Z-Trader Quant Strategies

Better Way than Tarriffs: Unfair Competition Law

noreply@blogger.com (Unknown) — Fri, 10 May 2019 11:01:00 +0000

There is a better way to respond to Chinese intellectual property theft: unfair competition law. Use of unfair competition law to sanction overseas piracy is a relatively new tool. However, our research has found that it has already proven effective in holding scofflaws accountable.

Read more here:
http://theconversation.com/tariffs-are-the-wrong-weapon-in-fight-against-chinas-pirates-heres-the-right-one-95622

Yield Curve - Predictiveness

noreply@blogger.com (Unknown) — Mon, 05 Mar 2018 19:00:00 +0000

The yield curve, which plots yields across Treasury maturities, is still by far the most accurate predictor of recessions, according to new research released Monday by the San Francisco Federal Reserve.

The spread between 2- and 10-year yields is a widely watched section of the curve for its indications of economic health.

An upward sloping curve, with longer-term yields higher than their short-term counterparts, is typical, especially in an expanding economy. An inversion between these two maturities — in other words, if the yield on the 2-year is higher than the 10-year — reliably predicts low future output growth and indicates a high probability of a recession, the Fed branch said in its report. An inverted yield curve has correctly signaled all nine recessions, with only one false positive in the 1960s.

Stock Market Update (9/18/15)

noreply@blogger.com (Unknown) — Fri, 18 Sep 2015 19:46:00 +0000

It has been a long time since we posted. Our stock signals have mostly remained steadily long during the stock markets's rise over the past year-plus.

Recent volatility due to "China worries" and the "FED interest rate watch" have increased volatility and led to several relatively sharp declines. Although there have been several sharp moves downward, investors should note that the S&P 500 is only about -5% to -7% off of recent peaks. In addition, stocks are 15% to 20% higher than they were two years ago.

Still, based on recent market action, here are our stock market indicators:

Long-Term Indicators are currently neutral, and are looking towards market action for a potential change in signal.
Intermediate-term models are currently mildly short; the market seems overbought.
Short-term indicators follow the current trend and are too short-term to report regularly.

It is noteworthy that other markets we trade - such as currencies and commodities - helped to cushion the decline in the equity markets the past few months.

Good luck!

Super-Wealthy and Inequitable NYC Taxes

noreply@blogger.com (Unknown) — Sat, 25 Jul 2015 22:57:00 +0000

Thanks to the structure of city and state tax codes, the billionaires buyingpieds-à-terre in the sky over Central Park are hardly paying property taxes at all. The values of these new condos are being assessed at just a fraction of what they're worth. And buyers are paying only a fraction of that fraction in property taxes.

This is a pressing issue for at least three reasons. For one thing, the property-tax levy is New York City's single largest source of revenue. The city is leaving money behind by failing to tax the most valuable homes at a rate closer to their market value. Meanwhile, well apart from the ultra-luxury condos, the city is overtaxing apartment buildings, whose renters are struggling the most with affordability. These outcomes go hand in hand.

Intermediate-Term Stock Market Indicators FINALLY Long

noreply@blogger.com (cc) — Thu, 07 Aug 2014 00:14:00 +0000

It has been quite a while that our stock market indicators have gone long, and our results suffered accordingly.

The stock market closed today at 1920. Our last update was 11 months ago.

Happily, our long-term indicators kept us generally long (to flat or slightly long) in the stock market since they remained strongly bullish during the run-up.
Currently, the long-term indicators are moderately bullish. The long-term indicator has its "foot off of the gas" due to the recent sell-off.
Our medium term oversold indicators are now fully long. These indicators had been predicting a sell-off incorrectly for several months, keeping us from being fully long in the stock market.

Over the long-term, we have a good record managing the ebbs and flows of the stock market. This recent under-weighting of equities brings us back closer to the pack in terms of market-timing, but we have outperformed most.

Bitcoin - Good Q&A

noreply@blogger.com (Unknown) — Wed, 26 Feb 2014 00:35:00 +0000

Here is some of the best information we have read about the Bitcoin. It comes on the form of Q&A (questions and answers) from the Washington Post.

