Date: 12/26/08
Open: $28.31
High: $28.78
Low: $27.89
Close: $28.49
Volume: 1,335,176
Advances: 74
Advances>=4%: 6
Declines>=4% 1
Daily Change: 1.149%

Date: 12/24/08
Open: $28.24
High: $28.59
Low: $27.73
Close: $28.16777
Volume: 1,088,851
Advances: 47
Advances>=4%: 1
Declines>=4% 3
Daily Change: -0.216%

12/23/08

Date: 12/23/08
Open: $28.55
High: $28.98
Low: $27.79
Close: $28.23
Volume: 2,933,223
Advances: 34
Advances>=4%: 0
Declines>=4% 6
Daily Change: -0.611%

12/22/08

Date: 12/22/08
Open: $28.73
High: $29.15
Low: $27.56
Close: $28.40
Volume: 4,168,272
Advances: 31
Advances>=4%: 0
Declines>=4% 8
Daily Change: -0.957%

12/19/08

Date: 12/19/08
Open: $29.01
High: $29.58
Low: $28.12
Close: $28.68
Volume: 8,164,826
Advances: 48
Advances>=4%: 9
Declines>=4% 8
Daily Change: 0.213%

12/18/08

Date: 12/18/08
Open: $28.86
High: $29.50
Low: $27.99
Close: $28.62
Volume: 5,739,844
Advances: 42
Advances>=4%: 5
Declines>=4% 12
Daily Change: -0.604%

12/17/08

Date: 12/17/08
Open: $28.52
High: $29.33
Low: $28.02
Close: $28.79
Volume: 5,136,706
Advances: 50
Advances>=4%: 5
Declines>=4% 5
Daily Change: 0.052%

12/16/08

Date: 12/16/08
Open: $27.84
High: $29.02
Low: $27.44
Close: $28.78
Volume: 6,298,820
Advances: 96
Advances>=4%: 55
Declines>=4% 0
Daily Change: 4.618%

12/15/08

Date: 12/15/08
Open: $28.24
High: $28.67
Low: $26.96
Close: $27.51
Volume: 4,394,638
Advances: 21
Advances>=4%: 1
Declines>=4% 18
Daily Change: -2.113%

Date: 12/10/08
Open: $28.55
High: $29.38
Low: $27.88
Close: $28.61
Volume: 4,678,362
Advances: 71
Advances>=4%: 14
Declines>=4% 5
Daily Change: 1.090%


Date: 12/11/08
Open: $28.36
High: $28.99
Low: $27.01
Close: $27.40617
Volume: 5,047,006
Advances: 8
Advances>=4%: 1
Declines>=4% 51
Daily Change: -4.221%


Date: 12/12/08
Open: $26.87
High: $28.38
Low: $26.44
Close: $28.09986
Volume: 4,581,365
Advances: 78
Advances>=4%: 32
Declines>=4% 1
Daily Change: 2.531%

12/09/08

Date: 12/09/08
Open: $28.88
High: $29.75
Low: $27.91
Close: $28.31
Volume: 5,656,112
Advances: 7
Advances>=4%: 1
Declines>=4% 32
Daily Change: -2.917%

12/08/08

Date: 12/08/08
Open: $29.12
High: $29.96
Low: $28.27
Close: $29.16
Volume: 6,090,141
Advances: 73
Advances>=4%: 28
Declines>=4% 6
Daily Change: 1.980%

12/05/08

Date: 12/05/08
Open: $27.45
High: $28.90
Low: $26.49
Close: $28.59
Volume: 6,699,773
Advances: 89
Advances>=4%: 42
Declines>=4% 2
Daily Change: 3.477%

12/04/08

Date: 12/04/08
Open: $28.15
High: $29.08
Low: $27.05
Close: $27.63
Volume: 6,242,182
Advances: 19
Advances>=4%: 3
Declines>=4% 28
Daily Change: -2.713%

12/03/08

Date: 12/03/08
Open: $27.36
High: $28.95
Low: $26.90
Close: $28.40
Volume: 6,434,717
Advances: 73
Advances>=4%: 23
Declines>=4% 4
Daily Change: 1.770%

12/02/08

Date: 12/02/08
Open: $27.37
High: $28.36
Low: $26.62
Close: $27.91
Volume: 5,900,532
Advances: 86
Advances>=4%: 48
Declines>=4% 1
Daily Change: 3.643%

12/01/08

Date: 12/01/08
Open: $28.66
High: $29.15
Low: $26.73
Close: $26.93
Volume: 6,068,370
Advances: 3
Advances>=4%: 0
Declines>=4% 82
Daily Change: -7.805%

Time to get bullish?

Based on my reading that the rally last week was driven by a dead-cat bounce by laggards, it suggest that the majority of what we have seen is being fueled by short-covering and value investors that stepped in at S&P 750 and Dow 7500. While positive, there are several technical conditions I need to see met before I am willing to get bullish enough to begin swing-trading the long side, none of which have occurred.

1) A break of the double inverse ETFs below their 50d MAs. This began to happen on Friday by the most volatile of the bunch but I am looking for a continuation of that trend. Following that will be a break of the 2x long ETFs above their 50d. Confirmation will be a substantial enough break that they remain below/above their 50d MAs in a short-term overbought/oversold condition as defined by RSI(2) > 90 and RSI(2) < 10.

2) A higher low logged on the broader indexes with confirmation occurring at a break above the previous high which is possibly being set now.

3) A tick up in the number of successful high-volume breakouts. This would indicate growth and speculative traders/investors are back in the market and a return of risk appetite.

4) Institutional buying as indicated by IBD style follow-through day and higher-volume positive days.

5) A 10d/50d MA cross on the IBD100. This has proven to be a pretty good trend indicator.

It is not possible for the market to enter a new medium-term uptrend without accomplishing these items so my confidence in this market will begin to grow as I can start checking them off, until then - remain wary.

Week ending 11/28/08

The turnover for the IBD100 was 37% this week. The index has gained 7.75% over the last 5 session, lagging the major indexes substantially. This suggest that much of the move over the past few days was primarily driven by a dead-cat bounce of lagging sectors vs. a breakout of new leadership.

11/28/08

Date: 11/28/08
Open: $28.75
High: $29.43
Low: $28.29
Close: $29.21
Volume: 2,118,822
Advances: 61
Advances>=4%: 7
Declines>=4% 2
Daily Change: 0.788%

11/26/08

Date: 11/26/08
Open: $27.64
High: $29.21
Low: $27.34
Close: $28.98
Volume: 5,401,916
Advances: 85
Advances>=4%: 36
Declines>=4% 2
Daily Change: 3.174%

Happy Thanksgiving.

11/25/08

Date: 11/25/08
Open: $28.44
High: $28.86
Low: $26.91
Close: $28.10
Volume: 7,684,292
Advances: 46
Advances>=4%: 10
Declines>=4% 9
Daily Change: -0.088%

Date: 11/24/08
Open: $27.40
High: $28.62
Low: $26.72
Close: $28.13
Volume: 7,795,821
Advances: 85
Advances>=4%: 45
Declines>=4% 1
Daily Change: 3.740%

11/21/08

Date: 11/21/08
Open: $26.57
High: $27.65
Low: $25.04
Close: $27.11
Volume: 9,244,288
Advances: 77
Advances>=4%: 49
Declines>=4% 4
Daily Change: 3.658%

Index updates 11.19-11.20

Date: 11/19/08
Open: $28.83
High: $29.42
Low: $27.34
Close: $27.50
Volume: 6,620,990
Advances: 2
Advances>=4%: 0
Declines>=4% 65
Daily Change: -4.953%

Date: 11/20/08
Open: $27.22
High: $28.13
Low: $25.82
Close: $26.15
Volume: 8,335,906
Advances: 7
Advances>=4%: 2
Declines>=4% 60
Daily Change: -4.879%

Yep, its bad. New low on the index since I've been tracking it. Down -47.70%
since 03.04.08.

11/18/08

Date: 11/18/08
Open: $28.94
High: $29.72
Low: $27.93
Close: $28.93
Volume: 6,845,950
Advances: 49
Advances>=4%: 9
Declines>=4% 4
Daily Change: 0.206%

11/17/08

Date: 11/17/08
Open: $28.74
High: $29.78
Low: $28.24
Close: $28.87
Volume: 5,072,214
Advances: 38
Advances>=4%: 4
Declines>=4% 3
Daily Change: -0.395%

11/14/08

Date: 11/14/08
Open: $29.93
High: $30.71
Low: $28.68
Close: $28.99
Volume: 6,175,956
Advances: 5
Advances>=4%: 1
Declines>=4% 54
Daily Change: -4.493%

11/13/08

Date: 11/13/08
Open: $28.71
High: $30.55
Low: $27.45
Close: $30.36
Volume: 7,575,193
Advances: 92
Advances>=4%: 66
Declines>=4% 2
Daily Change: 5.689%

11/11/08

Date: 11/11/08
Open: $30.14
High: $30.95
Low: $29.23
Close: $29.98
Volume: 4,395,595
Advances: 32
Advances>=4%: 0
Declines>=4% 16
Daily Change: -1.399%

11/10/08

Date: 11/10/08
Open: $31.09
High: $31.55
Low: $29.92
Close: $30.40
Volume: 3,819,386
Advances: 49
Advances>=4%: 4
Declines>=4% 6
Daily Change: -0.184%

Turnover for week beginning 11/10/08

26% turnover on the IBD100 this week.

