Our anticipation of a gap up was initially correct, but the market was hit with multiple sell programs on news with very wide noisy ranges along with massive bounces. The one-minute bar range averages in the E-mini Nasdaq was nearly $1000 or 50 points for some extended periods in the morning session. This makes it difficult to stay with short positions. The market continues to aggressively attack short trades with the bloated liquidity.
V-Reversal NQ was the highlight even with some slippage on a nice short in a fast market and continues to be one of the strengths in this market environment.
Zig Zag 2023 is the strategy that is most like V-Reversal but takes more trades. It has started to generate some nice signals and equity curves once again since September. Simply expanding the profit target from 35 points to 60 points improves the strategy. This is an example of how small profit targets can lead to larger drawdowns since you need winners to make up for loses. This is an existing strategy.
Zig Zag 2023 with 35 Point Profit Target
Hypothetical Performance with $25 round turn slippage and commission
Zig Zag 2023 with 60 Point Profit Target
Three Year Hypothetical Performance with $25 round turn slippage and commission
Many of the larger portfolios are not setup to trade price action that has become similar to daily FOMC news releases. We typically depend on the occasional trend or some smooth reversals with tone to overcome this type of price action. This type of price action on any given day or window of time is not unusual. What is unusual is to see this type of price action all day, every day for several months.
Typical directional day trading philosophy is that you have an "easy day" on occasion. The goal is to manage the challenging days so that the net of your trading profits on "easy days" exceeds your challenging days. The number of "easy days" has gone to zero lately for our larger portfolios.
"Easy Days" are dependent on your strategy. As the market cycles through different modes, being consistent with your approach, allows you to be there when the market lines up with your strategy, while treading water through other cycles. We are directional day traders entering the market on slow trends, fast trends, breakouts, counter trends and mean reversions.
We are working through this unusual market environment and will add more strategies similar to V-Reversal such as Zig Zag 2023.
Regime changes and new price action can be difficult at first, but it can provide new trading opportunities.
The constant noisy and sloppy market environment since mid-October "could be" a new regime. We also have to consider that it may not be a regime change but an extended post-election cycle. It has been three months since the election.
The market remains in a spikey range that it stubbornly fights to stay in.
This week we deployed the best strategies from our top market (E-mini Nasdaq) that had been leading the way with recent equity peaks. The market environment became even more challenging, and the Nasdaq strategies struggled more than average the last two days.
The One Million MNS was down -1.85% while the 250K Portfolio was down -$3,700. The set of strategies we traded went straight into a worse case drawdown. We started on Wednesday with a small gain. After two consecutive losing days we ended the week down -2.2% in the 250K Portfolio.
Next week the One Million MNS will scale back to Micros and trade the One Million MNS 35. The risk is 14K per E-mini or 1.4% per million. We will be trading 5 Micros instead of 1 E-mini to reduce our risk to 0.7% risk to worse case drawdown.
With 5 Micros, we can return to near breakeven for the month if it recovers to equity peaks since it is 2.4% away or risk 0.7% to worse case drawdown. This portfolio made its last equity peak on January 28th and January 2025 hypothetical performance was 2K greater than the average month over the 24 months in 2023 and 2024.
This portfolio includes the Zig Zag 2023 with the 35 point profit target. The 60 point profit target version may be added instead. We also have an update for MBT NightTrader.
The One Million MNS 26 that was traded today and the One Million MNS 35 that is setup for trading next week have been added to the Portfolio Calculator.
The Stock Index Portfolio 24 hypothetical results was -$7,580.00 and hit a new worse case drawdown. We see a similar portfolio from the One Million MNS 26 or 35 that will be provided as an update and continue to recommend the Two System NQ Portfolio while we adjust.
The Top 50 Select Portfolio hypothetical results was -$1,287.50. This portfolio is in a drawdown entry alert and is sitting in a 33K drawdown out of a 37K worse case drawdown since 2009. This portfolio was released last March. The drawdown is based on the original setup using DontTradeOnFOMC=1. It has not made an equity peak since November 20.
The 50K Portfolio hypothetical results was +$700 and the highlight portfolio of the day. This Portfolio is at a drawdown entry alert and a good time to start or increase contracts. This was also released in March 2024.
The Two System NQ Portfolio hypothetical results were +$1,975
The Five System NQ Portfolio hypothetical results were +$1,975
There was a lot of slippage today so live results are going to be worse on a day like today.
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