Q: What’s a bitcoin?

A: Bitcoin is an online currency that allows people to make one-to-one transactions, buy goods and services and exchange money across borders without involving banks, credit card issuers or other third parties. As a result, this exotic new form of money has become popular with libertarians as well as tech enthusiasts, speculators — and criminals. Bitcoins are basically lines of computer code that are digitally signed each time they travel from one owner to the next.

Q: Is bitcoin particularly vulnerable to counterfeiting?

A: The bitcoin network works by harnessing individuals’ greed for the collective good. A network of tech-savvy users called miners keep the system honest by pouring their computing power into a blockchain, a global running tally of every bitcoin transaction. The blockchain prevents rogues from spending the same bitcoin twice, and the miners are rewarded for their efforts by being gifted with the occasional bitcoin. As long as miners keep the blockchain secure, counterfeiting shouldn’t be an issue.

Richest 85 = Same Wealth as 1/2 of Population

noreply@blogger.com (Unknown) — Mon, 20 Jan 2014 15:42:00 +0000

According to a new report by Oxfam, the richest 85 people in the world control as much wealth as about one-half of the world's population.

That is 85 people compared with 3.5 billion.

A new report from Oxfam has been published in time for the World Economic Forum in Davos this week.

It shows the world's ultra-wealthy have not only recovered from the global financial crisis, they have positively blossomed.

The report shows the wealth of the 1 per cent richest people in the world is worth about $110 trillion, 65 times the total wealth of the bottom half of the world's population.

It also shows the world's richest 85 people control about $1.7 trillion in wealth, equivalent to the bottom half of the world's population.

Caution on Stocks 9/9/13 at 4:45 PM

noreply@blogger.com (Unknown) — Mon, 09 Sep 2013 21:26:00 +0000

Our stock market indicators are flashing a warning signal so investors and traders should take note and be careful. Our last stock market signal was on June 6, 2013, when our indicators were bullish. At the time, the S&P stood at 1609. The S&P is currently at 1672.

Long-term indicators are bullish.
Intermediate-term indicators are moderately bearish.
Overall, we remain slightly bullish, but we will be watching the short-term trends and indicators.

Investors should be cautious and should look for sell-offs to add to equity positions. Traders may look to the short side if the market accelerates to the downside. It is often difficult to predict turning points, but our intermediate-term model has had a good track record as documented by our blog.

As always, we will keep readers apprised of changes to our stock market indicators.

Crude Oil on 6/7/13 - Popped up 1% and then another 1%

noreply@blogger.com (Unknown) — Fri, 07 Jun 2013 14:25:00 +0000

Today, crude oil was trading lower by about -1%, then bounced to about even -- and is now up almost +1%. This is all within about 45 minutes -- and happened by about 10:15am EST.

Just an observation about market action and why traders oftentimes need to think about time-frames and how various triggers react to volatility.

Stock Signals: Back on the Gas Pedal 6/6/13, 6AM

noreply@blogger.com (Unknown) — Thu, 06 Jun 2013 10:32:00 +0000

As of the close yesterday, our overbought/oversold indicators have flipped from a bearish to a bullish stance. Our last signal change was on May 9, 2013, when our overbought indicators turned bearish. At the time, the S&P was at 1627. As of the close yesterday, the S&P stood at 1609.

For a while, this system's signal (and trade) was looking bad, with the S&P breaching the 1650 level, but some of the air has been let out of the bubble. This model is now bullish. Here is a rundown of the current technical trends in the U.S. stock markets:

Long-term indicators are bullish
Intermediate term overbought/oversold are bullish
Short-Term currently bearish, but this changes in the short-term.

Our tactical asset allocation models, which apply these approaches to various asset classes, have performed well.

Past performance is not necessarily indicative of future performance.

Reiterate Overbought Stock Signal 5/24/13

noreply@blogger.com (Unknown) — Sat, 25 May 2013 03:12:00 +0000

Two weeks ago, our stock market overbought / oversold indicator flashed a bearish signal. At the time, the S&P 500 was 1627. Today, the S&P closed at 1649.60, so this signal has been a loser, to date. Over the years, the overbought / oversold model has been a good performer, but at some point, good systems will "throw in the towel" and cut their losses (-- and get back on the main trend).