11/07/08

Date: 11/07/08
Open: $30.27
High: $31.12
Low: $29.50
Close: $30.46
Volume: 4,489,773
Advances: 70
Advances>=4%: 21
Declines>=4% 3
Daily Change: 1.752%

Big Bamboo Stop Study

I will once again refer readers to Woodshedder at iBankCoin for some background on Big Bamboo and additional commentary on the following results. The following data is the raw results from a series of tests looking at various protective stops for Big Bamboo. These backtests measure the results of every entry signal generated by the system on the leveraged ETF portfolio since they began trading and each signal is purchased with $10,000 worth of shares. No compounding, slippage or commissions are included. Think of this data simply as raw stats and these test only look at various protective stops used in conjunction with the specified profit target of RSI(2) > 80.

Note: The ATR stops test various multiples of the 10-period ATR for the ETF being traded and the stop is not adjusted daily for changes in volatility. It is fixed at the time of entry and left alone.

Charts of results:


Raw Data: HERE

Leveraged ETF Average Volatility

I am working on a couple of systems with Woodshedder at iBankCoin and just completed a quick study of average volatility for all of the leveraged ETFs currently traded. This is targeted towards refining stops for a couple of our systems that trade the leveraged ETFs but I thought it might be interesting for others to see. Basically this looks at the average volatility measured by a 10-period ATR since the ETF began trading. The AverageATR Percentage column is the daily ATR/Close which normalizes the volatility to a percentage move. The spreadsheet can be viewed HERE

11/06/08

Date: 11/06/08
Open: $30.60
High: $31.48
Low: $29.39
Close: $29.94
Volume: 6,047,382
Advances: 17
Advances>=4%: 3
Declines>=4% 32
Daily Change: -3.247%

11/05/08

Date: 11/05/08
Open: $32.05
High: $32.69
Low: $30.58
Close: $30.95
Volume: 4,684,761
Advances: 6
Advances>=4%: 2
Declines>=4% 54
Daily Change: -4.341%

The IBD100 actually closed above its 10dMA ($30.82) today for the 5th straight day. A first since 06.20.08.

11/04/08

Date: 11/04/08
Open: $32.81
High: $33.39
Low: $31.51
Close: $32.36
Volume: 4,892,538
Advances: 56
Advances>=4%: 10
Declines>=4% 6
Daily Change: 0.387%

11/03/08

Date: 11/03/08
Open: $32.13
High: $33.06
Low: $31.38
Close: $32.24
Volume: 4,136,131
Advances: 56
Advances>=4%: 9
Declines>=4% 5
Daily Change: 0.499%

Today was the 3rd consecutive day the IBD100 has spent above its 10dMA. The last time we were blessed with with such an occurance was August 1.

Turnover for week beginning 11/03/08

54% turnover on the IBD100 this week.

10/31/08

Date: 10/31/08
Open: $31.31
High: $32.65
Low: $30.68
Close: $32.08
Volume: 5,758,868
Advances: 76
Advances>=4%: 20
Declines>=4% 1
Daily Change: 2.000%

10/30/08

Date: 10/30/08
Open: $31.17
High: $31.98
Low: $30.21
Close: $31.45
Volume: 5,667,806
Advances: 89
Advances>=4%: 37
Declines>=4% 1
Daily Change: 3.363%

10/29/08

Date: 10/29/08
Open: $30.22
High: $31.54
Low: $29.43
Close: $30.43
Volume: 6,767,760
Advances: 63
Advances>=4%: 14
Declines>=4% 6
Daily Change: 1.011%

10/28/08

Date: 10/28/08
Open: $29.06
High: $30.52
Low: $27.98
Close: $30.14
Volume: 7,185,986
Advances: 92
Advances>=4%: 68
Declines>=4% 3
Daily Change: 6.058%

10/27/08

Date: 10/27/08
Open: $28.96
High: $29.91
Low: $28.04
Close: $28.43
Volume: 5,287,228
Advances: 12
Advances>=4%: 1
Declines>=4% 35
Daily Change: -3.103%

Turnover for week beginning 10/27/08

45% turnover on the IBD100 this week.

10/24/08

Date: 10/24/08
Open: $28.36
High: $30.30
Low: $27.64
Close: $29.34
Volume: 6,003,714
Advances: 18
Advances>=4%: 3
Declines>=4% 39
Daily Change: -3.188%

10/23/08

Date: 10/23/08
Open: $30.90
High: $31.70
Low: $28.91
Close: $30.30
Volume: 6,995,406
Advances: 30
Advances>=4%: 6
Declines>=4% 24
Daily Change: -1.684%

10/22/08

Date: 10/22/08
Open: $31.52
High: $32.23
Low: $30.11
Close: $30.82
Volume: 6,056,578
Advances: 9
Advances>=4%: 0
Declines>=4% 50
Daily Change: -3.870%

10/21/08

Date: 10/21/08
Open: $32.30
High: $33.24
Low: $31.45
Close: $32.06
Volume: 4,552,065
Advances: 20
Advances>=4%: 3
Declines>=4% 25
Daily Change: -1.998%

10/20/08

Date: 10/20/08
Open: $32.01
High: $33.11
Low: $31.21
Close: $32.71
Volume: 5,094,192
Advances: 93
Advances>=4%: 43
Declines>=4% 0
Daily Change: 3.910%

Today was the first day the IBD100 has crossed above its 10dMA in 21 days.

Turnover for week beginning 10/20/08

47% turnover on the IBD100 this week.

10/17/08

Date: 10/17/08
Open: $31.35
High: $33.15
Low: $30.23
Close: $31.48
Volume: 6,422,628
Advances: 22
Advances>=4%: 1
Declines>=4% 25
Daily Change: -2.327%

10/16/08

Date: 10/16/08
Open: $30.54
High: $32.59
Low: $29.19
Close: $32.24
Volume: 8,175,460
Advances: 95
Advances>=4%: 73
Declines>=4% 3
Daily Change: 6.241%

10/15/08

Date: 10/15/08
Open: $32.28
High: $32.88
Low: $30.03
Close: $30.34
Volume: 6,516,993
Advances: 2
Advances>=4%: 0
Declines>=4% 87
Daily Change: -7.477%

10/14/08

Date: 10/14/08
Open: $34.11
High: $34.67
Low: $31.81
Close: $32.79
Volume: 7,250,266
Advances: 33
Advances>=4%: 3
Declines>=4% 21
Daily Change: -1.777%

10/13/08

Date: 10/13/08
Open: $32.48
High: $33.80
Low: $31.23
Close: $33.39
Volume: 6,824,804
Advances: 93
Advances>=4%: 73
Declines>=4% 1
Daily Change: 6.843%

The IBD100 clearly undeperformed the broader indexes today and did not close above its 10-day SMA which is at $34.34. The 50-day is currently at $42.23.

Turnover for week beginning 10/13/08

An unbelievable 65% turnover on the IBD100 this week.

Week Ending 10/10/08

IBD100 Index down 14.17% for the week.

Date: 10/06/08
Open: $35.62
High: $36.33
Low: $33.07
Close: $34.86
Volume: 7,318,457
Advances: 14
Advances>=4%: 2
Declines>=4% 56
Daily Change: -4.245%

Date: 10/07/08
Open: $35.05
High: $35.96
Low: $32.93
Close: $33.30
Volume: 6,276,514
Advances: 7
Advances>=4%: 1
Declines>=4% 55
Daily Change: -4.477%

Date: 10/08/08
Open: $32.52
High: $34.67
Low: $31.39
Close: $32.82
Volume: 7,254,797
Advances: 25
Advances>=4%: 5
Declines>=4% 17
Daily Change: -1.453%

Date: 10/09/08
Open: $33.13
High: $33.94
Low: $30.34
Close: $30.58
Volume: 7,578,028
Advances: 3
Advances>=4%: 0
Declines>=4% 71
Daily Change: -6.824%

Date: 10/10/08
Open: $29.46
High: $32.39
Low: $27.63
Close: $31.25
Volume: 11,014,753
Advances: 67
Advances>=4%: 36
Declines>=4% 12
Daily Change: 2.190%

10/03/08

Date: 10/03/08
Open: $37.54
High: $38.83
Low: $36.01
Close: $36.41
Volume: 5,206,465
Advances: 28
Advances>=4%: 1
Declines>=4% 25
Daily Change: -2.022%

10/02/08

Date: 10/02/08
Open: $39.16
High: $39.49
Low: $36.66
Close: $37.16
Volume: 4,825,920
Advances: 5
Advances>=4%: 0
Declines>=4% 56
Daily Change: -5.312%

10/01/08

Date: 10/01/08
Open: $39.52
High: $40.31
Low: $38.30
Close: $39.25
Volume: 3,457,286
Advances: 35
Advances>=4%: 2
Declines>=4% 14
Daily Change: -1.096%

