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Rock228
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I trade volatility ETPs, occasionally S&P 500 through SPY or UPRO and invest long term in Dividend Growth stocks with high dividend CAGR values. Individual stock picking is a waste of time to me unless the company pays out large and high growth dividends. I have developed a VIX Draw Cycle... More
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  • DRAW CONTINUES?

    There is a high probability that our current draw continues. Since 2005 there are only 3 draws of 31 that ended without VCO, Vratio, Contango or the Sum of Contango + Roll yield going into the Red. In fact only 5 out of 31 didn't get at least 2 of those indicators red (so 2 out of 31 had only 1 indicator red). Those are some good odds to begin with but now let us look at the 3 times we failed to get to red on the indicators and notice that our current draw not one of our values has touched the highest value of any of those failed draws. In other words, if this draw ended now it would be the "worst" failure to reach red values on those four above indicators that I can find in 15 years of data.

      

    TOP

    TOP

    TOP

    TOP

     

    BOTTOM

    BOTTOM

    BOTTOM

    BOTTOM

    DATE OF DRAW

    DRAW TOTAL

    Contango Tops (Bold nailed it)

    VCO TOPS

    Vratio TOPS OR TOTAL Roll+Cont

    SUM Cont + Roll Yield

     

    Contango Tops (Bold nailed it)

    VCO TOPS

    Vratio TOPS OR TOTAL Roll+Cont

    SUM Cont + Roll Yield

           

    Highest numbers to Bottom

    2009 On

    8/27/2013

    -4.5%

    11.4%

    81.05

    1.17

    21.2%

     

    4.10%

    12.5

    1.07

    6.6%

               

    2004-2007

          

    Highest numbers to Bottom

    2005 On

    8/26/2005

    -3.2%

    13.6%

    102.9

    18.6%

      

    5.15%

    20.3

    1.07

    6.6%

               
               

    NOW

    -3.5%

    10.2%

    70.0

    1.26

    28.3%

     

    7.6%

    47.7

    1.10

    9.2%

    Notice looking at the 8/27/13 it is pretty much identical starts and 8/26/05 isn't a huge difference either so the scale of the moves are similar. I also looked at draws that didn't hit any red on the first two draws but then hit red on the third or later. There are two instances.

    6/24/11 there were four straight up days between the 2nd and 3rd mini-draws. 11/15/12 there were 3 straight up days before the 3rd mini-draw started. It is a good sign for us short the market that on only the 2nd day after the 2nd mini-draw ended we already had a down day. When I looked at all the times draws ended at 2 mini-draws the common theme was either a straight line up 2-3%+ or if there was a down day early on it was usually 3-5 days out and the largest was -0.32%.

    If I told you there is a 90% chance you will make money shorting here (3 of 31 draws Fail to get a red signal) or 84% chance we don't see a bottom until we get at least 2 Red values (5 of 31 Fail to get 2 red signals at bottom) I would take that bet. Those are pretty good odds. But obviously not a guarantee. There can always be a first.

    Two other things I find interesting. During June 2013 Taper Caper between the 2nd and 3rd draw (where we are now potentially) it was up 1.5%, down -0.63%, 2 up days and then big draw. Currently we are up 1.3%, down -0.61%...Let's see what is next.

    Also, last year after March Fed meeting we bounced around a bit but ended up -1.6% from before Fed meeting until 6 trading days later. Unless the Fed keeps the word Patient I think we are heading down and maybe even if they keep patient in if dollar stays strong.

    Oh and finally China. Housing data in China is horrible and falling apart fast. Their housing bubble is bigger than ours and over 50% of their GDP is government spending including infrastructure like housing. I read the government is freaking out and ordering shut down steel and copper plants to reopen to flood the markets with their cheap stuff to earn Revs to pay the bills and hopefully hit their GDP targets. Eventually this house of cards (no pun intended) will come crashing down and I think it will take the US with it - China is that big. Not good. Of course CNBC gives zero coverage to this because it defeats their narrative that everything is puppy dogs and rainbows.

    blogs.wsj.com/chinarealtime/2015/03/11/e.../

    BTW - In the near future I plan on removing a few of my articles that go into the most detail on how I do my long and short positions along with the data on-line. Fair warning to anyone who wants the data and articles to use in their trading down the line. I still plan on posting here when I make trades just not as much as to why I did it then.

    Mar 15 12:55 PM | Link | 15 Comments
  • MARCH VOLATILITY

    Looking at the last 10 years March has seen an outsized amount of volatility and SPY draws. Here is a list of the biggest draws and a list of all the significant draws since 2004.

