updates with appropriate signals.Monday Feb 26th 2018
DOW Booster UPDATE.
Here is a follow up of a typical end of day Dow Chart.
Still working on systems for daily updates but will post charts and data as we progress. I don’t advise using these signals currently as they will not be available every day but it does show how useful it will be within a few weeks.
You can see that INTC is shown as a buy for tomorrow.Sunday Feb 25th 2018
LOOK at the - DOW BOOSTER.
Here is the first look at the procedure for our Dow Booster program.
Monday morning gave you the new signal to buy Coca Cola Co. (KO), at the opening price if it was one of your preferred portfolio stocks.
It certainly benefits from applying our Algorithms. In the past 12 months it benefited from a 5.7% annual yield and moved up to a 15.8% yield. Total days owned was 225 out of 252 tradable days in the past year.
Would you choose to buy it tomorrow?
I cannot make that decision for you, but I have some mathematical facts that our proven Algorithms have consistently produced over 6 years and publicly demonstrated for more than 2 years.
Just look at Chart E, at the column marked - Action at Next Open. You will see all 30 Dow Industrial Index stocks, with their current Last Price and the annual gain before using our Algorithms.
Next, you will see the algorithm signals uniquely generated for each stock. They indicate either Own/Buy, In Cash, New Buy or New Sell. Following that column, you can see how many Buys and Sells occurred during the past 12 months. If it is still owned or is a New Buy, there will be one less Sell. If it is In Cash, our Algorithm is indicating no current ownership of that stock and the Cash may be reinvested in other Dow stocks.
There are usually 252 Trading Days each year and we have subtracted 3 additional days to allow for buying a different Dow stock and assumed that you would then be invested at the average annual return rate which is indicated at the bottom of the column headed – Gain After Algorithm. We assume this rate for all - In Cash - days for all 30 stocks after eliminating the 3 days for each of them.
To complete the explanation of this current Chart E, if you divide the average - Gain After Algorithm - by the average - Gain Before Algorithm, you will get 1.94 which represents the 94% Accumulated Algorithm Gains.
Finally, if you add the average – Gain After Algorithm - to the – In Cash Days Invested, and divide the total by – Gain Before Algorithm, you will get 2.60 which represents the 160% Total Accumulated Gains as a potential minimum annual return.
Why do I say – potential minimum?
For example, my personal plan would be to invest in less than the entire 30 Dow stocks and choose a changing portfolio of the best 5, 7 or 9 stocks chosen from the highest - Gain After Algorithm column. When our Algorithms kick one of them out of my portfolio, I would simply replace it with the next highest stock that moves into my portfolio.
I might complicate the selection by assigning a different percentage of ownership to each stock in my portfolio based on the performance indicated toward the top of our chart.
If I worked at Cisco or already owned some Apple stock, that might also affect my choices, but I would still Buy and Sell from our signals to improve the returns.
Finally, I probably would not Buy Coca Cola based on my own Algorithms. From the past, it made 26 trades in 225 days of the past 12 months and still only produced 15.8% of profit.Thursday Feb 22nd 2018
LATEST CHART for DOW INVESTMENTS..
This is an example of the work on the Dow 30 Industrials although the signals were given on different days this week and are not current.
We are using Cash to reinvest into an average stock minus the two days of cash T+2 banking rule for available funds.
As we continue to have progress I will post items of interest.
The point of posting this chart is to show that none of the 8 losing Dow stocks show a loss after using our new algorithms and the average gain is 112% more than your buy and hold strategy.
If you reinvest available cash in an average Dow stock at 33.4% the annual return increases to 181% more than a buy and hold strategy.Sunday Feb 18th 2018
NOTES ON TRADING THE DOW.
We have redirected our energy into finding an alternative to trading XIV and Volatility and we are finding some very good and less risky alternatives.
The main change has been recognizing that our Algorithms work on many stocks, indices and ETFs. Certainly, we must modify our Algorithms each time, but finding alternative investments has become more important to our efforts.
We created mathematical algorithms from years of development, but simply finding alternative investments is not so difficult and is less time consuming.