Currently, the Overbought stock signal is still bearish.
The long-term indicator remains bullish.
The short-term trend is up.
Thus, our positions have been dictated by our short-term model.

Note that the overbought indicator looks like it may flip to neutral to slightly bullish soon, so visit our blog regularly (or connect to our twitter).

Happy Memorial Day weekend.

Quick Blog Post: Stock Signals turn neutral to bearish (5/9/13 - 3:45pm ET)

noreply@blogger.com (Unknown) — Thu, 09 May 2013 19:51:00 +0000

S&P is currently at 1627.

More later.

In particular:

Overbought indicators are bearish.
Long-term signal remains positive
Short-term indicators will dictate our positions (were bearish near the close).

Fat Fingers, Phony Tweets and Today's Markets

noreply@blogger.com (Unknown) — Fri, 26 Apr 2013 10:38:00 +0000

A few years back, we had the "Flash Crash" due to the "fat finger..." This past week -- on Tuesday -- if you looked at the price chart for the day, and didn't know what was going on, you might think that there was a data error (see circled area). However, what you see is the real price action -- moving markets down 1% and then up 1%, within minutes -- due to false rumors of an explosion near the White House.

The DJIA dropped 120 points in just one minute due to the fake tweet! Tory Capital reports below:

For a few surreal minutes, a mere 12 words on Twitter caused the world's mightiest stock market to tremble.

No sooner did hackers send a false Associated Press tweet reporting explosions at the White House on Tuesday than investors started dumping stocks eventually unloading $134 billion worth. Turns out, some investors are not only gullible, they're impossibly fast stock traders.

Except most of the investors weren't human. They were computers, selling on autopilot beyond the control of humans, like a scene from a sci-fi horror film.

"Before you could blink, it was over," said Joe Saluzzi, co-founder of Themis Trading and an outspoken critic of high-speed computerized trading. "With people, you wouldn't have this type of reaction."

For decades, computers have been sorting through data and news to help investment funds decide whether to buy or sell. But that's old school. Now "algorithmic" trading programs sift through data, news, even tweets, and execute trades by themselves in fractions of a second, without slowpoke humans getting in the way. More than half of stock trading every day is done this way.

Gold Continues Sell-Off 4/15/13

noreply@blogger.com (Unknown) — Mon, 15 Apr 2013 12:25:00 +0000

Gold continued the extreme sell-off it saw on Friday, when it dropped from about 1565 to 1500 (basis the June 2013 futures contract). Over the weekend and into the New York opening on Monday, April 15, 2013, gold is seeing a breathtaking drop to the 1400 level. This drop of about 10% shows why traders often have risk management approaches in place and act first -- and ask questions later. Gold is now at two-year lows (at the lows of 2011 and 2012).

In futures trading, trend-followers are often seen as "reactive" -- but technical traders who follow trends have also seen their approaches be "predictive." Other precious metals such as silver and platinum, and related markets such as the Aussie dollar are also selling off in sympathy.

More on the technical selling from the CME:

The gold futures markets opened in New York on Friday 12th April to a monumental 3.4 million ounces (100 tonnes) of gold selling of the June futures contract (see below) in what proved to be only an opening shot. The selling took gold to the technically very
important level of $1540 which was not only the low of 2012, it was also seen by many as the level which confirmed the ongoing bull run which dates back to 2000. In many traders minds it stood as a formidable support level... the line in the sand.

Two hours later the initial selling, rumoured to have been routed through Merrill Lynch's floor team, by a rather more significant blast when the floor was hit by a further 10 million ounces of selling (300 tonnes) over the following 30 minutes of trading. This was clearly not a case of disappointed longs leaving the market - it had the hallmarks of a concerted 'short sale', which by driving prices sharply lower in a display of 'shock & awe' - would seek to gain further momentum by prompting others to also sell as their positions as they hit their maximum acceptable losses or so-called 'stopped-out' in market parlance - probably hidden the unimpeachable (?) $1540 level.

