Intraday Alpha

I got an idea of Intraday Alpha instead of Market Timing while meeting with equity derivative research team from a broker. Here is the performance of the intraday alpha before, during, and after the Fed announcement of rate lift:

Ultimate timing system

Signals from different strategies and securities have been aggregated and integrated. It's now fast and accurate:

Long bias in the equity market, any selloff is short live

Two-day selloff is stopped by the strong job report. This is another evidence that news can always cause unpredictable outcomes. Last strong job report caused a selloff, this time comes with a strong rebound.

Anyway, our pairs trading model has been proved to be able to pick up the market directions. It promptly suggests to close the previous positions and open "long NDX and short Dow", or simply buy in SPX, or short VIX.

It's also very interesting that during the strong selloff, the previous "short NDX long Dow" still lost 20 bps, while short position in SPX gained 0.76% in 4 days.

The uptrend is fading

YTD the average holding period is about 13 days. Since last uptrend signal appeared on Nov 16, it has been 14 days. It's not surprised that in this morning, the model gives us a downtrend signal. Pairs trading (long NDX short DOW) gained 1.1%, while buying S&P 500 Index would net 3% in last two weeks.

2015 YTD Live performance

While we still have one more month to end the year of 2015, we can celebrate the wonderful live performance of the Index Pairs Trading and Its Implied Timing Ability.

Well predicted urgly week

The S&P 500 Index dropped 3.6% in the week of November 9 - 13. Well, this selloff is well expected and predicted by our models.

The pairs trading model suggested to short NDX and long INDU on October 30, which implied that the equity market was likely to drop in the near future.

The index timing model showed a sell signal on Novermber 5. Even though there was a short-live buy signal before the market close of Novermber 11, a strong sell signal followed the market open on Novermber 12.

When both models point to the same direction, the market is very hard not to follow the trend.

The rally is continuing

The S&P 500 Index has climbed up by 100 points since the current UP signal appeared before the close on September 30. The emerging markets have also followed with more than 9% rally. The Hang Seng China Enterprises Index reopened on Oct 2 with an UP signal, and has since incresed by 800 points, or 8.3% by the close of October 9.

Investors are wondering whether the rally will continue. Interestingly, while the pairs model sucessfully predicted the rally at the open of Sept 29, the NASDAQ 100 Index (NDX) has lagged the Dow Jones during the last few days. However, the model still maintains the UP trend. The S&P 500 Index has got support at 2010. The rally is likely to continue if the index doesn't drop below this level.