09/30/08

Date: 09/30/08
Open: $39.05
High: $40.46
Low: $37.78
Close: $39.68
Volume: 4,506,614
Advances: 82
Advances>=4%: 36
Declines>=4% 3
Daily Change: 2.972%

09/29/08

Date: 09/29/08
Open: $40.50
High: $41.17
Low: $37.00
Close: $38.54
Volume: 4,710,831
Advances: 5
Advances>=4%: 0
Declines>=4% 71
Daily Change: -6.140%

09/26/08

Date: 09/26/08
Open: $40.53
High: $41.71
Low: $39.66
Close: $41.06
Volume: 3,316,473
Advances: 43
Advances>=4%: 4
Declines>=4% 8
Daily Change: -0.338%

09/25/08

Date: 09/25/08
Open: $40.96
High: $42.12
Low: $40.22
Close: $41.20
Volume: 3,021,353
Advances: 70
Advances>=4%: 8
Declines>=4% 4
Daily Change: 0.801%

09/24/08

Date: 09/24/08
Open: $41.54
High: $42.32
Low: $40.29
Close: $40.87
Volume: 3,179,419
Advances: 30
Advances>=4%: 1
Declines>=4% 12
Daily Change: -1.248%

09/23/08

Date: 09/23/08
Open: $42.10
High: $43.01
Low: $40.70
Close: $41.39
Volume: 3,509,603
Advances: 31
Advances>=4%: 0
Declines>=4% 15
Daily Change: -1.693%

09/22/08

Date: 09/22/08
Open: $43.25
High: $44.13
Low: $41.46
Close: $42.10
Volume: 3,529,215
Advances: 16
Advances>=4%: 0
Declines>=4% 37
Daily Change: -3.267%

Turnover for week beginning 09/22/08

28% turnover on the IBD100 this week

09/19/08

Date: 09/19/08
Open: $43.74
High: $45.50
Low: $41.68
Close: $43.52
Volume: 6,335,993
Advances: 84
Advances>=4%: 49
Declines>=4% 3
Daily Change: 4.067%

09/18/08

Date: 09/18/08
Open: $41.04
High: $42.94
Low: $38.97
Close: $41.82
Volume: 7,428,513
Advances: 82
Advances>=4%: 46
Declines>=4% 4
Daily Change: 3.336%

09/17/08

Date: 09/17/08
Open: $41.95
High: $42.74
Low: $39.72
Close: $40.47
Volume: 6,253,957
Advances: 4
Advances>=4%: 0
Declines>=4% 61
Daily Change: -4.907%

09/16/08

Date: 09/16/08
Open: $41.42
High: $43.35
Low: $40.18
Close: $42.57
Volume: 5,745,338
Advances: 75
Advances>=4%: 25
Declines>=4% 5
Daily Change: 1.267%

09/15/08

Date: 09/15/08
Open: $42.44
High: $43.81
Low: $41.10
Close: $42.00
Volume: 4,457,944
Advances: 8
Advances>=4%: 0
Declines>=4% 38
Daily Change: -3.829%

09/12/08

Date: 09/12/08
Open: $43.40
High: $44.39
Low: $42.60
Close: $43.67
Volume: 4,707,760
Advances: 52
Advances>=4%: 8
Declines>=4% 6
Daily Change: -0.056%

09/11/08

Date: 09/11/08
Open: $42.67
High: $44.06
Low: $41.93
Close: $43.66
Volume: 4,738,340
Advances: 63
Advances>=4%: 9
Declines>=4% 2
Daily Change: 0.812%

09/10/08

Date: 09/10/08
Open: $42.87
High: $44.04
Low: $42.09
Close: $43.28
Volume: 4,935,703
Advances: 84
Advances>=4%: 15
Declines>=4% 1
Daily Change: 1.790%

09/09/08

Date: 09/09/08
Open: $43.91
High: $44.72
Low: $42.14
Close: $42.49
Volume: 5,613,112
Advances: 14
Advances>=4%: 0
Declines>=4% 40
Daily Change: -3.471%

09/08/08

Date: 09/08/08
Open: $44.43
High: $45.33
Low: $43.00
Close: $44.01
Volume: 5,297,494
Advances: 77
Advances>=4%: 13
Declines>=4% 5
Daily Change: 1.469%

Weekly Review

There was a 29% turnover on the IBD100 this week. The index gave up 7.41% during the shortened 4-day trading week in the largest 1-week drop since I began tracking the index on 03/04/08. The index is down 23.8% since topping at $56.21 on 06/17/2008.

09/05/08

Date: 09/05/08
Open: $43.09
High: $43.99
Low: $41.66
Close: $43.38
Volume: 4,345,821
Advances: 46
Advances>=4%: 6
Declines>=4% 2
Daily Change: -0.156%

09/04/08

Date: 09/04/08
Open: $44.85
High: $45.47
Low: $42.74
Close: $43.44
Volume: 4,195,395
Advances: 5
Advances>=4%: 0
Declines>=4% 43
Daily Change: -3.902%

09/03/08

Date: 09/03/08
Open: $46.00
High: $46.78
Low: $44.38
Close: $45.21
Volume: 3,912,203
Advances: 29
Advances>=4%: 0
Declines>=4% 24
Daily Change: -2.033%

09/02/08

Date: 09/02/08
Open: $47.07
High: $47.90
Low: $45.49
Close: $46.15
Volume: 3,447,153
Advances: 41
Advances>=4%: 6
Declines>=4% 19
Daily Change: -1.498%

Turnover for week beginning 09/02/08

14% turnover on the IBD100 this week

08/29/08

Date: 08/29/08
Open: $47.31
High: $47.80
Low: $46.33
Close: $46.85
Volume: 1,850,536
Advances: 19
Advances>=4%: 0
Declines>=4% 0
Daily Change: -1.094%

08/28/08

Date: 08/28/08
Open: $46.94
High: $47.96
Low: $46.15
Close: $47.37
Volume: 2,123,668
Advances: 76
Advances>=4%: 14
Declines>=4% 2
Daily Change: 1.414%

08/27/08

Date: 08/27/08
Open: $46.12
High: $47.25
Low: $45.63
Close: $46.71
Volume: 1,938,806
Advances: 85
Advances>=4%: 8
Declines>=4% 0
Daily Change: 1.491%

08/26/08

Date: 08/26/08
Open: $45.96
High: $46.82
Low: $45.18
Close: $46.02
Volume: 2,101,180
Advances: 53
Advances>=4%: 2
Declines>=4% 4
Daily Change: 0.097%

08/25/08

Date: 08/25/08
Open: $46.91
High: $47.42
Low: $45.43
Close: $45.97
Volume: 1,933,187
Advances: 9
Advances>=4%: 0
Declines>=4% 11
Daily Change: -2.059%

Turnover for week beginning 08/25/08

18% turnover on the IBD100 this week with a lot of familiar names back on the list.

08/22/08

Date: 08/22/08
Open: $46.65
High: $47.61
Low: $46.00
Close: $46.94
Volume: 1,964,550
Advances: 76
Advances>=4%: 5
Declines>=4% 2
Daily Change: 0.685%

08/21/08

Date: 08/21/08
Open: $46.73
High: $47.47
Low: $45.70
Close: $46.62
Volume: 2,215,467
Advances: 28
Advances>=4%: 3
Declines>=4% 5
Daily Change: -0.915%

08/20/08

Date: 08/20/08
Open: $46.76
High: $47.78
Low: $46.00
Close: $47.05
Volume: 2,439,489
Advances: 56
Advances>=4%: 5
Declines>=4% 0
Daily Change: 0.790%

08/19/08

Date: 08/19/08
Open: $46.89
High: $47.67
Low: $45.83
Close: $46.68
Volume: 2,392,246
Advances: 22
Advances>=4%: 4
Declines>=4% 9
Daily Change: -1.122%

08/18/08

Date: 08/18/08
Open: $48.00
High: $48.64
Low: $46.59
Close: $47.21
Volume: 2,247,456
Advances: 20
Advances>=4%: 3
Declines>=4% 6
Daily Change: -1.089%

Turnover for week beginning 08/18/08

14% turnover on the IBD100 this week.

08/15/08

Date: 08/15/08
Open: $48.42
High: $49.09
Low: $46.92
Close: $47.73
Volume: 2,629,922
Advances: 33
Advances>=4%: 5
Declines>=4% 13
Daily Change: -0.893%

08/14/08

Date: 08/14/08
Open: $47.49
High: $48.77
Low: $46.76
Close: $48.16
Volume: 3,158,886
Advances: 70
Advances>=4%: 4
Declines>=4% 2
Daily Change: 0.868%

08/13/08

Date: 08/13/08
Open: $47.37
High: $48.47
Low: $46.34
Close: $47.75
Volume: 3,358,694
Advances: 52
Advances>=4%: 11
Declines>=4% 4
Daily Change: 0.555%

08/12/08

Date: 08/12/08
Open: $48.22
High: $48.94
Low: $46.67
Close: $47.72
Volume: 3,570,391
Advances: 31
Advances>=4%: 6
Declines>=4% 12
Daily Change: -1.293%

08/11/08

Date: 08/11/08
Open: $47.81
High: $49.32
Low: $47.00
Close: $48.34
Volume: 3,747,196
Advances: 69
Advances>=4%: 15
Declines>=4% 5
Daily Change: 1.262%

Turnover for week beginning 08/11/08

31% turnover on the IBD100 this week.