I have spent time this week looking for better computers but also looking at aspects of trading the general markets for leverage and less risk. You have seen our results for individually trading the 30 Dow Jones Industrial stocks.
Now, I want to show you three available alternatives that can each run through our system with surprising results. The new chart E1 contains these results and we offer the following explanations and comments.
The top part of the chart summarizes the 30 individual stocks from the original chart E, showing the combined average results from trading all of them on an individual basis from a few days earlier 12-month period. Basically, traded with equal money on each, they produced an 18% profit and our 30 individual Algorithms produced a 35% profit.
That works out to 193% gain or a year-end profit of 93% after 219 trades with an average invested period of 162 days or 64% of the 251 trading day year.
The bottom part of the new chart shows individual results for Exchange Traded Products that each profess to represent the Dow Jones 30 Industrials.
The first DIA is a long time favorite and returned 22% versus the 18% of the original accumulated individual stocks. That seems a little odd but many of the construction and trading techniques could each partially explain it and that is not my interest at present.
The second DDM is a 2x leveraged ETF by Proshares set up to do twice the performance of the Dow Industrials. It did more than double with the past 12 months reporting a 48% return. Again, internals and trading may well explain those differences.
The third UDOW is a 3x leveraged ETF by Proshares set up to produce three times the performance of the Dow. It also did more than triple reporting a 78% return. Once again, we will not go into the reasons why this might be.
This chart E1 is to show what happened when we ran all 30 stocks as well as the 3 individual ETF’s through our modified Algorithms. Obviously, the straight DIA at a 22% did not benefit as much from our 24% result. One reason that I can see is the difference in the quantity and value of signals when fine tuning is reduced to 1 signal per day versus 30 individual signals.
Our results improved as we went up in leverage and unfortunately, this also means up in RISK. However, if we apply our Algorithms to each of the 30 Dow stocks individually, we get our best percentage improvement at 93%. There must be a lesson somewhere.
My Mother was smart, and she said more work makes Johnny into a much smarter boy. I hope she knew nothing about the S&P500 or I am in for a lot more work.Saturday Feb 17th 2018
UPDATED DOW RESULTS.
Chart E has been updated to use Friday close prices for all 30 stocks and a small error in the last 6 stocks corrected for trade quantities and days invested.Friday Feb 16th 2018
COMPLETE DOW RESULTS.
Finally completed results for the Dow Jones Industrial stocks and much of the information remains as previously reported. You will see a chart on the Blog now showing all Dow 30 stocks. So, what can we finally report?
First, if we were invested in the entire set of Algorithms, we would currently own 19 of the 30 and we would improve the past year of results by 93%.
Finally, we would have made 219 trades and be invested for an average of 160.4 days each or 64% of the time. Average cash would be 36% of invested capital.
One clever interpretation of this would be that if the cash were put to work in the average return of these Algorithms, then the return would be much higher.
We would ideally calculate that by the following formula: -
(36% divided by 64%) multiplied by 93%, giving us an additional 52% profit for the year. The total return for the year would then be 145% profit in THEORY.
Information is coming faster right now and there will be an additional post to the Blog on Monday. Thanks.Thursday Feb 15th 2018
REALLY GOOD RESULTS SO FAR.
Hope to increase the information that I can report as the results are now becoming more evident as we proceed.
You will see a chart on the Blog today that shows our plain vanilla Algorithms working on the first 16 stocks belonging to the Dow 30 Industrials. They are in alphabetic order with no specific choice.
The exciting part of this to me, are the substantial results across the board, which leads me to be confident that we have more universal appeal. We can in the future put various types or combinations together.
Note that if you invested in these first 16 Dow stocks exactly 1 year ago, with equal amounts of money, you would now be up by 17.6% after 16 Buys.
However, if you had run the stocks through our New Algorithms during the exact same period, you would currently own 10 of them and you would have more than doubled your profit. This after just 100 total trades.
Here is the good stuff!
Not only that, but your money would be invested much more efficiently because you would have it invested for less of the time, making the cash portion available for increased investments, either in our Algorithms or some other choice.
