Going Short

The model is saying to be short on Monday. I have shorted QQQQ before the end of the day ($37.01). Could be early (the price already went to $37.10 and then fell back again), but eventually will be right I think. Based on the chart, this upcoming downmove could be signficant. The model though gives no information on future levels of the index, just the direction.

4:05pm Update:

I was a bit early going short but still up substantially for the day. Updated performance stats since 6/29/06:

Market Gain: -4.75%
Model Gain: 8.80%
Excess Return over Market: 14.22%

Account Gain: 14.90% (about $4000 on this account - not keeping track of gains in the Roth account but it is now up almost 40% on the contribution made earlier this year).
Excess Return over Market: 20.63%

Which is 145% of the model's gain. Using leverage and some intraday trades should result in a gain greater than the model and we are now seeing that. This kind of trading gain for a month is not unusual. What is hard is to not give the money back again. That is the next challenge.

If the index continues to rise on Monday and the full(5,5,3) stochastic goes over 80 (it is now at 75) I will close the short and go long as we will have entered the persistent overbought state. There is a risk of this based on my most forward looking indicator. I am short 2500 QQQQ shares in the trading account and long 5 $39 August puts in the Roth account. A one cent change in QQQQ therefore has a $30 impact on my net worth...