08/08/08

Date: 08/08/08
Open: $47.25
High: $48.61
Low: $46.27
Close: $47.74
Volume: 3,456,238
Advances: 62
Advances>=4%: 14
Declines>=4% 13
Daily Change: 0.353%

08/07/08

Date: 08/07/08
Open: $47.68
High: $48.56
Low: $46.38
Close: $47.60
Volume: 3,324,313
Advances: 27
Advances>=4%: 1
Declines>=4% 10
Daily Change: -1.368%

08/06/08

Date: 08/06/08
Open: $47.45
High: $49.10
Low: $46.49
Close: $48.26
Volume: 3,906,780
Advances: 71
Advances>=4%: 17
Declines>=4% 3
Daily Change: 1.245%

08/05/08

Date: 08/05/08
Open: $47.43
High: $48.86
Low: $46.13
Close: $47.67
Volume: 4,266,420
Advances: 70
Advances>=4%: 21
Declines>=4% 7
Daily Change: 1.070%

08/04/08

Date: 08/04/08
Open: $48.97
High: $49.62
Low: $46.37
Close: $47.16
Volume: 3,583,588
Advances: 19
Advances>=4%: 5
Declines>=4% 45
Daily Change: -3.609%

Turnover for week beginning 08/04/08

27% turnover on the IBD100 this week. Another very high turnover week. The reigning #1 spot, which had been held for quite some time by the same stock, fell off the list completely this week in a dramatic fall from grace. Most tend to work their way down the list before finally falling off. The fact that the fundamentals for many of these companies have not changed or does not change from week to week offers us a little insight into how signifigant a role momo is to the IBD ranking criteria and what their lookback periods may be.

08/01/08

Date: 08/01/08
Open: $49.31
High: $50.22
Low: $47.90
Close: $48.93
Volume: 3,228,571
Advances: 33
Advances>=4%: 7
Declines>=4% 1
Daily Change: -0.169%

07/31/08

Date: 07/31/08
Open: $49.55
High: $50.53
Low: $48.22
Close: $49.07
Volume: 4,111,712
Advances: 28
Advances>=4%: 3
Declines>=4% 17
Daily Change: -1.511%

07/30/08

Date: 07/30/08
Open: $48.82
High: $50.54
Low: $48.01
Close: $49.82
Volume: 3,593,719
Advances: 80
Advances>=4%: 29
Declines>=4% 1
Daily Change: 2.540%

07/29/08

Date: 07/29/08
Open: $48.00
High: $49.50
Low: $47.02
Close: $48.59
Volume: 3,795,006
Advances: 74
Advances>=4%: 18
Declines>=4% 5
Daily Change: 1.276%

07/28/08

Date: 07/28/08
Open: $48.45
High: $49.40
Low: $47.20
Close: $47.98
Volume: 3,131,759
Advances: 38
Advances>=4%: 0
Declines>=4% 9
Daily Change: -0.772%

Turnover for week beginning 07/28/08

28% turnover on the IBD100 this week. This is a very high relative to the average weekly turnover and suggest we are beginning to see a potential rotation of leadership out of energy related equities.

07/25/08

Date: 07/25/08
Open: $47.96
High: $49.43
Low: $46.94
Close: $48.36
Volume: 3,385,036
Advances: 69
Advances>=4%: 12
Declines>=4% 4
Daily Change: 1.189%

07/24/08

Date: 07/24/08
Open: $49.02
High: $49.89
Low: $46.39
Close: $47.79
Volume: 4,766,066
Advances: 18
Advances>=4%: 4
Declines>=4% 29
Daily Change: -2.522%

07/23/08

Date: 07/23/08
Open: $50.04
High: $50.92
Low: $48.05
Close: $49.02
Volume: 3,965,824
Advances: 27
Advances>=4%: 5
Declines>=4% 32
Daily Change: -2.580%

07/22/08

Date: 07/22/08
Open: $50.19
High: $51.48
Low: $48.71
Close: $50.32
Volume: 3,305,460
Advances: 45
Advances>=4%: 13
Declines>=4% 18
Daily Change: -0.688%

07/21/08

Date: 07/21/08
Open: $50.03
High: $51.36
Low: $48.90
Close: $50.67
Volume: 2,705,894
Advances: 79
Advances>=4%: 30
Declines>=4% 4
Daily Change: 2.209%

Turnover for week beginning 07/21/08

23% turnover on the IBD100 this week

07/18/08

Date: 07/18/08
Open: $49.67
High: $50.77
Low: $48.43
Close: $49.57
Volume: 3,077,210
Advances: 50
Advances>=4%: 2
Declines>=4% 3
Daily Change: -0.059%

07/17/08

Date: 07/17/08
Open: $50.73
High: $51.90
Low: $48.27
Close: $49.59
Volume: 4,085,084
Advances: 37
Advances>=4%: 10
Declines>=4% 34
Daily Change: -1.828%

07/16/08

Date: 07/16/08
Open: $50.31
High: $51.59
Low: $48.59
Close: $50.52
Volume: 3,645,199
Advances: 51
Advances>=4%: 23
Declines>=4% 8
Daily Change: 0.321%

07/15/08

Date: 07/15/08
Open: $51.14
High: $52.04
Low: $48.94
Close: $50.36
Volume: 3,582,455
Advances: 19
Advances>=4%: 3
Declines>=4% 26
Daily Change: -2.324%
Dow: -0.84%
Nasdaq: +0.13%
S&P: -1.09%

07/14/08

Date: 07/14/08
Open: $51.78
High: $52.81
Low: $50.36
Close: $51.56
Volume: 2,787,643
Advances: 65
Advances>=4%: 11
Declines>=4% 6
Daily Change: 0.440%

Turnover for week beginning 07/14/08

21% turnover on the IBD100 this week.

07/11/08

Date: 07/11/08
Open: $50.99
High: $52.39
Low: $49.81
Close: $51.33
Volume: 3,041,037
Advances: 59
Advances >=4%: 5
Declines >=4%: 5
Daily Change: 0.573%
Dow: -1.14%
Nasdaq: -0.83%
S&P: -1.11%

07/10/08

Date: 07/10/08
Open: $49.80
High: $51.52
Low: $48.77
Close: $51.04
Volume: 3,155,144
Advances: 80
Advances >=4%: 30
Declines >=4%: 2
Daily Change: 2.939%
Dow: +0.73%
Nasdaq: +1.03%
S&P: +0.70%

07/09/08

Date: 07/09/08
Open: $50.23
High: $51.88
Low: $48.98
Close: $49.58
Volume: 3,119,963
Advances: 35
Advances >=4%: 9
Declines >=4%: 12
Daily Change: -0.705%
Dow: -2.08%
Nasdaq: -2.60%
S&P: -2.28%

07/08/08

Date: 07/08/08
Open: $49.80
High: $50.77
Low: $47.45
Close: $49.93
Volume: 4,121,406
Advances: 38
Advances >=4%: 10
Declines >=4%: 10
Daily Change: -0.588%
Dow: +1.36%
Nasdaq: +2.28%
S&P: +1.71%

07/07/08

Date: 07/07/08
Open: $50.90
High: $52.06
Low: $48.98
Close: $50.23
Volume: 3,221,364
Advances: 27
Advances >=4%: 5
Declines >=4%: 17
Daily Change: -1.345%
Dow: -0.50%
Nasdaq: -0.09%
S&P: -0.84%

Back from vacation

I have returned from vacation and updated the IBD100 index stats. It was a bad week with the majority of the damage coming in the last two days. The IBD100 lost 5.67% this week and has given back a large portion of its gains over the past few months in a remarkably short period of time. The IBD100's components had become very concentrated in a handful of industry groups and it was only a matter of time until these leaders experienced a major correction (see comments). The next couple of weeks will be interesting.

