ALGO TRADING (Maya) UPDATES
Maya continues to relax one month after launch. Although she is simply following the rules that I have coded into her, it is a little challenging for me to troubleshoot any issues in the live environment when she is basically doing nothing.
She did open a put spread last week (that is when I officially kicked off the beta/pilot program to select members of our group) but then she closed that trade on the same day thinking it had a 65% loss. This was good, as it allowed me to catch a bug in the profit calculation logic for put spreads (call spread logic was fine). But only when she makes some moves, will I be able to catch these and that is what this beta/pilot is about. It is not ‘early access’, it is me recruiting few members of our group to iron out any kinks before I open it up to the whole group. Oh well, good things come to those who wait! .
SHORT WEEK, Thanksgiving, Core PCE and GDPÂ
It is going to be a compressed week due to thanksgiving. Jobless claims have been moved back to Wednesday instead of the usual Thursday. But then we also have GDP and all the Core PCE on Wednesday which are known to be huge market movers. Â
DIA – Very bullish
Unless Core PCE, Jobless claims or GDP come out with a nasty surprise, Dow Jones is looking extremely bullish here and we have the potential of seeing new highs as early as next weeek.Â
QQQ – Sluggish
Tech/Growth on the other hand is a different story. Even after beating earnings estimates, NVDA is pulling back. Look at all Mag 7 stocks, almost all of them are pulling back as well. This is not exactly an encouraging story for the bulls. Of course, if GDP, Jobless claims and Core PCE all come out with tame data, this story can change next week, but at least as of now it is not looking good.
RRG Charts (Sector Rotation)
RRG charts are back baby. If you don’t know how to read them, watch this video: https://tradingextremes.com/sector-rotation-secrets-picking-the-right-stocks-to-trade/
I was disappointed a few months ago as RRG charts did not prove effective as far as their predictive powers go, but they do give you a very good picture of sector rotation and what is happening in the markets at the moment. Here are some important points to keep in mind:
1) XLI, XLC, XLF, XLY are all positive and you can see that DIA (or Dow Jones) is shooting up showing some serious strenght.
2) Defensive sectors like XLU, XLP, XLV are dropping at the same time indicating that the market’s risk appetite is still there
3) XLK or tech is what will lead us into an end of the year bull run and santa rally. And it is poking its head above the water. Next week should make things very clear to us. If XLK keeps rising, we are heading into that end of the year rally.
DIVERGENCE INDICATORS – Still Strong!
These divergence indicators have been screaming – warning, warning for almost 2 months now, but no!!! the market continues to go up. I don’t know what to make out of this. As unsettling as this is, markets continue to march higher. Hope we don’t get a sharp drop on some stupid news, because that is what happens when markets keep ignoring these signs. But as mentioned in my notes, as long as VIX stays low and XLK keeps moving towards the leading quadrant, this bull run will not stop.
EARNINGS: Almost over
Earnings season is practically over, but 8 stocks from our watchlist are all reporting earnings on Tuesday.Â
Trading plan for next week
- I am hoping Maya will take a trade or two next week as that will help me with the beta/pilot program. But I not not going to force her to take any trades as that invalidates my backtests. Maya’s success rate is 70%-80% for a good reason. And that reason is patience and waiting for the right setups to show up.
- Wednesday is full of market moving events. So, although I will be trading before that but it will be on the lower end of the spectrum.