    2004

    March 8th Top

    -6.0%

    1st Top

         

    2005

    March 7th Top

    -5.1%

    1st Top

         

    2006

    -1.54%

    -1.38%

     

    Already Top 1/11/06, Bottom -3% 2/7/06

    Next Top June 9th

    2007

    -2.50%

    back to -1.81%

    -1.08%

     

    1st Top 2/20/07

    Draw Total -6%

              

    2010

    -0.96%

    -0.71%

           

    2011

    -5.10%

      

    Top 2/18/11

        

    2012

    -2.16%

    -1.17%

    -0.97%

    Top April 2, 1st day

        

    2013

    -1.51%

            

    2014

    -0.70%

    -1.91%

    -1.95%

    Top April 2, 2nd day

        

    SIMPLE LIST OF THE MAX DRAWS EACH YEAR

    2004

    -6%

    2005

    -5.10%

    2006

    -1.54%

    2007

    -2.50%

    2010

    -1%

    2011

    -5.10%

    2012

    -2.16%

    2013

    -1.51%

    2014

    -1.95%

    Also March has one of the 2 times the 1.8% rule fails to reach a new low and it looks painfully similar to what is happening right now. Up 1st day of the month and then a down move after.

    Date

    SPY Drw%

    DAILY %

    2012-03-06

    -2.16%

    -1.46%

    2012-03-05

    -0.71%

    -0.41%

    2012-03-02

    -0.30%

    -0.30%

    2012-03-01

    0.00%

    0.52%

    Date

    SPY Drw%

    DAILY %

    3/3/2015

    -0.41%

    -0.41%

    3/2/2015

    0.00%

    0.63%

    5 trading days after March 6th 2012 bottom we were back at new highs. This was a false start on a larger draw and is one of the things we need to try to avoid. My thinking is if we do get a 1.8%+ mini-draw starting here I would add to my UPRO position and not try to short the bounce just to be safe.

    The moral of the story is to expect at least a 1% SPY total draw at the close in March.

    PS- I meant to post this 3/2/15 at night but things came up.

    Mar 04 10:10 AM | Link | 1 Comment
  • THE PLAN

    Right now I am 50% UPRO in my biggest accounts. All of the buy trigger points are going to be either talking about % up over the most recent Top (SPY - 208.72 on 12/29/14) or mini-draw timing. Remember each mini-draw is at least 1.8% move down on more than one day in a row. The mini-draw ends on the first up day (I mean a decent up day, at least 0.3% up SPY). This is a slightly modified version of my Short strategy. Since we did not have a beginning of the year run there is a higher probability that this Top to Top run is 3-5% vs the normal 2-3% expected Top to Top run.

    *Stay 50% UPRO until

    *1.5% over Top = go to 33% UPRO = 1x the market

    *2% over Top = go to 0% UPRO

    *2.5% over Top = buy 4% UVXY (start shorting market)

    *3.5% over Top = buy 8% UVXY

    *5% over Top = buy 8% UVXY

    Obviously if you don't hit those targets then you don't buy. If you are still long UPRO and we hit a -1.8%+ draw over more than 1 day then you sell all UPRO.

    If you are long UVXY and the mini-draw starts I would hold on to your UVXY until you reach at least a 10% profit. I plan on holding until the 2nd mini-draw gets going or about 4%+ draw (Since 2003 there have only been 3 SPY draws of 3%+ that did not have at least 2 mini-draws. 3 of 38. 2 of the 3 single mini-draws happened shortly after the stock market bottomed in 2003 and 2009. Pretty good odds).

    In the mean time I also found another "can't miss" strategy. Short the first bounce after the 1st mini-draw. Since we are more than 90% certain a second mini-draw is coming soon if you immediately short the 1st up day after the 1st mini-draw you will make good money. My calculations show an average move lower after that 1st bounce of 1.9% with a low profit of 1.2% and a high of 5.2%.

    *Short 60% SPXU on 1st up day after the 1st mini-draw

    I plan to sell the 60% SPXU after the 2nd mini-draw looks over (at least 1.2% lower than buy point) or somewhere in the 4% draw range. At that point I will start to get long.

    *Buy 33%-50% UPRO around 4% draw or when you think 2nd mini-draw is finished

    The last 50% UPRO I will save for either the 3rd mini-draw (20 out of 37 draws since 2003 have 3 or more mini-draws) or when I feel the VCO signals say it is safe to put the rest in.

    *When market gets back to 0.5% over last top I will go 33% UPRO

    *When market gets to 1.5% over last top I will go to Cash and start shorting again. This time shorting at 1.5%, 2.25%, 3% and 5% as my normal plan states. Rinse and repeat.

    BTW- Have been sick off and on this entire month. Haven't kept up on my Motif or posting here but I have been working here and there and have found lots of exciting info to play the markets.

    Keep in mind the 1.8% Rule. I will be updating the article soon with all of the data since 1999.

    seekingalpha.com/instablog/7015781-rock2...

    Tags: UPRO, UVXY, SPXU, SPY, THE PLAN
    Feb 24 12:25 PM | Link | 41 Comments
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