Saturday, August 04, 2007

Weekly Trading Report

In the first three days of this month the NDX is down 0.7% and my trading accounts down1.1%. The model is up 0.52% because it would have stopped out once the market fell 1.25% this afternoon. I'm losing money at a slower rate than last month, which I guess is a good thing :P

Looking forward to Monday a lot of people seem to expect the market to continue to fall or even crash 1987 style. From my modeling this seems rather unlikely. My best analog for Monday is January 29th this year where the stochastic fell but the market ended up slightly. This is my working E-Wave scenario, which is rather bullish for early next week:

i.e. there should be a "C wave" up following the B down, which would likely exceed the top of the "A wave". On Tuesday the Fed has a chance to say something. This could be a critical juncture for the market. Unfortunately I won't be able to trade at that time.

My Interactive Brokers account was down $603 or 3.53% for the week if I don't count the open position I had over last weekend. If I do count that position then I was up about $400 this week. For the week the market was down 1.9% and the model up 0.2%.

I updated an analysis of the performance in this account relative to the NDX using weekly data:

As you can see from the chart I have a negative beta to the market - actually a beta of -1.6. I'm too bearish - ideally I would have a zero beta as this is meant to be a market neutral strategy. My weekly alpha is 2.6% which is where the regression line crosses the y-axis. This alpha has a t-statistic of 1.59 which is significant in a one-tail test at 5.9%. On average I made 2.1% per week while the NDX went up 0.3% per week. Taking into account volatility the NDX had a Sharpe Ratio of 0.69 while the account had a Sharpe Ratio of 1.37. Here again is the data, which shows why I persist in the face of recent negative performance. I know I can outperform the market with a fairly low probability that my results are just random.

On the net worth front I am down $16,500 already this month. $11k of that is due to investment/trading performance. The rest is mostly the moving bill.

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