Fishing for a bottom

• i re-initiated a discretionary swing long in the NQZ09 on wednesday at 1713.50 and this morning at 1677.25, for an average entry price of 1695.38...
• i am holding off on adding more due to 'BTD Index' and 'NDX 1st DOM' generating long entry signals for the NQ this evening...
• the NQ has carved out a series of lower highs and lower lows on the 15M chart shown above, as well as the 60M chart (not shown)....
• however, the 'BTD Index' chart of the NDX shows what i believe could be bottoming behavior:

• the 8 period ATR Volatility for the NDX is displayed in the lower pane of the above chart...it closed at 3.16% today...i placed a yellow circle at that 3.16% ATR Volatility level...
• i placed a green circle on each daily ATR Volatility bar that was also around 3.16% and saw the NDX close at or below the lower bollinger band (lower red line)...
• notice the last 3 instances (7/7, 8/17, 9/1) all bottomed that day or the next day, and then went on to make new swing highs...
• going back to the 4th (6/22) and the 5th instance (6/15), the NDX displayed different behavior: taking more days to bottom and not making a new swing high...
• we are only looking at 5 instances, so there isn't enough data to give us enough confidence to support a bullish, neutral or bearish view solely based on this behavior...however, i am open to the possibility that the NQ may find a swing bottom in this area...
• if this view is correct, then i have some NQ inventory to ride up...
• if this view is incorrect, i still have some more buying power to add to my long position as the NQ heads down...
• in any case, i am still bullish over the coming weeks and months...

Disclosure: Long NQZ09.

***remember this is an illustration of what i am trading and my thinking...it is not a recommendation for you or anyone else to buy or sell this or any other security...trade at your own risk***

'NDX 1st DOM' generated a Long Entry Signal for Thursday's Close, 10/1/2009

'NDX 1st DOM' generated a Long Entry Signal for Thursday's Close, 10/1/2009. This model is based on the behavior of the NDX on the 1st calendar Day of the Month (DOM). It is due to be exited at Friday's Close unless its Money Management Stop is hit intraday.

As can be seen from the Equity Curve shown above, the model is currently trading a few ticks below its all time high. However the three most recent trades were stops.The model uses a very tight Money Management Stop, currently 0.50% below the Entry Price. I only took a 50% position (3 NQZ09 @ 1665.50) instead of a full position (6 NQZ09) for this model tonight. I am already long some NQ based on tonight's 'BTD Index' (1 NQZ09 at 1665.00) long entry signal, as well as a re-initiated NQ discretionary swing trade (2 NQZ09 at 1695.38). Additionally, with all of the volatility this week and the Payroll report due pre-market, I don't want to take the chance of getting stopped out for more than the model theoretically calls for (0.50%). Again, like many times this week, I am being influenced somewhat by fear. So far, I say this influence has benefited me this week. However this can't continue, I will under perform one of the systemic models sometime soon.

Here are some of the model's Performance Statistics:

• Model Tracking Vehicle=NDX
• Start Date=11/1/1985
• Number of Trades=116
• Average Trade Return=0.39%
• Average Winning Trade Return=1.24%
• Average Losing Trade Return=-0.47%
• Win Rate=50%
• Ratio of Average Win/Average Loss (RAWAL)=2.63
• Profit Factor=2.68

The win rate is only 50%, but the average winning trade (+1.24%) is 2.63 times as big as the average losing trade (-0.47%).

Disclosure: Long NQZ09.

Disclosure: The performance results shown above are for Model analysis purposes and do not include commission or slippage. The model is built on data from the NDX, but I trade the model with the NQ e-mini. Actual trading results from the NQ usually differ from the model results of the NDX, with the NQ showing somewhat weaker performance data. Nonetheless, I still trade this model with the NQ and when executed according to the plan, it has generated consistent profitability for me.

***remember this is an illustration of what i am trading and my thinking...it is not a recommendation for you or anyone else to buy or sell this or any other security...trade at your own risk***

'BTD Index' generated an Entry Signal for Thursday's Close, 10/1/2009.

'BTD Index' generated an Entry Signal for Thursday's Close, 10/1/2009. This is another one of my favorite models. The last five trade's from this model were profitable, each one generating a new high for the Equity Curve. The last four have occurred since this past June.

The premise of the model is mean reversion, such that when the NDX is in a longer term uptrend, buy the shorter term dips. Clearly defining the 'longer term uptrend', the 'shorter term dip', as well as the price target exit and the money management stop (which is time based, not price based), is key to this model's success.

Here are some of the model's Performance Statistics:

• Model Tracking Vehicle=NDX
• Start Date=11/1/1985
• Number of Trades=123
• Average Trade Return=1.70%
• Average Winning Trade Return=2.72%
• Average Losing Trade Return=-2.51%
• Win Rate=80%
• Ratio of Average Win/Average Loss (RAWAL)=1.08
• Profit Factor=4.47

The Average Winning Trade is just a bit more than the Average Losing Trade (RAWAL=1.08), but this model generates 80% winners.

Disclosure: Long NQZ09.

Disclosure: The performance results shown above are for Model analysis purposes and do not include commission or slippage. The model is built on data from the NDX, but I trade the model with the NQ e-mini. Actual trading results from the NQ usually differ from the model results of the NDX, with the NQ showing somewhat weaker performance data. Nonetheless, I still trade this model with the NQ and when executed according to the plan, it has generated consistent profitability for me.

***remember this is an illustration of what i am trading and my thinking...my trading plan may change without notice...this is not a recommendation for you or anyone else, to buy or sell this or any other security...trade at your own risk***

'SPY Gopher' generated an Exit Signal for Thursday's Close, 10/1/2009

• 'SPY Gopher' got caught in today's bear raid...while up nearly 2.00% earlier in the week, it closed out down 1.91% (modeled position: SPY) and down a theoretical 2.01% on the trading position (ESZ09)...
• i say theoretical, because i did not follow the exit rules...as i mentioned yesterday, though bullish longer term on the ES and the NQ, the trading action was increasing my concern that the 1035-1065 base may not hold today....i was long 4 ESZ09 contracts, and sold 1 yesterday at 1056.50 and three more today around 3:40 pm at an average of 1032, making my average exit for the 4 contracts 1038.13 (only 3 contracts are shown on the chart because the 4th contract is traded in another account) :

• so while the theoretical trading position exit should have been at 1025.25 (4:00:00 pm price), the actual trading exit was at 1038.13...this exit, leads to a 0.78% trading loss (with commission) instead of the theoretical trading loss of 2.01%...in this case, acting on a reanalysis of the technicals and on fear saved me 1.23% on 4 ESZ09....
• the model loss of 1.91% is slightly more than 1.77% average loss...

Disclosure: Long NQZ09.

***remember this is an illustration of what i am trading and my thinking...my trading plan may change without notice...this is not a recommendation for you or anyone else, to buy or sell this or any other security...trade at your own risk***