The selling was timed for optimal impact with New York at its most liquid, while key overseas gold markets including London were open and able feel the impact. The estimated 400 tonne of gold futures selling in total equates to 15% of annual gold mine production - too much for the market to readily absorb, especially with sentiment weak following gold's non performance in the wake of Japanese QE, a nuclear threat from North Korea and weakening US economic data. The assault to the short side was essentially saying "you are long... and wrong".

Read more here:
http://www.cmegroup.com/education/market-commentary/metals/2013/04/pre-open-gold_3564.html

And why is gold selling off? Some say it is the result of China's latest round of economic numbers (China GDP), and others report that stories of Cyprus selling gold reserves (related to the Greek crisis) is hitting the gold market.

Head and Shoulders Above the Rest? Institutional Investors and Technical Analysis

noreply@blogger.com (Unknown) — Wed, 10 Apr 2013 19:54:00 +0000

Here is the Abstract of a paper on institutional investors and their usage of technical analysis.

Abstract

Based on a study of more than 10,000 actively managed equity and balanced funds, including about one-third of which employ technical analysis, the authors compared the investment performance of funds that use technical analysis versus those that do not using five metrics. They found that funds using technical analysis provided a meaningful advantage to their investors.

Source:
http://www.cfainstitute.org/learning/products/publications/contributed/Pages/head_and_shoulders_above_the_rest__the_performance_of_institutional_portfolio_managers_who_use_technical_analysis.aspx

Registration may be required to read more, but the main ideas are listed.

Billionaires Dumping Stocks...

noreply@blogger.com (Unknown) — Tue, 02 Apr 2013 16:28:00 +0000

Are we climbing a "wall of worry" or are we in store for a big stock market drop? Only time will tell -- but here is an interesting article about some big names who have been selling into the stock market rally.

*********

Despite the 6.5% stock market rally over the last three months, a handful of billionaires are quietly dumping their American stocks . . . and fast.

Warren Buffett, who has been a cheerleader for U.S. stocks for quite some time, is dumping shares at an alarming rate. He recently complained of “disappointing performance” in dyed-in-the-wool American companies like Johnson & Johnson, Procter & Gamble, and Kraft Foods.

In the latest filing for Buffett’s holding company Berkshire Hathaway, Buffett has been drastically reducing his exposure to stocks that depend on consumer purchasing habits. Berkshire sold roughly 19 million shares of Johnson & Johnson, and reduced his overall stake in “consumer product stocks” by 21%. Berkshire Hathaway also sold its entire stake in California-based computer parts supplier Intel.

With 70% of the U.S. economy dependent on consumer spending, Buffett’s apparent lack of faith in these companies’ future prospects is worrisome.

Unfortunately Buffett isn’t alone.

Fellow billionaire John Paulson, who made a fortune betting on the subprime mortgage meltdown, is clearing out of U.S. stocks too. During the second quarter of the year, Paulson’s hedge fund, Paulson & Co., dumped 14 million shares of JPMorgan Chase. The fund also dumped its entire position in discount retailer Family Dollar and consumer-goods maker Sara Lee.

Finally, billionaire George Soros recently sold nearly all of his bank stocks, including shares of JPMorgan Chase, Citigroup, and Goldman Sachs. Between the three banks, Soros sold more than a million shares.

Read more here:
http://www.moneynews.com/MKTNews/billionaires-dump-economist-stock/2012/08/29/id/450265

Stock Systems Go Long 2/25 (8:30 am)

noreply@blogger.com (Unknown) — Mon, 25 Feb 2013 13:45:00 +0000

Our stock systems are now long, with some of the air let our of the recent rise in the stock market. The stock market has seen a strong run since the depths of the financial crisis (2008/09) -- and also since the middle of 2011 and last summer. The market seems just a touch overbought, but our systems don't want to "fight the tape" any more on this short-to intermediate-term cycle. Although many are still struggling with this difficult economy, there are finally scattered signs of recovery.

Our last signal was on January 3,. 2013, when our overall stock signals went flat -- based on the intermediate-term overbought models going slightly bearish. At the time, the S&P stood at 1457, and with Friday's close at 1515.60, this signal was a slight loss. Currently, our models are:

Long-term: bullish
Intermediate-term: bullish
Short-term: changeable, but currently bullish.

