Out-trading algorithms and studying SiM (Sell-in-May) theory is on the docket here for the next coupe of weeks. We’ll get to the Chicago Fed outlook in a minute, but let me ramble for a bit…
What makes this a “nice” time to visit the casino (stock market) is it’s like walking in at 3 PM on a Friday afternoon. As most gambling denizens suspect, casinos like to “give a way a little to get a lot.” The smart player (if there is such a thing, so ignorant are most gamblers of statistics) will concentrate play during the hours with large numbers of players are arriving. When people are packing up to leave at the end of a weekend, it’s in the casino’s interest to see that machines don’t pay off as much Sunday around checkout time. Not that this actually happens, but there’s a gambling theory for you.
We also quit gambling around 8 PM because after that, seems like things fall down to (and below) average payouts. (One of our readers is a former gaming commission type who will hopefully comment, eh?)
Unfettered by a gambling commission, last week was a dandy for professional traders. The major indices were run-up on Thursday, The pro’s were able to “cover” with lower prices for underlying index securities Friday. A dart toss today seems to point to mid-morning before a low later in the day. That’s a dart, not advice.
Since we don’t offer financial advice, we love to point you to the entry in The Trader’s Almanac about how markets can sell-off in May.
Our research here is eyeing a new system akin to trading the greeks” in options..
Wouldn’t it be nice to have your own “magic algorithm?” Almost without regard to price levels. Just write a trading model of your own and let it decide the long and short of it…Ah, the “Walter Mitty-ness” of it, huh?
In statistical terms it’d be like “Buy a house when everyone else is buying and own the house until the buying fever breaks.” Then, “Sell the house near the top” when For Sale signs start to pop up around the neighborhood.
This is not dissimilar to the On-Balance-Volume approach used by Joseph Granville, but the problem is to be used effectively in the short-term, one needs to sit in front of a trading platform and look at “the tape” (screen) all day long.
It would be glorious to use changing statistical relationships, but now comes the rub: Working out the changes and listing them into a trading decision-tree…then testing in the real world..
This week, looks like a reasonable time for such “system testing.”
System trading is fraught with time issues. For example, if you are trading anything based on an average, the market can turn and you’ll only see it after the now reversed average has eaten all your profits and maybe then some. Our current system returned 1.38 and 1.80 percent last week and then lost 2.38 percent. That loss might have been avoided by holding over the weekend, but the exit rule happened mid-session Friday.
That’s the tough part: Learning to be absolutely disciplined.
Might there be a way to plug & play with a “Bayesian Model” that will look more dispassionately at certain statistical relationships and “guess-ahead better?” Oh, sure. Just how much money do you want to spend building and testing what may not work or may take years to evolve the right algorithms?
With almost nothing in this morning’s news flow to get excited about (J Powell speech at 7 PM tonight, anyone?) we’re stuck in the annual problem zone: sorting out where Sell-in-May goes this year and whether it or the the pre-holiday upside bias will play out over the balance of the week. Remember, next Monday is Memorial Day.
A more useful pursuit is optimizing my personal “day pattern.” That involves looking at the market while writing 40-minujtes and then spending 20-minutes in the gym. Walking the treadmill and doing reps on the weight machine is sure to have a higher personal return than all the day-trades on Earth.
Chicago Fed National Activity Indicator is just out:
.Led by declines in production-related indicators, the Chicago Fed National Activity Index (CFNAI) fell to –0.45 in April from +0.05 in March. Three of the four broad categories of indicators that make up the index decreased from March, and two of the four categories made negative contributions to the index in April. The index’s three-month moving average, CFNAI-MA3, moved down to –0.32 in April from –0.24 in March.
About the next “exciting” thing this week will be the Fed Minutes Wednesday, but we already know: They met, they did nothing. Pass the No-Doz.
Oh, a big toe-curler Friday:Durable Goods data. But the market should be on a delusional tear by then with the holiday weekend starting…but we shall see.
Useless Recycled News
SSDD if you ask us.
>Wars and Rumors Of Dept: Iran Slams Trump’s “Genocidal Taunts” As “Team B” Concocted Threats. Meanwhile, Air Force preps light attack plane for combat missions in great power war. Damned if we didn’t sell our old Beechcraft too soon.
>Antisemitism Watch: Chicago police on alert after attempted arson and vandalism at synagogues. Radical home-grown extremists or free-entry un-vetted people who hate America? Place your bets…the world’s crazy.
>Trauma Stock: Tesla. Tesla shares fall after analyst says Elon Musk distracting carmaker with ‘sci-fi projects’..Not sure who started it, but we smell a pile-on coming as Wedbush Calls Tesla A “Code Red Situation” Sending Stock Crashing To 3 Year Low/
“The Failing New York Times (it will pass away when I leave office in 6 years), and others of the Fake News Media, keep writing phony stories about how I didn’t use many banks because they didn’t want to do business with me. WRONG! It is because I didn’t need money. Very old
….fashioned, but true. When you don’t need or want money, you don’t need or want banks. Banks have always been available to me, they want to make money. Fake Media only says this to disparage, and always uses unnamed sources (because their sources don’t even exist)……
>Which Gets Us Mired in Politics: Former Bernie Sanders staffer sues pro-Sanders organization for racial discrimination. Are the dems just trying to piss everyone off or is it a coincidence?
>Canceled Vacation? Britons could be banned from Syria under counter-terrorism laws. Um…like 1 tourist maybe impacted? Who in their right mind….
>Clicks Smash Bricks Remix: Sears Could’ve Been Amazon. Here’s How It Blew Its Chances.
OK, off to breakfast and then we shall see about trading today. Futures after CFNAI down 165 on the Dow…no, make that -174 now…
Moron the ‘morrow!