2009-06-30

HOME WORKS (JULY 2009)

General Markets

Traders, the home work page for July is here. As usual, please click on “comments” to add your home work or read other comments. The “post your home work” link is updated to take you to July 2009 page now.

I had a wonderful time doing and following home work and it has really helped my analysis skills. I have also started posting my home work trades results online. The account was positive for the month of June!

As usual, you can subscribe to post comments via any blog reader software (like Google reader). Select the drop down option on the right hand. Also when you post comment, there is an option to subscribe to follow up comments via email.

Happy trading.

VS

2009-06-21

Correction! What correction?

S&P500 (ESu9)

Sell up to 932, Stop above 957, Target 810-780

Fashion is like swine flu, easy to catch and difficult to understand and it tends to take over a clear mind. Recall when you last heard the "green shoots" and now it seems every one is talking about it. So much so that the real meaning of "green shoots" when it was first used is almost forgotten. We are talking about the impressive spring 2009 recovery in world markets and Indices have not looked back after hitting their lows in March 2009 (in case of Asian/Emerging markets the lows were since in Oct-Dec 2008 period). The rally has taken many pundits by surprise. They were talking it down all the way up, first calling it a bear market blip, then a bear market correction and then a bear market rally. But markets needs no pundits and the rally did march on. The green shoots were firmly in ground.

Now that most pundits have become a firm believers in those green shoots that they are overlooking their lawns. The green shoots appear to be overgrown and need a good mowing.

The rally which started in March 2009 appears to be halting at key technical levels as the supply of good news seems to be drying up. The weekly S&P500 seems to indicate a double top. Also the MACD on daily charts have started showing signs of fatigues.

The markets are divided in two camps, those who missed the rally and waiting for a chance to jump on and those who were lucky enough to climb at start and looking to get out with fat profit. And there is no doubt that a lot of money is sitting in low yield "safe" accounts and that wall of money can hit the market any time.

Given this outlook, I still believe in the rally which started in March 2009 and if the money on sideline start coming back into the market on pullbacks, we can soon see next wave (wave 3 which is usually the juiciest) of this bull market. But for that to happen a healthy correction is needed.

I expect a pullback to 810 - 780 region on S&P500. This would likely to bring down the cyclical PE ratios near enough to the lows of the previous bear cycles. If market could hold this area, the next bounce up should take us to 1126-1234 region. However if the green shoots get burnt by excess fertilizers or scorching summer sun, March lows could easily be taken out. This indicates that these markets are delicate and nimble trading is required.

I am positioning myself for the pullback with a cautious shorts, hoping to hop on to the next bull wave soon. It would be interesting to review the situation when we are in the next buy zone. Since this trade is technically a counter trend trade (the major trend is still bullish), a safe way to play this is also via options (850/810/770 Sep 09 PUT). If a profitable position is created and pullback materialises, 810 puts can be sold and then shorted to create a risk free butterfly.

ZS-TMR : Thirty Minute Rule (Opening Range Play) Analysis : Now it is time for grains!!

My Development as a Commodities Trader: Thirty Minute Rule (Opening Range Play) AnalysisThere may be more meal in Grains TMR - especially in this volatile environment!


Few weeks back I did some preliminary analysis work on past 1 month data on Allan's TMR (Thirty Minute Rule - Opening Range Play) which was mainly based on trading E-Mini S&P500 during the opening range. Since then we are taking TMR trades on ES every day and it seems to generate good results and a profitable outcome. The discussions and results are summarised in the link above.

Taking on from that, I started investigating TMR on grains once I saw another smart fellow trader Quin talking about it. The results were astounding (**** past performance is no guarantee of future results ****) on past data analysis. Soybean has been very volatile lately and my analysis indicated that it would be quite profitable to apply TMR rules to Soybeans and other grains markets.

Traditionally Grains and Commodities, Bonds and Currency markets suit better for breakout plays (breakouts are not always fake-out - reserved for a future post sometime) and therefore it would seem logical that TMR might play better on Grains.

A word of caution here that Soybean has been very volatile lately and therefore the results could be bit exaggerated. However as commented on the original TMR post I have modified strategy which gives best possible Profit objective for 5 pt stop based upon past data. So I believe as volatility reduced, the profit objective will start reducing as well. Also I noted that it
could be best on Soybean markets to leave a runner on with trailing stops OR a fib/ATR based target in line of breakout. So by applying some of the "refinement techniques" the results from ZS-TMR can be enhanced further. I leave those to the individual trader's skills.

Results:
--------
a) Best results were achieved for 12pt Profit Objective 5 Pt Stop resulting in 45.7 pts per month with 43% success rate.
b) For a low pain quick trades, 3/5 generated good returns of 29.5 pts per month (with 81% success rate).

As always, TMR trading is bit boring and requires a lot of discipline. The reported results do not include slippage and commission which will eat into the profits and increase the loss. For
successful TMR strategy the platform should be fast to avoid slippage and commission should be lowest possible.

ZS TMR

Max P&L

Date

Open

30 Min High

30 Min Low

30 Min Range

TMR

5 PT

BEST EXIT

20-May

1182

1189.5

1176

13.5

S

16.00

1,160.00

21-May

1157

1172.75

1155.25

17.5

L

1.00

1,173.75

22-May

1184

1184

1170.75

13.25

S

6.75

1,164.00

26-May

1164

1167.25

1156.25

11

L

20.25

1,187.50

27-May

1195

1199.5

1189.5

10

L

1.25

1,200.75

28-May

1186

1195.5

1184.25

11.25

L

2.00

1,197.50

29-May

1192

1193

1185.75

7.25

S

10.50

1,175.25

01-Jun

1203.5

1219.75

1202.5

17.25

L

7.25

1,227.00

02-Jun

1215

1215

1209

6

S

8.50

1,200.50

04-Jun

1195

1199.75

1193

6.75

L

32.25

1,232.00

05-Jun

1213

1229.25

1211.5

17.75

L

4.50

1,233.75

08-Jun

1221.5

1235

1217

18

L

4.50

1,239.50

09-Jun

1241.5

1245.5

1232.5

13

L

3.50

1,249.00

10-Jun

1243.5

1254

1238.75

15.25

L

1.50

1,255.50

11-Jun

1260

1266.5

1256.75

9.75

L

24.75

1,291.25

12-Jun

1262

1262

1246.5

15.5

L

3.25

1,265.25

15-Jun

1221.5

1228

1213.5

14.5

S

16.50

1,197.00

16-Jun

1217

1219

1206.5

12.5

S

19.00

1,187.50

17-Jun

1197

1201.25

1188

13.25

L

13.75

1,215.00

18-Jun

1207

1213.25

1202

11.25

L

12.75

1,226.00

19-Jun

1219.75

1222

1201.75

20.25

S

26.25

1,175.50


WIN % 5 PT

PO

P&L 20 D 5 PT

24%

17

4.8

33%

16

40.0

33%

15

33.3

33%

14

26.7

38%

13

37.1

43%

12

45.7

43%

11

37.1

48%

10

42.9

48%

9

33.3

52%

8

36.2

57%

7

37.1

62%

6

36.2

62%

5

23.8

71%

4

28.6

81%

3

29.5

86%

2

20.0