Happy Independence Day

07/03/08

Date: 07/03/08
Open: $52.04
High: $52.69
Low: $49.27
Close: $50.91
Volume: 2,384,379
Advances: 14
Advances>=4%: 1
Declines>=4% 22
Daily Change: -2.488%

07/02/08

Date: 07/02/08
Open: $55.10
High: $55.96
Low: $51.85
Close: $52.20
Volume: 3,475,452
Advances: 8
Advances>=4%: 0
Declines>=4% 64
Daily Change: -4.610%

07/01/08

Date: 07/01/08
Open: $54.25
High: $55.45
Low: $52.86
Close: $54.73
Volume: 3,130,454
Advances: 61
Advances>=4%: 9
Declines>=4% 4
Daily Change: 0.426%

06/30/08

Date: 06/30/08
Open: $54.44
High: $55.84
Low: $53.50
Close: $54.50
Volume: 2,797,203
Advances: 64
Advances>=4%: 13
Declines>=4% 6
Daily Change: 0.981%

06/27/08

Date: 06/27/08
Open: $53.27
High: $54.77
Low: $52.45
Close: $53.97
Volume: 3,789,617
Advances: 72
Advances>=4%: 12
Declines>=4% 1
Daily Change: 1.225%

06/26/08

Date: 06/26/08
Open: $54.03
High: $54.86
Low: $52.30
Close: $53.32
Volume: 3,199,476
Advances: 25
Advances>=4%: 1
Declines>=4% 18
Daily Change: -1.93%

06/25/08

Date: 06/25/08
Open: $54.69
High: $55.64
Low: $52.73
Close: $54.37
Volume: 3,421,860
Advances: 47
Advances>=4%: 8
Declines>=4% 4
Daily Change: -0.14%

06/24/08

Date: 06/24/08
Open: $55.93
High: $56.44
Low: $53.88
Close: $54.45
Volume: 2,747,162
Advances: 9
Advances>=4%: 1
Declines>=4% 22
Daily Change: -2.803%
Dow: -0.30%
Nasdaq: -0.73%
S&P: -0.28%

06/23/08

Date: 06/23/08
Open: $55.12
High: $56.78
Low: $54.20
Close: $56.02
Volume: 2,529,149
Advances: 70
Advances>=4%: 27
Declines>=4% 2
Daily Change: 2.03%
Dow: 0.00%
Nasdaq: -0.85%
S&P: +0.01%

Next two weeks

I will be unable to post any new studies over the next two weeks due to a vacation and some parallel research I am working on. One component of this involves a method for testing dynamic portfolios in Traders Studio and if all of that comes together, it will make for some very interesting studies moving forward.

Traderfeed posted a great link this week I am reproducing here as it will probably be of interest to readers of this blog. BreakoutFutures. Daily updates to the IBD100 index will also be irregular as well but it is being tracked and will be updated when possible. Thank you for your patience.

Turnover for week beginning 06/23/08

11% turnover on the IBD100 this week.

Oil and energy continue to dominate the IBD100 with 3 of the new additions being off-shore drilling related securities. 1/11 is alt-energy.

06/20/08

Date: 06/20/08
Open: $55.58
High: $56.39
Low: $54.09
Close: $54.90
Volume: 2,818,319
Advances: 31
Advances>=4%: 1
Declines>=4% 8
Daily Change: -1.247%
Dow: -1.83%
Nasdaq: -2.27%
S&P: -1.85%

06/19/08

Date: 06/19/08
Open: $56.47
High: $57.20
Low: $54.64
Close: $55.60
Volume: 2,856,372
Advances: 43
Advances>=4%: 4
Declines>=4% 18
Daily Change: -1.041%
Dow: +0.28%
Nasdaq: +1.33%
S&P: +0.38%

06/18/08

Date: 06/18/08
Open: $56.19
High: $57.07
Low: $54.94
Close: $56.18202
Volume: 2,539,460
Advances: 44
Advances>=4%: 5
Declines>=4% 4
Daily Change: -0.054%

06/17/08

Date: 06/17/08
Open: $55.08
High: $56.29
Low: $54.39
Close: $56.20818
Volume: 2,514,825
Advances: 71
Advances >=4%: 15
Declines >=4%: 0
Daily Change: 1.486%
Dow: -0.89%
Nasdaq: -0.69%
S&P: -0.68%

Today was the index's highest close since I began tracking it.

06/16/08

Date: 06/16/08
Open: $54.80
High: $56.13
Low: $54.12
Close: $55.38509
Volume: 2,474,092
Advances: 83
Advances >=4%: 9
Declines >=4%: 0
Daily Change: 1.854%
Dow: -0.31%
Nasdaq: +0.83%
S&P: +0.01%

Limit Orders and Performance

End-of-day traders can often feel at a disadvantage to their day-trading colleagues, even when trading a system developed with EOD data and designed for EOD trading. This week I wanted to try and determine what kind of advantages might exist for the intraday trader with the breakout system we have been developing and look at some ways the EOD trader might still take advantage of them.

Using our latest standard entries and exits listed below, I began with a basic data mining exercise probing specifically around the day of, and day following our entry signal, all still with the use of OHLC data. The following statistics are averaged between all three of our standard test portfolios.

% of Close to Close Winners: 49.43%
% of Open to Close Winners: 49.27%
% of Overnight Gap Ups: 41.88%
% of Overnight Gap Ups that don't fill the following day: 10.65%
Average Overnight Gap: 0.02%
Average Close to Close Return: 0.18%
Average Open to Close Return: 0.17%

At first look, these results do seem to offer a slight edge to the intraday trader who can place orders before the market closes on the Entry Signal Day (ESD). However, 89.35% of these stocks do retrace back below the close so the next step was to take a closer look at these.

The method I decided to use for this was to calculate the difference in price (Close-Open) on the ESD and then use a percentage of that to determine what percentage of stocks had a low below that point the following day. For example, if a stock had an ESD open of $40 and an ESD close of $46, the total ESD price change was $6. A 50% retracement would mean the stock had a low the following day below $43. The percentage of stocks hitting these retracement points were as follows:

5% 81.71%
10% 73.71%
15% 64.66%
20% 55.31%
25% 46.58%
30% 38.61%
35% 31.59%
40% 25.09%
45% 20.24%
50% 15.73%
55% 11.95%
60% 9.03%
65% 7.04%
70% 5.27%
75% 4.57%
80% 3.86%
85% 3.34%
90% 2.89%
95% 2.23%
100% 1.84%

What I gathered from this was that the use of a limit order rather than a market order at some retracement point below the ESD close may offer enough of a price advantage to increase expectancy and provide the EOD trader with a technique to level the playing field a bit with their intraday colleagues.
As usual, we will run the test on three separate portfolios to increase our confidence that the results are systemic and all tests will be run from 01/01/1998-12/31/2007. Other than the use of limit orders at the various retracement points, the entries and exits are identical to the ones used in the past several weeks:

Setup:
10-day average daily volume >= 100,000 shares
Entry:
200% volume increase over 10-day average daily volume
2x ATR breakout (Close >= Yesterday’s close + 10-day ATR*2)
Exit:
8% fixed protective stop (GTC stop order)
20% fixed profit target (GTC limit order)

In the following graphs, I have also indicated the performance level for the corresponding market order for easy comparison, identified by the thin horizontal line. The performance criteria are as follows:

PF=Profit Factor. This ratio is derived simply by dividing gross profit by gross loss.

EDR=Expectancy per dollar risked. It is calculated by Average Trade/Average Loss. The results are in dollars with .60 representing 60 cents per dollar risk.

EER=Efficient Expectancy Ratio. This is our EDR/Avg. Days in Winning trades. This number is meant to reveal the most efficient use if capital as it calculates expectancy per dollar risk per day in trade. The results are in dollars with .01 representing 1 cent per dollar risk per day in trade.

Although the results are not as smooth as we would like, what is important to note that in almost all instances, the use of a limit order outperformed that of a market order. As indicated in the raw data below, the number of trade opportunities diminishes rather quickly as the retracement level requirement increases but the use of a small 10% retracement increased our Avg Trade and EDR by 19.1% on our Nasdaq portfolio, 9.4% on the IBD portfolio, and 13.8% on the S&P portfolio.

It is also interesting that the higher retracement levels have a pretty clear bias towards higher trade efficiency as shown in the EER graph resulting from the fewer average days winning trades are held. Perhaps most ironic is that the use of a limit order instead of a market order improved expectancy by over 3x what the use of the infamous moving averages did in last week’s tests.

The conclusion here is that there is really no need to chase these. The likelihood of at least a small retracement the day following an entry signal is high and waiting on that better price can offer a rewarding increase in expectancy. Furthermore, the use of limit orders at predefined levels allows the EOD trader to place these outside of market hours and still capture some of the price advantages typically reserved for intraday traders with the added advantage of reducing or eliminating entry price slippage.

Turnover for week beginning 06/16/08

14% turnover on the IBD100 this week.

06/13/08

Date: 06/13/08
Open: $53.52
High: $55.01
Low: $52.80
Close: $54.38
Volume: 2,830,048
Advances: 81
Advances >=4%: 14
Declines >=4%: 1
Daily Change: 1.895%
Dow: 0.00%
Nasdaq: +2.09%
S&P: +1.50%

06/12/08

Date: 06/12/08
Open: $53.97
High: $54.88
Low: $52.57
Close: $53.37
Volume: 3,118,386
Advances: 32
Advances >=4%: 1
Declines >=4%: 8
Daily Change: -0.872%
Dow: +0.48%
Nasdaq: +0.43%
S&P: +0.33%

06/11/08

Date: 06/11/08
Open: $54.39
High: $55.32
Low: $53.14
Close: $53.84034
Volume: 3,072,686
Advances: 41
Advances >=4%: 4
Declines >=4%: 16
Daily Change: -0.621%
Dow: -1.68%
Nasdaq: -2.24%
S&P: -1.69%

06/10/08

Date: 06/10/08
Open: $54.86
High: $55.67
Low: $52.94
Close: $54.18
Volume: 3,231,885
Advances: 21
Advances >=4%: 3
Declines >=4%: 19
Daily Change: -2.054%
Dow: +0.08%
Nasdaq: -0.43%
S&P: -0.24%

06/09/08

Date: 06/09/08
Open: $55.34
High: $56.49
Low: $53.85
Close: $55.32
Volume: 3,306,257
Advances: 62
Advances >=4%: 11
Declines >=4%: 6
Daily Change: 0.637%
Dow: +0.58%
Nasdaq: -0.61%
S&P: +0.08%

Filtering Trades by Moving Averages

Most people who trade breakouts realize that there are times and market conditions where breakouts work fantastically well and times when they just don’t. Furthermore, these periods where breakouts have a high tendency to fail is often what constitutes a large percentage of the drawdowns and frustration associated with them. A technique for reducing profit targets, tightening stops, or simply staying out of the market all-together would be a huge benefit in improving the overall performance characteristics of these types of systems.

