THE BOND SYSTEM
We are getting whipped around some this month in the Bond System. This is going to be our first monthly loss with that system this year. What to do? The simple answer is there is nothing to do, let me explain.
Systematic trading is not always the panacea some people think it is. When the winning streaks are going like the one we had it is raise the roof time and then when we get into bad streaks like this it is jump off the cliff time. Actually neither of these are true. I hate losing as much as the next person, I would argue I hate it more than most. However, I have been telling everyone right when the winning streak started heating up that it would not always be that way. Now everyone is seeing what I was talking about. Even good systems have periods of losses. I am going to be writing in detail about exactly how to measure these when they occur and what to do about them, in next month's Newsletter. When we go through a losing period it is no fun. I have people bailing out on the system and I knew that would happen the minute one of these periods developed. I tried to warn everyone that no system is infallible but I think people thought I was just crying wolf since all the trades were so darn good. I have been at this a long time and have been through plenty of periods where systems had bad trades. As a result as much as I don't like it either, it is the nature of the beast. ( Sorry about this paragraph, Blogger won't let me left justify it no matter what I try to it gets centered I guess ).
For the time being I will offer a general overview of analyzing systems but leaving the details to those who get the Newsletter. You have to measure and deal with equity runs in systems in some ways the same way you deal with analyzing a market. You look at trends and retracements etc.. and then determine whether or not the trend has changed or not. At this point in spite of the losing month the trend has not changed yet so we still keep plugging away. That may seem like a simple answer but making things complex does not make them better from my experience.
I know some people are tied up in the fiscal cliff crap and the whole point of using either systems or technical analysis is to get that Noise out of our heads. Our systems and or tools will tell us what to do and we don't have to rely on some arbitrary opinion we might have one day about politics. Trying to guess our way through trading is not going to work over the long haul, even if you happen to be able to do it for periods of time successfully. I personally can't do it so I don't try. The whole Fiscal Cliff media hype is irritating to me and if I never heard another word about it that would suit me just fine. I am not going to pick sides, I think both of the two parties leaders are clowns at this point so how could I pick a side? It seems all they agree on is that smoking is a good idea.
I mentioned that I was looking for some down side action in the indexes and we have gotten some of that. This was based on mostly a COT type of sell setup plus a few of my proprietary tools pointing down. Those tools are still pointing down so the view has not changed. It is certainly possible Washington could create a big rally if something happened, but I can't concern myself with that. I cannot predict the future or how people will react to the future events. My tools are telling me to look down so that is what I am doing.
This is still a choppy mess so there is not an entry that I can see other than some things my short term mechanical system is flashing for tomorrow. I don't see a reason to take a position type of trade in this market here. I see no reason to force something that is not there. If you are inclined to short play the Naz it is the weakest of the indexes.
I think the Gold market is setup for a buy here based on the some strategies I use that I don't discuss in here.
That is all I have for tonight.