Tuesday, November 23, 2010

Odds for the Dow on 11/24/2010

Category Prediction Rate % Correct Notes
Direction 18/24 75% 20/24 disregarding minor closing range
(losses were 0.30%, 0.65%, 0.20%, 0.22% gains could have been made on 2 of those days)
Significant High/Low* 1/1 100%
Gap Fill+ 1/1 100%
Hypothetical Portfolio Starting Date Compounded Return
$10,000 starting balance 11/18/2010 +1% $10,100 balance, profits are reinvested
* A significant high/low occurs when the market makes a move greater than 0.5%. This test is measuring the following case: If the odds of a significant high/low are >= 72% in either direction, a significant high/low was made the following day.
+ When the odds of a negative high/pos low <= 3% and the market gaps in the low odds direction, the gap fills.

Today was a success for the directional prediction. Unfortunately, the range issue clouded my judgment and I failed to take advantage of the down day, but at least I wasn't long!

Tomorrow looks positive. Also note that the day before and after Thanksgiving is seasonally bullish, so a long position seems favorable here. That being said, I only bought a partial position in UPRO. I'm unwilling to put a huge chunk of my money on the line for a trade against the trend. It kind of felt like people were trying to front-run some of this positive seasonality and got trapped in a bad trade today. This could either provide new longs with a great entry, or they'll get snowed again tomorrow. I'm willing to bet with the system for tomorrow, with the understanding that it's only a partial long position (not the full amount I'd normally trade) and that I will take it off if profit targets are met -- for me, it's about a 0.25% gain on the index.

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