MF Global -- Good News...

noreply@blogger.com (Unknown) — Wed, 30 Jan 2013 15:08:00 +0000

At long last, it looks like the MF Global situation will be resolved in a positive way -- with the possibility of making customers "whole."

The NY Times reports:

On Thursday, a bankruptcy court will review a proposal that would return 93 percent of the missing money to customers like Mr. Desai. And the trustee who has submitted the proposal, James W. Giddens, has quietly identified a way that, if sent to the judge and approved, could plug the remaining shortfall for customers in the United States, according to people involved in the case.

The broad push to make MF Global customers nearly whole, a goal now surprisingly within reach, is a remarkable turnaround from the firm’s 2011 bankruptcy filing when such a recovery seemed impossible.

Stock Systems -- Go Flat 1/3/13 at 3:30pm

noreply@blogger.com (Unknown) — Thu, 03 Jan 2013 20:39:00 +0000

Our overall stock market signal has gone from bullish to neutral. The S&P is currently at 1457.

The last signal change was on October 11, 2012, when the (intermediate-term) systems went long, when the S&P stood at 1438. The systems rode some volatility -- but in the end, completed the bullish stance with a gain of 19 S&P points.

After the recent rise in stocks:

Our intermediate overbought indicators are now slightly bearish.
Long-term model is bullish.
Short-term model helped to bring us to the current neutral position.

Happy New Year!

The Economy Will Improve (Economist)

noreply@blogger.com (Unknown) — Mon, 24 Dec 2012 13:43:00 +0000

Here is a 2013 Forecast from The Economist and the CMEgroup.

The new year will begin with heavy clouds suspended over
much of the global economy, but with the prospect of
brightening later in 2013.

Uncertainty over the “fiscal cliff” will weigh on U.S. growth in
the short-term, but assuming this hurdle is safely negotiated,
confidence should improve next year. By mid-2013 stimulus
should also more visibly be boosting China’s economy, and
even the euro zone should be growing again.

The Economist Intelligence Unit’s latest global forecast—
largely unchanged from last month—is therefore for a
limited pick-up in Gross Domestic Product growth next
year, with improvements in key economies setting the
stage for a stronger recovery in 2014

Read more here:
http://www.cmegroup.com/market-insights/files/eiu-global-economy-2012-12-12.pdf

Happy holidays!

Stock Systems: Re-Iterate Long Trading Signals 12/4/12

noreply@blogger.com (Unknown) — Tue, 04 Dec 2012 18:57:00 +0000

We have not needed to update our stock trading signals because the signals have mainly remained the same. Our last signal update was on October 11, when the S&P stood at 1438. The S&P closed yesterday at 1410. Our stock market signals remain:

Long-term models remain bullish.
Intermediate-term (Overbought / oversold) models remain moderately bullish.
Short-term trends continue to dictate our stock positions.

Since October, the stock market has been fairly volatile, dropping from the 1460 level down to 1350, before rebounding to the 1410 level.

Long-term investors should look to add to positions on stock declines.
(E-mini) S&P traders should look to be long, based on our long-term (bullish) and intermediate-term (moderately bullish) signals.

High Frequency Trading: Good Overview

noreply@blogger.com (Unknown) — Tue, 16 Oct 2012 17:41:00 +0000

Here is a great overview of "high frequency trading."

High frequency traders employ pattern recognition algorithms that look deeply at bids and offers on stocks to determine if the movement on the bid quotes or offered quotes implies a directional tendency.

Computer-driven algorithms are “reading” the quotes, the intentions of buyers and sellers as they put down their orders in real-time, to make a trade that the HFT player expects to profit from if the directional bias their computers pick up is correct.

HFT computers look at all the bids and offers wherever any stock is traded. Sometimes stocks are traded at several different exchanges or “venues” at the same time.
But trading the price discrepancies that sometimes occur because there are different quotes at the same time at different exchanges for the same stocks isn’t where HFT players make their money, although they do that, too.

What the HFT boys actually do more of than high frequency trading is “high frequency quoting.”

