Monthly Archives: January 2008

Slice of Life – Haiku

When I was at the spa and recovering from my mystery ailment, I rediscovered Haiku again. I really enjoyed writing these short poems and expressing myself in that creative manner when I was younger (high school). At the time, the subject matter of my poems depended on which girl I was in love with or trying to impress. :)

Although I haven’t written any Haiku in years, I started getting my creative mind working again by observing the natural world in deeper Zen like detail and surfing the Internet for some classics.  Something appeals to me about it again.

One of my favorite poems is by Issa:

In my old home
which I forsook, the cherries
are in bloom

Stock NeuroMaster BUY/SELL Signals III

Here’s today’s Stock NeuroMaster BUY/SELL signals for the market open. So far the system is showing good results, three out of four positions are in positive gains and the model is recommending to HOLD all positions today. I’m impressed with this program and when you combine it with a prudent risk/money management system, you should get a solid trading system.

EWZ: BUY signal on 1/22/08, entered 1/23/08 @ $66.11, recommendation to HOLD (current close @ $74.60, Gain +15.5%)

QQQQ: BUY signal on 1/28/08, entered 1/29/08 @ $44.58, recommendation to HOLD (current close @ $44.56, Loss -0.04)

SNDA: SELL signal on 1/28/08, entered 1/29/08 @ $30.01, recommendation to HOLD (current close @ $27.43, Gain +8.60%)

XOM: BUY signal on 1/29/08, entered 1/30/08 @ $84.54, recommendation to HOLD (current close @ $85.28, Gain +0.87%)

Of course standard disclaimers apply like, trade at your own risk, this isn’t a recommendation to BUY or SELL, etc but you can try Stock NeuroMaster for free for 14 days!

Stock NeuroMaster BUY/SELL Signals II

In addition to last night’s BUY/SELL post, I’m adding XOM to the list. XOM gave a clear BUY signal yesterday and I entered a small market order for this morning’s open.

XOM: BUY signal on 1/29/08, market order entered for open today

There’s room for one more stock or ETF to this “test” portfolio, drop me a comment or an email if you have a suggestion for one.

Stock NeuroMaster BUY/SELL Signals

I got a few emails from people who wanted to add the QQQQ’s and SNDA to the portfolio. I’ll probably take two more symbols to make this a manageable affair.

These are Stock NeuroMaster generated BUY/SELL signals. To find out more information about Stock NeuroMaster, read my product review.

QQQQ: BUY signal on 1/28/08, entered 1/29/08 @ $44.58, recommendation to HOLD (current close @ $44.41)

EWZ: BUY signal on 1/22/08, entered 1/23/08 @ $66.11, recommendation to HOLD (current close @ $74.90)

SNDA: SELL signal on 1/28/08, entered 1/29/08 @ $30.01, recommendation to HOLD (current close @ $29.46)

Short USDCNY & ISE Options

currency.thumbnail.jpgWell I’m back in the saddle again trading Forex and I’m short the USDCNY pair.  This is a beautiful trending pair and I couldn’t resist establishing a small position in it.  My plan is to establish this as a longer term position because I believe the USD will continue to weaken and the CNY will continue to strengthen.  How can you not love that?

Also, I want to check out the Forex options available via ISE (hat tip Soren) as this will be the year for me to learn about trading options and their strategies.

Buy or Sell iShares MSCI Brazil Index (EWZ)?

Just for fun and to test out the robustness of the Stock Neuromaster system, I’ve decided to create a small selective portfolio of stocks and ETFs, generate BUY and SELL signals, and follow along in this blog to see what happens. To kick this off, and in honor of Wallstrip’s new host Julie Alexandria, I’ve decided to add the Brazilian iShares ETF (EWZ) to the portfolio.

EWZ-012808Although this happened last week, the model issued BUY signal on the evening of 1/22/08, which was executed on 1/23/08 @ $66.11 (open) for EWZ and the current recommendation is to HOLD at today’s open (I previously wrote the wrong signals because I was looking at the wrong model, sorry.)

If you have any suggestions for which stocks or ETFs you’d like to see in this portfolio, leave me a comment with the symbol. To play around with Stock Neuromaster, you can get a 14 day free trail here.

In Foreclosure? Walk Away & Save Money

Ugly posted this interesting LA Times article his Del.icio.us link role a few days ago. It seems that people with upside down mortgages (where your mortgage is greater than the value of your house) are voluntarily letting their properties be foreclosed on.

A homeowner who can’t sell his house tells the L.A.Times, “Foreclose me. … I’ll live in the house for free for 12 months, and I’ll save my money and I’ll move on.”

Banks and lenders fear this kind of thinking — that walking away from a house could be the smart economic move — appears to be on the rise. Wachovia, in a conference call yesterday, warned investors that increasing numbers of homeowners are walking away from their homes by choice: “… people that have otherwise had the capacity to pay, but have basically just decided not to because they feel like they’ve lost equity, value in their properties…”

It sure makes business sense to me why homeowners are doing this, cut your losses and get out but is it the right thing to do? I don’t know if its right or wrong but I do know that the Banks need to start being more accommodative to all borrowers now. Lending has gotten so tight that our mortgage company wants to charge us $5,000 just to refinance our investment property, and we have great credit!

With all this voluntary foreclosure activity, is it time to be a foreclosure vulture capitalist? Not yet, wait till the banks are choking on supply.

