Skip to content

Tech Cold War – White Swan #2

There’s something in the air…

When we come to new all time records and White Swans, they can behave in strange ways. Sometimes the extreme event fails to revert back to norm. Like it happened last week.

Today I was reading something about the potential commercial tech cold war among China and US.

We are used to this kind of articles. Anyway the recent poor overnight performances showed 14 nights with a total performance of more than -8% loss on SPY. It’s a huge overnight loss. It looks like the markets believe in this potential tech cold war.

Are we facing a new global recession and big bear markets?

Including today, looking back to 1993 (SPY inception), there are only 20 similar events. 19 of them are included in the 2 big bear markets of 2001 (in September) and 2008 (in October). Only one instance occured in 2011.

To sum up, there are 95% odds of being at the start of a 50% or more big bear market like those of 2001 and 2008. On both it happened at the final stage of the bear market. Now we are coming down from all time highs: this time it should be different.

This is what the stock market is telling us. Let’s wait and see!

Marco Simioni

Nightly Patterns

 

 

6 crash nights down in a row – White Swan

There’s something out there… A White Swan is coming!

China has finally reacted to Trumps export duties. Is the commercial war starting today? Nobody knows… The only thing we know is what the markets are doing now: crashing overnight and going sideways or up intraday.

SPY gapped down for 6 nights in a row today. This is not unusual. What is completely new is that SPY lost about 5.81%, summing up all these 6 nights. This is a bearish record performance back to 1993. It has never happened for more than 26 years (since SPY inception).

It only happened once (March the 16, 2011) that it lost more than 4.5% but less than 4.75%. It has been followed by 4 up nights in a row with a total of 2.81% of return. I’ll keep it in mind for the next 4 nights.

I call these events “White Swan” because we know how they are and that they may happen in future. I would now say this to be a “Black Swan”. You should not be able to describe the Black ones before they happen… anyway for the White ones it should be easier!

Marco Simioni

Nightly Patterns

Enjoy the new Global Trade Titans webinar on Wednesday!

Traders Talk Live is hosting a webinar entitled:

Trading Smarter, Not Harder

Dr. Dean Handley is panelist speaker and presenting:

TITANS WEBINAR

Date: Wednesday April 10, 2019Time: 1:00 pm EST

Register: here

 

See you there on Wednesday,

Marco Simioni

Global Trade Titan

GLOBAL TRADE TITANS AWARD – year after year!

It is a pleasure to announce that Nightly Patterns has been awarded as a Global Trade Titan for 2018 again! Now I’m beginning to be considered one of the elderly ones…

I have been in the Titans team since 2014. So it’s 5 years years now. I must thank again Dr. Dean Handley’s great truthful and transparent work with us.

2019 has started with great wind on our overnight trading wings and huge profits.

Remember to keep Global Trade Titans website monitored frequently as we have many interesting articles by Dr. Handley coming out and new entries as well…

Thank you Dean!

Marco Simioni, Global Trade Titan

TTW 2018 bb

I wish I had a future… on S&P 500 Dividend Aristocrats etf!

nobl

I’m always looking around for new market edges… There’s a lot written on high dividends stocks stronger bullish bias over lower dividend stocks. Many articles have been written on fundamentals factors and so on over dividends… I decided to run a simple backtest this morning:

be long every day at the overnight session on NOBL etf (from today’s close to next day’s open), you can see this on the “above zero line” cumulative % return equity curve (not compounded);

the opposite (always long) (from today’s open to today’s close) equity curve is displayed of course below the zero line. It shows a strong bearish edge. Intraday session delivers a total 70% loss being long everyday.

It is clear from the chart above that the overnight session leads to strong performances being long all nights: about 117% return since this etf inception in October 2013.

This is roughly 3 times the equal strategy returns of SPY! (it’s about 35% since 2013)

I wish I had a future…

More than 6 years of Nightly Patterns!

Greetings traders!

It’s more than 6 years now Nightly Patterns is trading LIVE (October 2012).

It’s not easy to find trading services that have been trading live for more than 6 years profitably.

What have traders following Nightly Patterns since October 2012 earned so far?

I know, I know… we lost in 2015. I’m not “Mr Market”. This is part of the game. We closed 6 profitable years out of 7. And that loss was very little compared to the huge profits.

Anyway, it depends on the number of contracts traded and their consistency. It’s not easy to be patient and consistent in the long run, specially during long and deep drawdowns. Updated results here. But at the end patience and consistency win the game!

Many of you have been keeping on trading and many have been trying and leaving. Consistency and patience, it pays to stay!

Here are the numbers:

6 years

Well, I have considered 6 years for the yearly subscription fee so $798*6 = $4788. And Ihave considered 1,2 as an average eur/usd change rate, as yearly Nightly Patterns fee is 665 Eur. I didn’t consider brokers futures trading fees. Mainly because trading frequency is low and futures fees per contract are usually very low too, the impact is minimal.

The % impact of Nightly Patterns subscription on returns goes from 19% to 2% as we increase the number of contracts.

I let you think about the numbers!

