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Trading System Signals on 12/22/2023

The live trades in the 250K Portfolio were down today -$6,300 with a lot of slippage and some automation errors. The hypotheticals today were -$5,560. We went live yesterday into a drawdown alert when the current drawdown was $9,300 away from a worse case drawdown. The current drawdown based on the last couple of days is just above the worst-case drawdown. We will update the Portfolio Calculator for the latest results this weekend as we have some room to bounce. After all this chop and the end of the year dynamics next week, I am optimistic we can capture some gains into the end of the year.


We are around breakeven this quarter, but coming into the quarter we are up 18% on the year in trading profits using day trade only algorithms.


Waiting for a drawdown to start a new portfolio continues to be a good strategy for reducing risk.


The Stock Index Portfolio 27 E-mini was down -$4,797.50


The Stock Index Portfolio 27 Micro was down -$495.75


Lately, the market has been more difficult to day trade than I have seen in it in a long time. We have been able to tread water this quarter by mostly sitting out and waiting for drawdowns to start. We have the Christmas holiday coming up on Monday with four trading days left next week. Most market participants try to anticipate if the market will move higher or lower. With long/short algorithmic day trading, we try to lock into some repeatable patterns that we have seen in the markets over the years in either direction. The patterns in the market have been more "predatory" and seem to continue to attack most of our positioning most of the time this quarter. 


Stealth bull markets are my least favorite type of markets as they are more difficult to trade. Most of the moves happen at night or after a massive stop run. This type of bull market seems more concerned about who gets to participate in the move than the actual move itself. In general stealth bull markets have the perception of more manipulation. This month we saw the Nasdaq hit 12 higher highs in a row. It also set a new record in the Nasdaq futures hitting 11 days in a row of higher highs and higher lows with also some of the lowest average ranges in the VIX. Since November 1, the disconnect between what the daily chart looks like based on the trend as compared to the day trade charts is one of the biggest differences I have seen. (The daily charts are very trend while intra-day markets are extremely choppy).


Sometimes after the VIX works to extreme levels, the market is sloppy re-adjusting. We are certainly seeing that. 


Today could have gone either way. The last five days of the year are the Santa Clause rally - which could be trendy. If the market rallied, we could have said, "of course, the Santa Claus Rally".  If the market did not rally or sold off, we could also say, "the Santa Claus Rally came early", which as of today, appears to be the case, so that scenario seems obvious in retrospect. The market has certainly been due for a sell off for a long time but it continues to have the liquidity to move higher. Even in the 2022 "bear market", it was never a complete bear market in my opinion and more of a pullback. 


We were set to take long and short trades today. The market postured higher and came close to Wednesday's highs. There was shallow stop running early as the market postured to move higher, only to sell off hitting stop losses to exit many long positions. The market then reversed higher but then once again, moved into a deeper stop run, stopping out more longs, causing some strategies to get short. The market then rallied back. 


I am surprised that after the move yesterday, the market did not take back the highs on Wednesday by the close today. 


We are certainly due for more favorable price action in this drawdown cycle and look forward to the last week of trade in 2023 next week.

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