Rogue Trader Kerveil to Name Names

Ha! Just as I thought, something does smell fishy in this whole SocGen vs the Rogue Trader thing. I never believed that Jerome Kerveil concocted such an elaborate scheme all by himself. The Daily Mail reports (emphasis mine):

Executives at Societe Generale had originally insisted that 31-year-old Jerome Kerviel acted alone.

They compared him to a “lone arsonist who burnt down a big factory”.

But yesterday they conceded that he was unlikely to have carried out his deception without accomplices. And in interviews with detectives, Kerviel was said to be “naming names” and refusing to be a scapegoat.

What’s even more interesting from this article is,

But Societe Generale has made it clear that Kerviel did not personally benefit from the fraud.

If he didn’t benefit from this elaborate fraud, then who did at SocGen?

Product Review: Stock NeuroMaster

About a week ago I stumbled across a neat little stock neural net program called, interestingly enough, Stock NeuroMaster. I downloaded it and played around with it during its 14 day trail evaluation and was surprised by how easy it is to use.

Although I’m a heavy duty RapidMiner modeler, and I build intricate custom neural net/genetic algorithm models, Stock NeuroMaster appeals to me for its simplicity and ease of use.

SNM-NasIf you don’t care about how neural nets work, don’t want to deal with the hassle of finding data and making predictions sets, and just want a system to generate BUY and SELL signals with a click of a button, this is the system for you.

The system, from what I’ve deduced, uses a standard backpropogation algorithm. It downloads OHLC closing data for your selected stock symbol, then applies a zigzag line to the peaks and valleys of the stock price (this is done to find profits and losses), generates training BUY/SELL signals, then trains the data for maximum profit, and then builds a model.

SNM-PerformanceOnce the model is built, you can update the data by downloading daily/weekly data and then create a prediction with a simple click of a button. The prediction will then automatically generate a BUY/SELL or HOLD signal for the next trading day open. The model will also keep a log of all generated BUY/SELL signals and give you some system statistics on how well the system is performing.

Pros

  1. Easy to use, no knowledge of neural net algorithms needed
  2. Clean GUI, easy to read clean charts
  3. System Performance, Profit and Loss statement, and Buy/Sell Signal summary
  4. Easy step by step model building and prediction sets
  5. Yahoo, Metastock, and CSV (format) data compatibility and updates
  6. Stop loss and trading strategy settings

Cons

  1. Only a few technical indicators
  2. No real time data feed or update, only end of the day data downloads
  3. No “R” position sizing

Bottom line: If you want a neural net program that will generate BUY and SELL signals for stocks, without knowing how the inside guts work, then this is the product for you. Download the Stock NeuroMaster free 14 day trial (zip file) and let me know what you think by leaving me a comment.

The Year of Options

I’ve decided that this is the year I focus on understanding the option markets.  I’m interested in not only Stock options but Forex ones as well and to prepare my mind for this crazy endeavor, I started re-reading Natenberg’s book, “Option Pricing and Volatility,” and Taleb’s “Dynamic Hedging, Managing Vanilla Options and Exotic Options” book again. This time I’m really focusing in on the equations and esoteric calculations which I can embed as Excel macros running in TraderXL Pro. I’m doing this for two reasons, one I’m interested in the mathematical rigor of the options market and two, I’m trying to understand how to make money off Black Swan Events in the markets.

One top of this I’ve recreated my option volatility neural net model to forward forecast the historical volatility for the $VIX. I realized after testing it last year on the QQQQ’s and S&P500 that I had better success on the latter index and perhaps forward forecasting for the $VIX might be a better option (heh).

Bear Market Rally?

question.JPGThere’s a lot of confusion going on in the markets right now and some believe that there are market rallies right around the corner while others think we’re going down. I was talking to the Market Doctor yesterday and he’s convinced that, 1) we are in a Bear Market, and 2) this is a Bear Market Rally we’re experiencing. Based on the global carnage we saw this week, and several major indicies are now trading 20% below their peaks (aka as a Bear Market), I’d say he might be right. He’s not the only one who’s seeing the market action with Bearish eyes.

Sudden Debt poses a valid question in his latest post (emphasis mine):

In 25 years looking at the US economy and global markets, I have never seen such swift action from the Fed and the government, theoretically designed to avert or ease a looming recession. For example, the Fed’s 75 bp one-day cut was the largest in its history and the fiscal stimulus bill was approved by Congress in record time. Everything is being done in a great big hurry. Why? And what further conclusions may be drawn from such action?

Yes, what was it with this sudden 75bps rate cut? Was it a Fed knee jerk action to the major Monday sell off, which we’re finding out now was probably a result of Société Générale’s $7 Billion USD unwinding of a rouge trader’s fraudulent trades, or does the Fed know something we don’t know? Chances are the former and latter scenarios are correct, at least for me, and the Market Doctor might be onto something.

Forex Update

currency.thumbnail.jpgI’m starting out the year with my Forex account down 20%. Ouch! Well its all my fault, I shouldn’t have been trading while sick. I let my positions get away from me and I made some stupid buys. Plus the market was so volatile it kept stopping me out right and left!!! I have to study the Forex markets in detail now that my time at the Spa is coming to an end. Things have changed in the currency markets, especially in the Yen crosses. I wonder how many Kimono Traders blew out with its recent strength?

The beauty of trading Forex is that you can recover easily from a 20% drawdown just as easily as you can add another 20% loss to that amount!