Pradeep Bonde of Stockbee has his Market Monitor which in my experience, has done a fantastic job recently of giving the all-clear sign for breakout and momentum based trading strategies but this is a proprietary indicator and one that is difficult to backtest without archived historic data for it. There are way too many such indicators out there to test them all but I decided this week to test one of the most common and simple to implement filtering techniques, moving averages.

Everyone has there favorite so at the risk of being accused of literal curve fitting, I decided to test a wide range of them from 10 to 200 days in 10-day increments so everyone can see how there favorite holds up. To keep things simple, we only require that the close be greater than or equal to the X-day simple moving average.

In addition to filtering by the individual MA of the stock being tested, I also looked at filtering by the MA of a corresponding broader index. For those tests, we use an independent data series; NDX for the Nasdaq portfolio, SPX for the S&P portfolio, and RUT for the IBD portfolio, and require that these broader index's close is greater than or equal to the X-day simple moving average before taking the trade.

As usual, we will run the test on three separate portfolios to increase our confidence that the results are systemic and all tests will be run from 01/01/1998-12/31/2007. Other than the addition of these moving averages, the entries and exits are identical to the ones used in the past several weeks:

Setup:
10-day average daily volume >= 100,000 shares
Close >= X-day SMA

Entry:
200% volume increase over 10-day average daily volume
2x ATR breakout (Close >= Yesterday’s close + 10-day ATR*2)

Exit:
8% fixed protective stop (GTC stop order)
20% fixed profit target (GTC limit order)

I will post charts of all 4 of our performance ratios and then discuss the results, followed by the raw data. The heavy lines are the results of applying the MA filter to the individual stocks themselves while the thin lines represent filtering of the corresponding indexes. The results are a little surprising.

EDR=Expectancy per dollar risked. It is calculated by Average Trade/Average Loss. The results are in dollars with .60 representing 60 cents per dollar risk.

PF=Profit Factor. This ratio is derived simply by dividing gross profit by gross loss.


EER=Efficient Expectancy Ratio. This is our EDR/Avg. Days in Winning trades. This number is meant to reveal the most efficient use if capital as it calculates expectancy per dollar risk per day in trade. The results are in dollars with .01 representing 1 cent per dollar risk per day in trade.


DDR= Drawdown ratio. This number is calculated by Net Profit/Maximum Drawdown. A higher number is better.


Raw Data of MAs applied to individual stocks


Raw Data of MAs applied to corresponding indexes


Not what you were expecting? The figures highlighted in grey in the raw data charts are the results of the entries and exits without the use of a MA filter. As you can see, the addition of a MA, any MA, does tend improve things a little but any advantage one has over another, or even the advantage of using one at all is minimal at best. The Nasdaq portfolio experienced the best improvement of the three but even that one only had a 5.7% improvement in expectancy using the best-case 90-day over nothing at all. Far from convincing even if that 90-day remained the best moving forward – which it won’t.

You will also note that these results tend to be very “peaky” with relatively wide swings from one value to another and this can generally be taken as a warning sign of curve-fit results. If we had a nice smooth transition from low to high for example, I would be far more willing to conclude that “longer MAs were more effective than shorter MAs” but even that simple of a statement would be a stretch here.

It is very easy to look at a chart of a specific stock and draw the conclusion that only trading it when above some particular MA would have improved things drastically but these tests clearly highlight the flaw in that type of exercise and point out why portfolio and basket testing is important if one is truly interested in robust criteria not fit to specific market, stock, or situation.

I want to make a few points here. There are situations where I feel MAs are useful but one must carefully think through the logic behind them and other criteria of the system being tested with them. I am currently working on mean reversion system with a couple of other bloggers and the use of a MA has been very effective in that particular situation but the goals, logic and objective of the system is completely different than what we have here.

One of the unique things about the breakouts we are testing here is that unlike an N-day high breakout, for example, made famous by the turtles, these breakouts are capable of entering at the very beginning of a trend – the “bottom” if you prefer. The irony of the MAs is that the longer the average, the more reliable it is considered but the longer the lag and the more of a good trend you may miss. The use of medium to long-term MAs in this example can completely wipe out one of the key advantages of this type of entry. Our 20% profit target is also relatively modest for the magnitude of our breakout criteria which really makes this a swing-trade oriented system. If your choice of stops and corresponding time-frame for trades are different, you may or may not derive more benefit from the use of a MA than what we get in these tests. Thorough testing is the only way to know for certain.

The last point I want to make really has more to do with an approach to system development I prescribe to which is commonly referred to as KIS, or Keep It Simple. Often you see a system chocked full of so many rules, you really wonder what components are truly responsible for the majority of the results. By starting simple and layering up criteria component by component, it allows the trader or system developer to understand what each element is actually contributing to the system. Many believe, myself included, that the simpler a system is, the better it will hold up over time. If a rule isn’t doing anything to improve something, be it expectancy, draw-downs, win-rate, etc., it probably shouldn’t be there.

Turnover for week beginning 06/9/08

Only 8% turnover on the IBD100 this week.

06/06/08

Date: 06/06/08
Open: $55.84
High: $57.05
Low: $54.42
Close: $54.97
Volume: 3,355,680
Advances: 22
Advances >=4%: 5
Declines >=4%: 18
Daily Change: -1.726%
Dow: -3.13%
Nasdaq: -2.94%
S&P: -3.26%

Not suprisingly, Friday was also a high volume down day for the IBD100 as well but it did manage to hold up much better than the broader indexes and only gave back about 1/2 of Thursday's big gains. The IBD100 ended nearly flat for the week with 0.2% gain.

06/05/08

Date: 06/05/08
Open: $54.23
High: $56.29
Low: $53.69
Close: $55.94
Volume: 3,525,27
Advances: 94
Advances >=4%: 42
Declines >=4%: 2
Daily Change: 3.573%
Dow: +1.73%
Nasdaq: +1.87%
S&P: +1.87%

Today was the 2nd highest volume day since I've begun tracking the index. The highest was on May 21 at 3,545,450.

06/04/08

Date: 06/04/08
Open: $54.25
High: $55.28
Low: $53.22
Close: $54.01
Volume: 2,925,542
Advances: 34
Advances >=4%: 2
Declines >=4%: 7
Daily Change: -0.942%
Dow: -0.10%
Nasdaq: +0.91%
S&P: -0.03%

06/03/08

Date: 06/03/08
Open: $55.09
High: $56.07
Low: $53.60
Close: $54.52
Volume: 3,220,170
Advances: 28
Advances >=4%: 6
Declines >=4%: 5
Daily Change: -0.619%
Dow: -0.81%
Nasdaq: -0.44%
S&P: -0.58%

06/02/08

Date: 06/02/08
Open: $54.58
High: $55.89
Low: $53.56
Close: $54.86
Volume: 2,413,015
Advances: 52
Advances >=4%: 8
Declines >=4%: 5
Daily Change: 0.303%
Dow: -1.06%
Nasdaq: -1.23%
S&P: -1.05%

Risk/Reward & Percent Risk Position Sizing

Things are not always what they seem.

I am away this weekend and will not have time for a regular study but I wanted to cover something that will be an important concept moving forward. For those already familiar with these concepts, I apologize in advance for boring you but we will be adding a little twist at the end.

To-date on this blog, we have not really introduced money-management, position sizing, and compounding to any of our tests. The reason for this is to keep the raw test results as pure as possible without the introduction of additional variables and complexities. As we began to introduce these elements to our tests, I will primarily use percent risk position sizing on this blog and wanted to briefly describe how it works and point out a few key structural components with a very straight-forward example.

Let’s assume the following:

Trading Account: $100,000
Risk per trade: 1%
Protective Stop: 8%
Profit Target: 20%
Share Entry Price: $50

By choosing to put 1% of our equity at risk per trade, we are risking up to $1000 per trade: $100,000 * 1% = $1000.

Our system calls for an 8% protective stop and we know we have an entry price of $50 so that means we are risking $4 per share: $50 * 8% = $4.

This means our protective stop gets placed at $46: $50-$4=$46

Now to calculate how many shares to buy, we simply divide our risk amount per trade by our risk amount per share: $1000/$4 = 250 shares.

Easy enough. Stockbee has an easy-to-use calculator for this on the website.