They have their computers send out their own bids and offers, or quotes, to all the exchanges, almost all the time.

How HFT Manipulates Markets

What they are doing is trying to influence, I call it manipulate, what other traders and investors do with their bids and offers. They are trying to fake or set-up other market participants to react to the quotes the HFT players fire out onto the exchanges for all the stocks they trade.

Only the HFT quotes sent out aren’t meant to be acted on. They aren’t looking to buy on their bid quotes or sell on their offer quotes.

Instead, they are sending out orders to “ping” markets.

Ping refers to how sonar works. For example, a submarine sends out a sonar beep which hits a target and sends back a sound (which sounds like a ping) which the sonar operator “reads” to determine the pinged object’s distance and shape.

HFT players are constantly pinging stocks where their quotes are housed and displayed. They send out their orders to manipulate others to adjust their quotes, which get fed into the HFT algorithms to determine any directionality; then, if an opportunity exists the HFT computers buy or sell shares that someone else has put onto the market.

They aren’t quoting constantly as bona fide “market-makers” are supposed to do, which they claim they are acting like. They are simply putting out millions of fake bids and offers which they pull almost immediately, just to read the movement of other market participants who react to the HFT come-ons.

It isn’t illegal. But it is manipulation.

Read more here:

http://etfdailynews.com/2012/10/16/the-truth-about-high-frequency-trading-and-the-coming-stock-market-crash/

Part 2 of article (no increase in liquidity, but increased chances of out-of-control markets)

http://etfdailynews.com/2012/10/19/unless-we-act-high-frequency-trading-will-crash-the-stock-markets-indexsp-inx/

Stock System Update: Long at 12 noon (10/11/12)

noreply@blogger.com (Unknown) — Thu, 11 Oct 2012 16:07:00 +0000

Our stock market systems are going from neutral to moderately bullish. Our last stock system update flashed a warning on September 10, 2012 -- and went neutral when the S&P stood at 1433. Currently, the S&P stands at 1438, so it was a fairly successful signal.

http://z-trader.blogspot.com/2012/09/stock-systems-flash-caution-330pm-91012.html

Our long-term models remain bullish.
Our overbought/oversold models are moving to moderately bullish.
As usual, short-term trends should help dictate your trading positions and risk management.

Improving Investment Decisions with Quant Analysis

noreply@blogger.com (Unknown) — Fri, 21 Sep 2012 01:03:00 +0000

Below are some excerpts on a SeekingAlpha article -- that highlights "the application of quant analyses to produce meaningful and objective investment information."

With so much at stake in the finance and investment world, there are constant debates about investment performance, asset allocation, active vs. passive approaches, and more. In this article, we review recent articles on the application of quantitative models to the investment world - and look at the stock market's technical outlook.

History can tell us where we have been -- and a scientific and mathematical approach can help guide our investment decisions going forward. Quantitative analytics can be applied to many areas within finance, ranging from asset allocation and risk management to trading / investment strategies and the growing interest in alternative assets.

Quantitative approaches can be used to improve investment decisions by producing objective analysis. The goal is to improve investment results and the probability of repeatability. Math and scientific methods can help put history and patterns on our side. Here are some important takeaways:

Varied interests and motivations can reduce optimal investment decisions.
Performance data is not necessarily useful in predicting future results, especially when studying short-term manager performance.
Behavioral finance has shown that many investors overreact to recent events, and tend to ignore long-term historical patterns.
Mathematical models can minimize the negative impacts of greed and fear, improving discipline -- and taking emotion out of the equation.
Robust quantitative analysis can improve "forward information" and repeatability.

Systematic and scientific approaches can yield meaningful information and help improve long-term performance by providing objective analysis to investment committees.

Stock Systems: Flash Caution 3:30pm 9/10/12

noreply@blogger.com (Unknown) — Mon, 10 Sep 2012 19:36:00 +0000

Quick blog post for now; more later.

Our stock market models are currently overall neutral after riding the stock market to recent highs.

Our long-term models remain bullish.
However, our overbought/oversold models are bearish.
In addition, the short-term trend is down.

More later, but wanted to get this info out. The S&P is currently at 1433.