02/26/2013 Market Outlook (The Optimized Non-Stop Model)

Nothing new in the short-term evil plan below. The rebound today looks like a Bear Flag, so maintain the red dashed route, which means the rebound shall fail, there should be a new low ahead.



The possible All Up Day mentioned in today’s Trading Signals, is not confirmed, neither is the Non-Stop early warning mentioned in today’s Trading Signals. If SPY drops below today’s low tomorrow and open > close then we might have the early warning tomorrow. Anyway, allow me to take this chance to introduce the new optimized Non-Stop model.

The chart below shows what the optimized version of Non-Stop model looks like. The major changes comparing with the trial version shown in my public chart list are:

  1. Algorithm is used to eliminate whipsaws, so difficult to show via stockcharts now as a simple crossover may not count.
  2. The main signal performs good after the optimization, but, after a sharp sell off, it tends to long too early. In the back test, luckily even SPY made a lower low after the main signal longed too early, the selling was over before the lower low made too much scary damage, therefore the results are fairly good. However, if in the future, after the initial sharp sell off, the next leg down is even more furious, then the system might lose huge. So an early warning system is introduced to prevent the potential unfortunate future. If you don’t understand what I’m saying here, read the chart below carefully. After the Aug 2011 sharp sell off, the main signal longed earlier, and maintained the long status. However, in between (while the main signal maintains the long status), the Oct down leg made a new lower low, which luckily was bought later, otherwise, if this lower low kept going, then the system would suffer huge losses. Noticed that the early warning system had a warning in between (while the main signal maintains the long status), if hedge appropriately, not only would the hedge close safely, in case the main signal did go wrong, the losses would be limited.
  3. An early warning not only can give you a little more time to adjust positions but it also allows me some wiggle room to make a better decision based on my own analysis whether a hedge is needed or profit taking is needed and decide what kind of ETF to hedge.


The chart below compares the performance between the main signal and the early warning system. Both are good enough (Profit Factor > 1.25 is good enough), but the Profit Factor of the main signal is much better than that of the early warning system.




下面的short-term evil plan没有新内容,反弹,看着像是Bear Flag,因此维持红色虚线的走法判断,就是说反弹会失败,还会有new low。



今天的Trading Signals里提到的可能的All Up Day,最终没有确认。


今天的Trading Signals里提到了可能Non-Stop model早期预警触发了,不过,从晚上收集到的最终数据看,早期预警今天并没有触发。明天如果SPY跌破今天的low,且open > close的话,才有可能触发。没有关系,正好趁此机会解释一下优化版的Non-Stop model。

下面的图是优化版的Non-Stop model现在的样子。和public chart list里的trial version比较起来,最大的改变有:

  1. 需要用算法来去除whipsaw,所以很难再用stockcharts来显示了,因为简单的均线对穿不一定触发信号。
  2. 主信号经过优化后效果很好,但是在暴跌的时候,会有提前long的倾向。在历史测试中,尽管提前long了,但最终SPX在lower low后都幸运的反转了,因此对过去的历史测试显得效果很好,但是万一碰到将来暴跌后的第二轮下跌更加猛烈的情况,那么损失就会很大。有鉴于此,所以引入了早期预警。看不懂这段的解释的,注意看下面的图。2011年8月暴跌后,主信号提前long了,此后就一直维持在long的状态。但这中间,10月份的下跌形成了new lower low,这个new lower low幸亏被买起了,否则如果一路跌下去的话,而主信号一直维持long,那么损失将会很大。注意到早期预警在此期间有个warning,如果能适当hedge的话,不仅hedge本身能全身而退,万一主信号错了,也不致于损失过大。
  3. 引入早期预警还有个好处就是大家有充分的时间调整仓位,我也有足够的灵活性,根据我自己的分析而决定是否hedge,是否套利,以及使用什么ETF作hedge。


下面的图是主信号和早期预警的收益比较。可以看到,两个都是不错的(Profit Factor > 1.25就足够了),但主信号的Profit Factor要比早期预警好很多。


5 Comments on "02/26/2013 Market Outlook (The Optimized Non-Stop Model)"
  1. Comment left on:
    February 26, 2013 at 9:52 pm
    90 ufo says:

    nice, welcome the new non-stop model!

  2. Comment left on:
    February 26, 2013 at 10:01 pm
    racer29 says:

    WMT:SPY defensive move indicator for possible tops.
    my version of TRIN from DecisionPoint using 55DMA for possible intermediate tops

  3. Comment left on:
    February 26, 2013 at 10:19 pm
    ConquerTheRally says:

    Cobra, it seems the early warning system can only be used to support the main system; i.e., it should NOT be used alone by itself (the max drawdown would be very big)?

    • Site Administrator
      February 26, 2013 at 10:41 pm
      Cobra says:

      It can be used alone, for sure. Just it’s more sensitive, so require book profit more aggressively.

  4. Comment left on:
    February 26, 2013 at 11:32 pm
    vikasrao says:

    Thank you for sharing this, interesting that the main system’s profit factor is much higher than the early warning system. 

Comments have been disabled here. This discussion has ended.
© 2013 Cobra's Market View — All Rights Reserved.