Now here is where things get interesting. We know that if our protective stop gets hit, we lose $1000 but if we hit our profit target, our gain will be $2500: $50 * 20% * 250 shares = $2500. Obvious enough, but what happens if we use a 4% stop instead? Run the math. We now are buying 500 shares at the same risk level. This means if our protective stop gets hit, we still only lose $1000 but if our profit target hits, we now make $5000 instead of $2500. The risk/reward ratio is 2x as much.

But wait, there is always a catch. We also know that the tighter the stops, the lower our win rate. The question you must ask his how much lower is it? This is really what expectancy is all about. If we refer back to one of our earlier studies and look at the raw data here, we see that in this example, our 8%-20% stop combination had a win rate of 41.94% compared to only 26.04% for the 4%-20% combination.

If we calculate expectancy for these two scenario (Chris Perruna will show you how) using the same number we did at the beginning, we get an expectancy of $467.90 for the 8%/20% combo and an expectancy of $562.40 for the 4%/20% combination – 20% more! The reason for this is simply because the tighter stops allow us to put on larger positions at the same risk level and this only becomes evident after the implementation of percent risk position sizing.

If we take this one step further and make – say 200 trades with each pair of stops in a year, the 8%/20% combo would generate $93,580 in profit while the 4%/20% combo would make $112,480 in profit and still does not include compounding. Furthermore the tighter stop will loosen up dead capital much quicker and will allow us to make more frequent trades with less margin. The only thing standing in our way now is the psychology of a 26% win rate.

Additional info:
Trader Mike

05/30/08

Date: 05/30/08
Open: $54.30
High: $55.43
Low: $53.49
Close: $54.70
Volume: 2,738,820
Advances: 77
Advances >=4%: 10
Declines >=4%: 3
Daily Change: 1.531%
Dow: -0.06%
Nasdaq: +0.57%
S&P: +0.15%

05/29/08

Date: 05/29/08
Open: $54.51
High: $55.42
Low: $53.00
Close: $53.87
Volume: 2,972,119
Advances: 27
Advances >=4%: 6
Declines >=4%: 13
Daily Change: -1.479%
Dow: +0.41%
Nasdaq: +0.87%
S&P: +0.53%

05/28/08

Date: 05/28/08
Open: $53.53
High: $54.98
Low: $52.55
Close: $54.67
Volume: 2,781,925
Advances: 86
Advances >=4%: 23
Declines >=4%: 1
Daily Change: 1.723%
Dow: +0.36%
Nasdaq: +0.22%
S&P: +0.40%

05/27/08

Date: 05/27/08
Open: $53.51
High: $52.45
Low: $52.27
Close: $53.74
Volume: 2,542,711
Advances: 51
Advances >=4%: 9
Declines >=4%: 1
Daily Change: 0.372%
Dow: +0.55%
Nasdaq: +1.50%
S&P: +0.68%

Average True Range, Part2: Stops

This week we are going to be referring to two previous studies:
A Closer Look at Profit Targets
Average True Range, Part1

In the first Average True Range Study, we concluded that ATR multiple breakouts entries did provide an edge over percentage breakouts with regard to expectancy and efficiency. The logic behind that is based on the adaptive nature of ATR breakouts to conform to various markets, time periods, and conditions. This week, I set out to determine if that same logic would apply to stops, thus offering an advantage over the percentage stops tested last week. The entry criteria will be exactly the same as last week’s study and we will also be testing protective stops and profit targets using ATR multiples instead of percentages.

The logic for these stops are as follows:

Protective Stop
ATRStopPrice=EntryPrice-(Average(TrueRange,10,0)*ProtStopX)
ExitLong(ATRStopPrice,Stop,Day)

Pofit Target
ATRProfitTargetPrice=EntryPrice+(Average(TrueRange,10,0)*ProfTgtX)
ExitLong(ATRProfitTargetPrice,Limit,Day)

What is interesting about these is that the stop and target prices are calculated daily based on the previous 10-days ATR and therefore change from day-to-day to adapt themselves to the security’s recent volatility. They expand as volatility increases and contract as volatility dries up.
In order to make these results comparable to last week's, I began by determining what ATR multiples for stops and profit targets gave me similar average losses and average wins. What these preliminary test concluded was that an ATR multiple of 1.0 closely corresponded to 4% of price movement over many, many trades (with equities). Therefore we will step through ATR multiples of .5 (from .5-2.5) for protective stops and 1.0 (from 1-10) for profit targets to closely resemble last week’s study. You will note when making comparisons that the average wins and losses for these are similar. Comparison Study here

As usual, we will run the test on three separate portfolios to increase our confidence that the results are systemic and all tests will be run from 01/01/1998-12/31/2007.

Let’s being by looking at EDR=Expectancy per dollar risked. It is calculated by Average Trade/Average Loss. The results are in dollars with .28 representing 28 cents per dollar risk.





It is never as much fun to write about inconclusive tests but unfortunately that seems to be the case here. Of the three portfolios, ATR stops only outperformed on the Nasdaq portfolio with a maximum EDR of 1.34 vs 1.01 for the percentage based stops. The average EDR for the Nasdaq portfolio was .61 and and .5 respectively. That is a substantial improvement but this points out why multiple portfolios is critical if one is serious about finding robust methods. On the IBD portfolio, the ATR stops had a maximum EDR of .73 and an average of .36 while the percentage stops resulted in a maximum of .81 with an average of .4. Not as large a difference but clearly no edge for the ATR stops with our IBD portfolio. The S&P results were about equal.

Now lets look at a more conventional performance barometer, PF=Profit Factor. This ratio is derived simply by dividing gross profit by gross loss.





The results are very similar here as well with only the Nasdaq portfolio experiencing an advantage of the ATR stops over the percentage based ones.

Finally, for EER=Efficient Expectancy Ratio. This is our EDR/Avg. Days in Winning trades. This number is meant to reveal the most efficient use if capital as it calculates expectancy per dollar risk per day in trade. The results are in dollars with .01 representing 1 cent per dollar risk per day in trade.





Ah ha, our good old EER ratio again presents a unique picture. With regard to trade efficiency, the ATR stops do reveal an edge across all three portfolios with varying degrees of success.
IBD ATR - max:.030 avg:.012
IBD % - max:.024 avg:.010
NAS ATR – max:.043 avg:.021
NAS % - max:.029 avg:.013
S&P ATR - max:.020 avg:.011
S&P % - max:.012 avg:.005

Although we are dealing with small numbers here, the advantage in percentage terms is not inconsequential.

So how do we make sense of these mixed results? I want to make it clear where facts end and speculation begins … here.

It is my belief that ATR stops are effective when using extremely tight stops which is where we see the EER test really excel. The looser the stops, the less a role daily noise plays as more significance is offloaded to vehicle selection, overall trend, and structural relationships. The evidence does seem to suggest that ATR is effective at allowing stops to adapt to and remain clear of daily volatility when deployed properly under appropriate circumstances. Personally, I would strongly consider and test ATR stops further if my system objectives required tight stops or all of my orders were executed mechanically with my brokerage. The success with the Nasdaq portfolio was substantial enough to warrant further testing. Below, I will post the raw data for futher study. Hope everyone here in the U.S. enjoyed their Memorial Day weekend.

Turnover for week beginning 05/27/08

Only 7% turnover on the IBD100 this week.

More RSI(2)

Following is some extra-curricular research I have been working on regarding RSI(2) as a short-term mean recursion system in conjunction with several other bloggers.

Woodshedder
Dogwood
Skill Analytics

The following looks at two conditions on my 3 standard test portfolios + a leveraged long and short portfolio of ETFs. The ETFs test back as far as there is data for them and the stock portfolios test back 20-years to 01/01/1988. Each trade is $10,000. No money management, slippage, commissions, etc. have been used.

The left most column is RSI(2) value used in a <= condition.
PF=Profit Factor
EDR=AverageTrade/AverageLoss
EER=EDR/Avg. Days in Winning Trades.

I will continue to append this post as more research is done. As this system is basically looking to catch short term corrections and stay out of breakdowns. As such, there are a few other conditions I will testing including: A) Testing for diminishing volume on the pullback that sets up the RSI<=X condition. B) Testing to make sure the longer-term trend is still intact with Bollinger bands, n-day lows and additional longer-term moving averages.


Condition 1:
Entry: 50-day Avg Vol >= 100,000 shares
RSI <= X
Exit:
RSI >= 80


Condition 2:
Entry:
50-day Avg Vol >= 100,000 shares
RSI <= X
Close >= 50-day sma
Exit:
RSI >= 80


Chart of results:

Notes: I believe the catawampus curve on the ETFs is due to the relatively few samples. I also tried requiring the RSI(2) to be below the threshold for two consectuve days but that didn't really help things, which suggest if you do not get an immediate bounce, you could be looking at a breakdown. This sets up the possibility that the addition of a 1-day timed stop if RSI(2) stays below your threshold could help keep you out of trouble.

