Thursday, May 20, 2010


Regarding the systems...I have stated over the last few days/weeks, that the systematic outlooks were mixed...meaning some systems have been looking short and some have been looking long. In that kind of situation, I have suggested that commitment to the market in either direction be moderated to manage risks in a way that is constructive. For my trading models, I have reduced size allocations by 50%. This means that we will be able to return to full allocations when the majority of the systems are committed in complimentary biases. In this case many of the RVS systems are looking for downward bias shifts. This is not unanimous yet and tomorrow will be a big tell. If we bounce hard, which is a reasonable outcome to expect, then the mixed bias will continue for a little bit. However, without a sustained move to the upside the long positions that are currently on the table will look for a good bounce for an exit and then the systems will likely turn their attention to the short side.

I will post details as soon as they are available.

On another topic, the Releverage/Deleverage analysis today did an outstanding job of demonstrating commitment to the "risk-off" trade. There were only two times during the day that the market made minor attempts to catch a bid under the risk trade as represented by this tool. I have to admit, I jumped on it when it happened and posted the chart. I did take longs at the support level I indicated earlier...but the market never demonstrated committed bids and premiums being paid for leveraged risk. I will continue to post those charts in the next few days. If anyone is interested in understanding more about them please feel free to comment on this post or contact me directly.
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