Trading System Signals on 8/19/2024

The market continues to melt up and the strategies continue to trade this environment well. The streak is the longest one we can remember, and the timing continues to be interesting. We anticipate a less structured market later this week with Jackson Hole and Fed speak. A choppy market isn't necessarily bad for our strategies as there are some choppy patterns that work well with our many counter trend strategies. A sporadic or unstructured market can be challenging when it does happen - based on unexpected events and surprises in the market. The way that Wall Street continues to lobby the Fed and hang onto a rate cut is also interesting.

You can see in the following chart, that ever since the Federal Reserve took on a more active agenda in the form of QE in 2009, the extreme pace of the equities outpacing commodities has reached a historically low level. Its tricky calling long term tops and bottoms but if this cycle reverses, commodities would trend higher, equities would trend lower, or both scenarios would happen. The speed and timing are certainly the unknown. The next commodity Super Cycle might be somewhere in the near future.

The One Million MNS 130 hypothetical results were +1.8% and the 250K hypothetical results were +$3.6K. The Stock Index Portfolio 18 hypotheticals hit its 10th winner in a row with +$480 on the E-minis and +$47.50 on the Micros.

Entering on a drawdown is still the strategy we will use after missing the beginning of this move when I had to be out of the office.

V-Reversal patterns on the daily charts have become more of a normal pattern as the liquidity believes that markets are always supposed to rebound quickly to new highs, or the Fed will do something about it. We saw that just two weeks ago, while the market was selling off, bulls were calling for an emergency rate cut.

I believe the V-Reversal pattern that works now will be the pattern that eventually tanks the market. The liquidity has not been punished with any real margin calls in recent years for "catching the falling knife". The longer something works, the more leverage and the more traders pile into it. There will eventually be a V-Reversal that doesn't bounce and hits a threshold where there would have to be massive deleveraging. I'm not saying this will happen soon and the V-Reversals I am referring to are based on daily bars. I am also not referring to our V-Reversal trading systems that use stop losses and does not increase leverage. Additionally, our V-Reversal strategies can also take short trades as well as long trades.