Commentary, Methodology

12/2/20 – Current Signals, Methodology Overview

The foxes sat out close to open (CO).

Tactically, I sold near the open yesterday. For the last 30 years or so, money is made from close to open, with open to close (OC) more or less a crapshoot. Buying at the open and selling at the high, generally makes less money than shorting the open and buying at the low. Flap volatility (high/low distance) is about 10 times the standard deviation of CC.

It’s hard to imagine how smart, profitable independent day traders must be to overcome such serious handicaps. On days with a small down gap like today, there are pretty good odds that the gap will fill, but that’s a little like playing Russian Roulette.

3x Bulls play better close to open. TNA is a consistent CO winner, but a heartbreaker on OC. SOXL works well on CO and less so on OC also. TQQQ has been relatively consistent both ways. It hasn’t been bad to buy SOXL at the close, sell at the open and buy TQQQ OC… I’m not sure that’s real intelligent but it has sort of worked.

The foxes have done consistently OK since 2014, and fantastically since 2018. That happens because equities have reacted positively to x00, x33, xCC, and xFF states during the period. That is not a law of nature however, eventually they will change to react more positively to x03, x30, xCF, and xFC.

However nicely everything is hanging together now, the goal isn’t to invent the golden goose. That’s not the way life works.

Leave a Reply