---

Money Management Tests
For these, I added a 12% protective stop that was used for percent risk money management in addition to Condition 2 entry and exits using RSI<=10. Tests were run on leveraged ETF portfolio. Risking 5% of equity per trade:
Start Size $10,000.00
First Equity Date 09/01/06
Last Equity Date 05/19/08
Number of years 1.7139

Return Over Period 111.83%
AnnualReturn 65.25%
Compound Annual Growth Rate 54.96%

Percent Maximum Drawdown 15.53%
Date of Maximum Drawdown 12/10/07

Date of the Longest Time Between Peaks 06/11/07
Longest time between peaks 117 days
Average time between peaks 43 days 10:17

Sharpe Ratio 1.8545
MAR 3.5386

Risking 10% of Equity Per Trade

Start Size $10,000.00
First Equity Date 09/01/06
Last Equity Date 05/19/08
Number of years 1.7139

Return Over Period 321.45%
AnnualReturn 187.56%
Compound Annual Growth Rate 131.48%

Percent Maximum Drawdown 29.15%
Date of Maximum Drawdown 12/10/07

Date of the Longest Time Between Peaks 06/11/07
Longest time between peaks 117 days
Average time between peaks 43 days 10:17

Sharpe Ratio 1.9035
MAR 4.5099

I have posted a Trade by Trade report HERE for the 10% risked per trade model

NOTE: Damian pointed out that the percent risk model is becoming over-leveraged on 8/27 when multiple signals are triggered. I hadn't caught it yet - thanks. Need to look into some methods of trade selection/rejection when multiple signals received. This is a problem with percent risk position sizing as situations can occur when a risk allocation can actually have you purchase more positions that available equity will allow. Rather than pull it down, I will leave this up as an example of good collaboration at work. In real-time, I would probably backtest signals and take the best-performing one. There is a way to do this with "virtual trades" in Trader's Studio but I don't know how to code it - yet.

05/23/08

Date: 05/23/08
Open: $54.08
High: $54.74
Low: $52.27
Close: $53.54
Volume: 2,502,538
Advances: 22
Advances >=4%: 3
Declines >=4%: 5
Daily Change: -1.028%
Dow: -1.16%
Nasdaq: -0.81%
S&P: -1.32%

05/22/08

Date: 05/22/08
Open: $54.77
High: $55.64
Low: $53.07
Close: $54.10
Volume: 3,189,596
Advances: 29
Advances >=4%: 2
Declines >=4%: 13
Daily Change: -1.213%
Dow: +0.19%
Nasdaq: +0.67%
S&P: +0.26%

05/21/08

Date: 05/21/08
Open: $55.99
High: $57.18
Low: $54.28
Close: $54.82
Volume: 3,545,450
Advances: 21
Advances >=4%: 1
Declines >=4%: 19
Daily Change: -1.926%
Dow: -1.77%
Nasdaq: -1.77%
S&P: -1.61%

High volume distribution day across the board. The IBD100 did manage to stay above its 10-day moving average for its 13th consecutive day. Superstitious?

05/20/08

Date: 05/20/08
Open: $55.24
High: $56.54
Low: $54.20
Close: $55.90
Volume: 2,842,386
Advances: 64
Advances >=4%: 10
Declines >=4%: 4
Daily Change: 1.232%
Dow: -1.53%
Nasdaq: -0.80%
S&P: -0.87%

05/19/08

Date: 05/19/08
Open: $55.37
High: $56.78
Low: $54.13
Close: $55.22
Volume: 3,129,566
Advances: 53
Advances >=4%: 9
Declines >=4%: 9
Daily Change: 0.401%
Dow: +0.32%
Nasdaq: -0.50%
S&P: -0.50%

A Closer Look at Profit Targets

I’ve decided to postpone the ATR stop studies one more week and first take a closer look at percentage based profit targets in more detail. Percentage based stops are a more intuitively familiar and thus a better way to lay out some fundamental concepts we will also be addressing when we look at ATR stops. It will also provide us with data that we can compare and benchmark the ATR stops against. Many of the concepts are probably familiar to most but looking at the data in this way will make it possible to arrive at some basic mathematical “truths” when it comes to stop combinations. Fortunately, these “truths” are universal and applicable on any time-frame, from short-term day-trades to long-term buy-and-hold investing. It is imperative that a trader understand how the manipulation of these criteria affect the way your system will behave and what to expect out of it.

This week also makes it abundantly clear why it is absolutely critical that a trader or investor has a specific agenda when it comes to putting together one’s rule set. There is no magical combination of numbers, no “Holy Grail”. With certain benefits come certain drawbacks and understanding these concepts is crucial for putting together a system or set of rules that work specifically for what one is attempting to achieve. Perhaps the most important questions one must ask are: What time-frame am I most comfortable trading in? How often do I want to trade? How often do I need to be “right”?

As we will see, a protective/profit stop pair provides an enormously flexible technique for adapting a system fit the answers to these questions.

This week we will use some of the entry criteria collected in last weeks tests. I have chosen numbers that are balanced between providing us enough trades for statistical relevancy while still offering us enhanced performance over some of our earliest tests.

As usual, we will run the test on three separate portfolios to increase our confidence that the results are systemic and all tests will be run from 01/01/1998-12/31/2007.

Our entry criteria will a liquidity condition requiring 10-day average daily volume to be greater than 100,000 shares. In addition, we will require a volume surge over 10-day average daily volume to be >= 200% and a price breakout to be >= 2x the 10-day ATR. Trades will be entered at open with a market order the day following the entry signal and $1000 worth of shares are purchased for each trade..

Let’s being by looking at EDR=Expectancy per dollar risked. It is calculated by Average Trade/Average Loss. The results are in dollars with .28 representing 28 cents per dollar risk.







These tests are remarkably similar and allow us to begin to make some basic assumptions as they relate to the implementation and selection of stops. In addition to these charts, I will also post the raw results at the end of this blog entry that should be used to supplement the graphics.

From these results, we can state the following with reasonable certainty:

The higher our profit target, the higher our expectancy per dollar risk, irregardless of what protective stops we use. This can be clearly associated with upward price drift. The higher our price target, the longer our average winning trade and thus the increased benefit from this upward price drift. We also know however that with increased trade duration comes increased risk.

Referring to the raw data, we see that the greater the spread between the protective stop and the profit target, the lower our win rate. For our Nasdaq portfolio, we see that a 2% protective stop, coupled with a 40% profit target had the highest expectancy but only produced winning trades 13.79% of the time. Could anyone actually tolerate trading a system with that win rate? Probably not but the numbers do make sense, our winning trade will be 20 times our average loss and since we are correct 13.79% of the time, a sizable profit is derived from that difference.

The inverse is obviously true as well. In our Nasdaq portfolio, a 10% protective stop (our largest), coupled with a 4% profit target (our smallest) produces winners 75% of the time but our average trade is only $9.06, compared to $80.89 for the 10%-40% combination, with an EDR of only .09 cents per dollar risk.

Ironically, with any fixed pair of stops, an increase in win% is the only way to increase net profit for a given set of stops. Your average loss is fixed, your average win is fixed, and therefore winning more often is the mechanism by which more profit is generated. In the previous two entry studies here and here, an 8% protective stop with a 20% profit target was held consistent. The increase in performance with the ATR entries can be associated with an increased win% at these stops.

Now lets look at a more conventional performance barometer, PF=Profit Factor. This ratio is derived simply by dividing gross profit by gross loss.







In these test, we benefit from upward price drift with both our protective and profit stops but unfortunately, as with EDR, a higher PF comes with a lower win rate. This paradox is perhaps what has allowed trend following to continue working for so long. There is a psychological barrier that exploits a fundamental characteristic among most of us, the need to be “right”.

The last set of tests does however offer a different perspective.
EER=Efficient Expectancy Ratio. This is our EDR/Avg. Days in Winning trades. This number is meant to reveal the most efficient use if capital as it calculates expectancy per dollar risk per day in trade. The results are in dollars with .01 representing 1 cent per dollar risk per day in trade.







Here we begin to see a different picture emerge. One of the most critical considerations for an active trader is the efficient use of capital. These tests begin to prove a less conventional, but more useful barometer for deploying this capital to quickly roll into and out-of trades, maximizing profit and minimizing dead-money in go-nowhere trades. Using this ratio as a gage, we see that a very tight protective stop, coupled with a modest price target is the most efficient in this regard. Again referring to our Nasdaq portfolio, a 2%-12% combo is the retrospective “ideal”. In this scenario, our win rate is only 25% but our average win is 6x our average loss. Our average trade duration for winners is also only 13-days which means with a 12% profit target, our winners are running at an average rate of nearly 1% per day. Trades that don’t immediately move in our favor get cut quickly and we are taking profits before trades start to linger.

RAW DATA







Everything we looked at today certainly provides credibility to the popular adage that stops have a larger impact on a system than do entries and the manipulation of stop combinations is one of the most effective methods of tailoring a system to one’s needs. So which if these techniques are “best”? I do not believe there is a single answer to this question and a position sizing strategy designed to take advantage of whatever stop combination one is comfortable with will have a tremendous impact on the bottom line, which is really what we are all concerned with. In a few weeks, after further building up our trading “kit-of-parts”, we will look at a few money-management/position sizing combinations to really see what these stop combinations could really make with trading cost, slippage, and compounding added to the equation.