Simply put, if we say that stocks go up 60% of the time and down the other 40% of the time, and you can be out when they are going down and in when they are going up, you achieve much better results.
A further look at the first straight purchase of all 16 stocks means that you would have lost money on 3 of them with the worst being General Electric at minus -51.1% and the best being Boeing at a positive 102%.
Our Algorithms eliminated all 3 losses and changed General Electric to almost 4% profit with the best still being Boeing at 114% profit.
Obviously, there are a multitude of choices just surrounding the Dow, but we are looking at other possibilities as well as single stocks, ETNs and ETFs. There are just as many choices when considering types of World Markets and types of Industries, either individually or as melded groups.
Please stay tuned as I fully intend to finish all the Dow 30 Industrials and make some choices available as soon as possible. We are committed to this project, especially now that we see so many alternatives in an amazing array before us. Thanks again for your interest.Saturday Feb 10th 2018
THERE IS ALWAYS A BETTER WAY.
With seven years of focusing on the best way to improve my own investments, algorithms took second place to finding the VIX Volatility Index and XIV concept.
I must tell you that one week of failing results and having to think about the Credit Suisse deal, finally pointed me to successfully applying the Algorithms to tests elsewhere. And it worked!
In 1969, I used a Consultant to run a seminar on Functional Analysis, when I first heard the phrase – There is always a better way. I recognized it as part of my DNA and immediately adopted it.
Unfortunately, I do not do magic tricks, but I do have this DNA that does not quit, and I also still have over 6 years of Mathematical Algorithms and research.
I did some preliminary testing on a broad set of Exchange Traded Products and those results are shown in the small chart below.
The Top 10 includes Biotech, Semiconductors, China Stocks, Dow Stocks, Nasdaq Stocks, Crude Oil, Natural Gas, Silver, Oil Services and the S&P500 Stocks.
The Chart shows their Market returns for the past 12 months and finally, the Annual Return after processing them through the Algorithms.
My current thinking is an index or mixture that solves the issue of relying on a single issue such as XIV, which worked well for about 3 years before the recall. This is very early and will take more time to develop.
I will keep the Website and Blog going with the intention that negative and singular goals will be replaced by a balanced approach that will work, no matter the direction of the Markets or Economy.
Worth noting from the chart is that Gold and Silver and maybe Energy often become hedges against the Dow and S&P500. However, more importantly, Industries that lost money over the previous year were turned profitable after the Algorithms were applied.
I will send out occasional emails as significant changes occur and want to thank you for your interest in these Algorithms.
Tuesday Feb 6th 2018
A HUGE DISAPPOINTMENT.
This has been a huge disappointment to you and to all of us and for it to happen in Extended Hours Trading is no solace.
XIV opened today at 10.49 and in three steps went to 5.50 and traded up to 8.69 and down to 7.35 at the close.
Credit Suisse was quick to issue an Event Acceleration per their Prospectus and we appear to be subject to XIV going below 20% of the Prior Day Closing Value.
Here is the Credit Suisse announcement again --> Credit Suisse Announcement
My apologies cannot change this bleak situation. Positions may be liquidated before the cash payment per ETN which appears to be after Feb 20th, 2018.Tuesday Feb 6th 2018
ALERT - Roebuck Systems Update
We have received several questions asking how yesterday's events have impacted XIV trading. We want to share an update on how we understand what is happening.
Credit Suisse announced the following this morning: --> Credit Suisse Announcement
It appears that no new shares will be issued and trading will end on Feb 20th. Trading in XIV has not currently opened. We will continue to update you with any new information regarding XIV and do our best to provide clarity on anything else that arises.
Malcolm and the Roebuck Systems team.Monday Feb 5th 2018
I am advising all followers not to buy any XIV until we can ascertain whether or not Credit Suisse or VelocityShares intends invoking their 20% value rule. During Extended Hours Trading tonight, XIV went as low as $10.00 per ETN which may or may not affect their 20% rule. We will try to find an answer to this and publish our findings as soon as we can.