Most traders are conditioned into F.E.A.R. after a losing streak (or losing trade for that matter!), whereas more experienced traders who have committed to finding ways (mentors, etc) to conquer those fears have no problem executing on all fronts. They know fully well that systems move in and out of profitability, but that over a long enough period the expectancy of their system will take its course.
The forecast I use is no different. It can go through weeks that are absolutely breath taking (correlation > 0.85) and then mediocre the next (correlation < 0.6). Generally, I would say the forecast - if used correctly - keeps you on the right side of the market at least 60% of the time.
This is what the forecast looked like last Friday:
Intraday ES Forecast (as at November 20, 2009) - right of green line is transposed forecast
The correlation on this fit was an astounding 0.89!! I tell you, I have been using this forecast for a while but I never get tired of seeing it perform this well. Like all things in the market, however, nothing is perfect.
This is what the forecast looks like today:
Intraday ES Forecast
Not exactly pretty, is it?
In all honesty, we could go up or down from here but as a very disciplined trader I obey the forecast (or transposed forecast) to the tee every time, every day, every month and every year. No questions asked. In case you're wondering - I'm short.
RATIOS
The VIX/VXV ratio continues to be on a sell alert so if you are long I suggest you be very careful.
VIX/VXV Ratio
The more and more we undercut the 0.875 level, the higher the risk to the downside.
POSITION TRADING
As many of you know, I have been diligently working on a project I hope to release sometime next year. Among the various sub-projects is my position trading system. It went long at the close on October 29, 2009 and has an exit date of November 30, 2009 (or when stopped out, whichever comes first). This is also a giant signal that a top if coming, if not already in. I thought I would pass this along as anecdotal evidence to support the short side.
BOB HOYE
This needs no introduction of course! You can find the audio HERE.