Hope to see you in,

Marco Simioni

Nightly Patterns

Free giveaway for Christmas!

Enter free giveaway 1 yearly Nightly Patterns subscription plan!

5 years

Presidential Cycle overnight perspective

The Presidential Cycle is a well-known stock market phenomena. There are 4 years in the cycle:

– Election year

– Post-Election year

– Midterm year

– Pre-Election year

I decided to run a backtest on SPY since its inception in 1993 to see whether this long term seasonality/cycle had an effect on overnight trading.

The answer to this question is yes, as you can see from the sheet above.

I considered trading all nights only during the traditional bullish months for stocks:

January – February – March – April – November – December.

I would say Midterm and Pre-election years to be the 2 best years with above 1,33 profit factor and lower % drawdown. Post election year is acceptable, nearly the same values as Pre-Election year.

It is clear that  Election year is terrible for overnight trading with very low profit factor and very high % drawdown.

Anyway these results are not tradable but they can offer traders an idea of where one of the most famous long-term bias lies.

If you have any questions, please write me at: nightlypatterns@hotmail.com

Marco Simioni

Nightly Patterns

QuantFor

RSI2 overnight returns since 1993 – Still good?

Previous post: #1 of the Cornerstones series.

Here we come with the second cornerstone of Nightly Patterns:  RSI2 (Relative Strength Index) used to filter long overnight trades on SPY back to 1993. We take all overnight trades on SPY when today’s close is above 200 SMA and RSI2 value is below 20.

Why did I choose 20 as a RSI threshold? Because this is the most common value considered as an oversold threshold. I’m not looking for the best threshold but I’m only working on the general phenomena consistency. And I’m wondering if all my patterns built on RSI2 are still solid enough.

How are 200 SMA and RSI2 dealing with the new recent data?

NT %W PF AW AL MAX MIN % DRAWDOWN
731 67,72 1,92 0,36 -0,4 4,09 -3,23 -4,28
T-score 5,78

It’s not doing so well from the numbers above. Profit factor (reduced from last year stats). I remember it was above 2. 731 nights from 1993. I like the compounded drawdown which keeps there under 4,5%.

And here’s the equity curve:

RSI 2

Impressive start in the 90’s leads to good filtering efficiency in 2001/2 and 2008/9 big bear markets (thanks to 200 SMA filter). It looks like we have problems recently, in the last year we are experiencing an important correction and we are still below the last peak on the equity line (look at the top-right corner of the chart).

Anyway, I don’t see a definite change in the structure of the curve, as we have already been recovering during the last few months. It looks like all RSI2 based patterns will continue to outperform the market as they have have done in the last 25 years!

It will continue… with the other cornerstones!

If you have any questions, please write me at: nightlypatterns@hotmail.com

Marco Simioni

Nightly Patterns

QuantFor

New Nightly Patterns rules set results!

I’ve been spending months thinking how to increase Nightly Patterns trading frequency without experiencing extreme drawdowns.
As we deal with futures (20X leverage or 5% margin on Emini contracts) drawdowns on capital used as margin can be very high.
Instead on using the Odds Map very selective approach, I tried to make a more rough trade selection. The equity curve above shows strong returns, about 400% from SPY inception, trading SPY. Can you imagine expoiting Emini futures leverage?

This is the most robust set of rules:

Take a LONG trade when there are MORE than 5 bullish patterns triggering and NO bearish patterns triggering.

Take a SHORT trade when there are MORE than 2 bearish patterns triggering and LESS than 3 bullish patterns triggering.

Here are the numbers:

Profit Factor = 2,96

% of winning trades = 69%

# of trades (since 1993) = 1908

# of trades per year = 76

# of trades per month = 6,36

Trade frequency rised from 5 to more than 6 trades per month. But what I like most are the following monthly returns on SPY, which are definitely better than my previous approach, last 5 years of live performance included. I know, I know, this is only a backtest and not a live trading results sheet.
But I think they are robust enough.

Here is the simple SPY version returns on invested equity:

new nules monthly spy

And here is the 5% margin Emini (20X leveraged) version monthly double digit returns

on invested equity:

new rules monthly ES

Lastly, I want to make you focus on the 71% monthly drawdown on 2009, it was about 80% measured daily. Very high, that’s why traders need a cash reserve trading futures.
It means traders only have 20% of cash reserve left to face further drawdowns (not so much), with current 50% invested equity/50% of cash reserve rule. Globally it was 40% drawdown on total Nightly Patterns dedicated capital.

To be prudent I think to raise the current 50%/50% equity/cash ratio at least to 60%/40% equity/cash new ratio for aggressive traders, and to 70%/30% equity/cash for prudent traders.

So on total Nightly Patterns dedicated capital: 

max % daily drawdowns = 32% (aggressive traders – 40% invested equity)

max % daily drawdowns = 24% (prudent traders – 30% invested equity)

This is the price to pay for these new strong double digit returns! You can look at the SPY daily % drawdowns chart (drawdown on Emini margins must be leveraged by 20x)

new rules spy drawdowns

 

%d bloggers like this: