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Guy,
I trade futures across a broad spectum on most major exchanges. I am of the
school of thought that says to position trade in global futures you must
diversify across both products (different markets and/or regions) and systems
(in my case I both trade trend and counter-trend and have experimented with so
many other approaches).
My only involvement in cash equities would be my core equity holding purchased
over the years with profits from my trading account.
I must say that I find your posts to be most informative; certainly the wisdom
that comes from trading for many years shows in your messages Thanks for
sharing.
Regards,
Essan.
Guy Tann wrote:
> Essan
>
> Interesting! Are you trading individual equities, indices or what?
>
> I didn't mean to imply that our system turned unprofitable. If you look at
> the period from May 1st to present, it's up 181% as of EOD today. If
> anything, the increased volatility has helped us tremendously.
>
> Without this Bond linkage though, it's up 311%, or almost double.
>
> I think that worries me more than anything. With the increased volatility
> in our current trading range as well as this apparent decoupling from Bonds,
> leads me to believe that we're going to have a breakout. Now with all of
> the current problems worldwide, as well as that 'dead analyst bounce' when
> the US jumped in to support the Yen, I've got to believe that there is a
> good possibility of a breakout to the down side. Again, we're short term
> traders, so it doesn't bother me which way the market goes, it's just that I
> worry about the bottom falling out of everything.
>
> Volatility is my friend. Dull, long term trending markets are my enemy. My
> only worry is that we'll go into a bear market, the market will bottom and
> then we'll have 15 years of no activity because there is nothing going on.
> I better start looking for a job if that happens :). Or at least make sure
> my better half's happy and making money in her job.
>
> Regards
>
> Guy
>
> -----Original Message-----
> From: owner-metastock@xxxxxxxxxxxxx [mailto:owner-metastock@xxxxxxxxxxxxx]
> On Behalf Of Essan Soobratty
> Sent: Friday, June 19, 1998 11:02 AM
> To: metastock@xxxxxxxxxxxxx
> Cc: grtann@xxxxxxxxxxx
> Subject: Re: Times are a changing? Bonds&Equities
>
> Guy,
>
> My systems/methodolgies have been experiencing similar phenomena for the
> past
> few months. Not only my interest rate basket vs S&P but also across other
> instruments too.
>
> I trade a broad range of markets around the world and at any one time will
> have
> positions in up to maybe 15 markets. My systems use the inter-relations
> between
> instruments not only for signal confirmation/divergence but also for
> risk-measurement. These changes that I have observed have not (yet?)
> reached a
> level where they have turned a profitable methodology into a losing
> proposition
> but my measures of profitability have decreased somewhat with increased PnL
> volatility.
>
> Like you, I am still exploring what these fundamental changes are that are
> transpiring and how best to capture these within a methodology without
> re-optimizing parameters.
>
> I am also noticing a marked shift in profit contribution from my various
> systems: My trend-following systems have improved in performance at the
> detriment of my counter-trend systems. Up until recently my portfolio risk
> was
> approximately 70% trend-following and 30% counter-trend. I have now upped
> my
> trend-following risk to 85%. This has increased some measures of
> profitabilty
> and also dampened some the previously mentioned increase in PnL volatility.
>
> Regards,
>
> Essan.
>
> Guy Tann wrote:
>
> > Has anybody else noticed a decoupling of the T Bonds and equities? Our
> > trading system has used the Bonds to confirm our S&Ps trades for the last
> > twelve years with great success. In the last month or two, I've noticed
> > that Bonds seemed to have decoupled from the equities market and that we
> are
> > better off trading our basic S&P system without Bonds confirming.
> >
> > Is this a temporary decoupling of Bonds and equities caused by the Asian
> > economic crisis or is it more permanent in nature?
> >
> > Is this the beginning of the end of the bull move???
> >
> > Pro:
> >
> > Asian crisis. Possible collapse of Far East financial infrastructure.
> > Asset deflation. Commodity price decline. Earnings impact on US firms
> > caused by the aforementioned Asian problems as well as loss of export
> > markets (dollar inflation). Too much money (401k, etc.) chasing too
> little
> > quality. Equity prices discounting not only future earnings but the
> > hereafter.
> >
> > Con:
> >
> > Lack of final blow off to the upside. Falling interest rates (Asians
> > chasing US Bonds). Fairly stable economy and competitive US edge due to
> our
> > already having gone through our own financial upheaval (S&L crisis, etc.)
> > and industry restructuring (reengineering) during the last decade.
> >
> > I'm sure there are tons of Pros and Cons that I'm too lazy to think of and
> > that's why I started this thread. I'm also sure that some of you have
> > spotted other indicators in your trading that I would never see, just due
> to
> > the fact that I only trade S&P futures and never look at Bonds, equities,
> > options, LEAPS, foreign markets, etc..
> >
> > This recent Bond/Equity relationship change has made a major impact on our
> > trading results. In the last 6 weeks, our trades without Bonds are 77%
> > more profitable than using the Bonds. In the past, coupling Bonds with
> our
> > S&P trades has made the difference between a profitable year or a losing
> > year. What worries me is that maybe this isn't a new trend, but simply an
> > aberration. Simply a point discontinuity or as one of my kids would say,
> a
> > flea on an elephant's butt. Currently, we're still trading using the
> Bonds
> > to confirm. I'm watching our S&Ps with and without the Bonds, and I'm now
> > getting ready to switch over to ignoring the Bonds. However, I'm really
> > nervous reacting to a 6 or 10 week 'trend' versus our twelve years of
> > experience.
> >
> > Any ideas or thoughts would be appreciated.
> >
> > Regards
> >
> > Guy
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