Global Macro CTA - Standard Deviation Price Tables

So, the "Momentum" players have apparently said "Yes" to a continuation of the recent equity rally and whats probably more significant on Friday........to a potential reversal down in Fixed Interest. But are they correct?

As watchers of this Blog may be already aware, I assign no fundamental economic interpretation to any price movements. I am solely concerned with the Rate of change of prices over various diversified time horizons and what I can predict from statistically analysed results of my Trading models.

We all know, however, that "Momentum" analysis on its own is a lagging indicator and typically on longer term charts often signal at the latter stage of a rally especially following a reversal of a previously persistent trend.

Over the years, I have found it VERY helpful to overlay a particular favourite contrarian indicator of mine namely "Divergence" whether it be up or down.

For the un-initiated, this indicator can identify potential Bull or Bear traps shown when Higher/Lower prices are no longer accompanied with Increasing/Decreasing Momentum.

Of course,  Divergence in the Short term can be the catalyst for invaluable market Mean Reversions and an opportunity to re-establish "longs" or "shorts" in the same directiion of the main trend at more advantageous average prices. For example, the DAX could fall 200 pts and yet the Medium momentum trend would still be "UP". So the importance is to attach "Risk" to any particular price by keeping in touch, not just whether momentum is positive or negative, but more imortantly have a measure of the "rate of change" of momentum and predict whether it will continue.

Outlined below, is the latest snapshot of a range of Exchange Traded derivative across the front month contracts in Fixed Interest, Equities. Forex and some Commodities. This of course is only a snapshot and in the real world my models are "adaptive" to real time prices. For an explanation of how these numbers are calculated please refer to earlier posts

Enjoy

Legend

Red - Price statistically Overbought and should experience some Reversion to Mean

Blue - Price statistically Oversold and should experience som Reversion to Mean

Black- Last Price at Posting

Yellow - Central Daily Moving Average Pivot. Close above indicate recent strength. Close below indicates recent weakness

Daily Trend- Positive / Negative / Neutral

St Dev - Rate of change of  Daily Trend momentum (Accelerating Up/ Down/ Contracting)

FOREX- Protecting Long EurUSD Profits NOW

All

As you know in Systematic Trading I firmly believe it is not my business to pick tops or bottoms.

Trend following models in any form, however, aspire to remain in the same trade for the longest amount of time as long as the trend is persistent. However we can readily accept that few trends are linear straight line affairs and diversification over timescales/time horizons provides a broader objective assessment of maximising P&L'

The EURUSD is circa 20 big figs higher that the recent 1.1890 June 6TH or so low in Q2 2010. The trend obseved by many Momentum followers remains "Up" and for Greenback weakness to continue to continue......or will it????

It is however always prudent to money manage any position. Not by undermining the original hypothesis for the long but at key pre determined objectives to be patient and accept that the rate of change of the trend may be changing.

Hence with current Spot at 1.3850  I suggest that to protect EURUSD long entry 1.2300,  I am now prepared to write 1.4000 DEC CALL Receiving 2.36 effectivly allowing me to partial exit 1.4236
The trend in the underlying may continue higher but I can assess the rate of change of momentum at a later stage and either decide whether to remain in the trend

Enjoy

Multi Yield Curve Analysis-Update

Ahead of important US GDp numbers today, I thought it would be useful to give an update of the four main Govenmrnt Bond Yield Curves that I look at, USA, Eur, Jpy and UK.

This is an unemotional statistical summary and I do not claim to attribute any "fundamenatal economic" justifacation for the shape or recent changes in the shape of various segments of each Curve.

Enjoy.

Global Macro Futures- Standard Deviation Price Tables

Outlined below is the latest Table of Stand deviation price Tables for 8 Euity Exchange traded derivatives and 9 Fixed Interest as at Close of trading on Friday last

For a more detailed explanation of how these values are derived please refer to earlier Post 10 Sept 2010.


Legend

Red - Price statistically Overbought and should experience some Reversion to Mean

Blue - Price statistically Oversold and should experience som Reversion to Mean

Black- Last Price at Posting

Yellow - Central Daily Moving Average Pivot. Close above indicate recent strength. Close below indicates recent weakness

Daily Trend- Positive / Negative / Neutral

St Dev - Rate of change of  Daily Trend momentum (Accelerating Up/ Down/ Contracting)

Eur & Usa Yield Curve Segment Analysis-Week 40

Every week, I post a snapshot of the USA and EUR Govenment Bond Yield Curves and overlay one of my Trending strategies on various Segments of each Curve.

As mentioned in many of my Blogs, I look at these Systematically, without offering any "fundamental" or "economic" reasoning for these changes

The trending indicators are represented over 2 Trading Time horizons

• Weekly- Longer Term Investment play
• Daily- Shorter Term Trading

Also included is a series of standard deviation of yield movements that may or may not represent Support/Resistance yield targets for each of these Curve Segments.

[click to enlarge]

Global Macro Futures - Standard Deviation Price Tables Update

I have learned over the years to view with a degree of cynicism the blanket "blind" acceptance of many forms of Technical Analysis or Charting, particularly the unproven, un-tested, non validated claims of many of its proponents.

Sure, we all need tools or crutches to trigger or support our investment decisions but it has taken me a long time to distinguish the "Voodoo Analysis" from the scientific, statistically validated approach I now try to implement.

You will see many reference in my Blog to various forms of Standard Deviation. Notably in the case of Momentum studies I am more keen to understand the "Rate of change of Momentum"as the direction of the Momentum itself . In many circumstances we can learn so much more from the second derivative.

Oulined below is the latest Table of Standard Deviation of PriceVolatilty derived from four central Moving Averages (Weekly, Daily,30 mins and 5 mins). For a more detailed explanation of how these numbers are derived and what periods and type of MA used please see earlier Post 10 Sept.

These Tables may or may not turn out to be "Supprt or Resistance" levels but they are a statistically consistent generation tabular form where the Mean Reversion have been evidenced and validated.

Enjoy.

Red- statistically Prices Overbought and should experience some Reversion to Mean

Black-last price at time of Post

Yellow-Daily Pivot, the Central moving average. Price above indicate recent strength. Prices below indicate recent weakness

Blue- statistically prices Oversold and should experience some Reversion to Mean

Daily Trend- Positive / Negative / Neutral

StDev-Rate of change of Daily Momentum: Accelerating Up/ Down / Contracting

Multi Yield Curve Analysis- Part 2

Yesterday, I posted a review of the EUR, USA, JPY and UK Government Bond Yield Curves showing the absolute current values of certain segments of these curves.



[Click to Enlarge]

 I have overlaid one of my Trend following strategies  on the EUR and USA Curves with the following results: