PPI was hotter than expected today as inflation looks like it could be "creeping higher" once again.
The noise level and price distortions in the market exist from time to time. We are in an extended noise cycle based on my measure since mid-October. As traders we have to find a way to trade whatever market we are given, even when it is challenging. The market breadth has been down all month except for yesterday, yet the Nasdaq and S&P remain mostly bid up.
We traded the same setup that we traded yesterday and gave back the gains as well as an additional 1%. The One Million MNS was down -3.95% while the 250K Portfolio was down -$7,900. The hypothetical results for the setup we traded was down about -5.3% today. We scaled back to limit the losses. We setup our trading to capture the turning point in the portfolio risking 2% to capture 12% starting yesterday. We are down about 1% the last two days of trading but the portfolio is at its worse case drawdown and we are down -3.2% on the month.
From April to mid-October, we had observed more drawdown bounces and have worked to capture those recently. We are not seeing the normal bounce backs from a drawdown that we typically witness.
The bearish case we presented is still a consideration.
For our live trading, we will trade a very short list of E-mini Nasdaq strategies such as V-Reversal, Gap Continuation, and AT 2022 when the conditions line up with the market, keeping risk at 0.5% per day. Since mid October's pre-election cycle, it has been challenging trading the larger portfolios. The metals were big losers today in Silver and Gold. All markets were down more than normal with sharp pullbacks in dip buying setups. The 30 Year Bonds trading system which had a nice short trade today with Bond yields rising on PPI inflation data was the exception.
Silver was down about -4.2% on the day while Gold was down -1.8%. We had many strategies buying the dip in those markets and getting stopped out.
We could be in a regime change with a new president taking office in January. We will be researching more than trading the rest of the year. The current strategies had been consistent from April 1 through mid October and there are several Nasdaq strategies that remain at the top of our list with recent equity peaks that we will focus on. With all the noise in the markets, we want to limit the market exposure. I prefer diversity but when markets are unusual and distorted for this long, focusing on a smaller setup while we wait to sync up with the market is essential.
The hypothetical results for the Stock Index Portfolio 18 were -$6,075 per E-mini and -$727.50 per Micro. The Silver contract had a loser today at 1/5th the size on the Micro.
The hypothetical results for the Top 50 Portfolio were -$7,492.50
The hypothetical results for the 50K Portfolio were -$1,667.50
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