What's working right now?

There's no doubt markets are behaving in a different than they have in recent history. Some short term indicators like the DVB have fallen out of sync with markets. While there are some ways to filter and adjust to market conditions to turn off certain inputs, it’s useful to know what is actually working right now.

Luckily I’m privy to a great tool my colleague Jeff Pietsch has in beta right now. A performance matrix displays various indicators across different ETFS via 252 period Sortino ratio. It’s a very neat, visual way to see what is working on which market.

Here’s a sneak preview:

As you might have guessed, the shortest of the short term indicators have not been doing well, but looking a bit further out (DVI, DVIM etc), markets are still mean reverting – It’s just not the sort of mean reversion that the likes of the DVB thrives on though.

The longer term DVI, DVIM and DVIS have fared better on the main markets of late, but the real star has been the Livermore Trend Indicator which has shone while the DVB has faltered. All of these indicators are available within the DV Indicators package, a product I must disclose I am involved in.

The simple solution would therefore be to switch your attention to what is working and step away from what isn’t. But we all know this is incredibly easy to do with the benefit of hindsight, but rather more difficult in reality.

In the next few weeks I’ll be running a test of a 252 period Sortino rank method for indicator switching and will report back when I can on this rather mammoth undertaking.

One solution going forward might be to hedge bets by averaging indicator signals across fast and slow indicators with the addition of a trend indicator (Livermore Trend Indicator) as a final overlay.

Inputs:

• Fast: DVB (DV2 period)
• Fast: DV3 Period
• Slow: DVI (Intermediate)
• Slow: DVIM (Intermediate Magnitude)
• Trend: Livermore trend indicator

Buy on score below 0.5 sell on score above 0.5

Returns:

This still of course comes with a huge dollop of hindsight in the selection of the indicators to throw into the averages. Still it gives you an idea of what is working right at present.

Now where’s that time machine…

Comments

[scrilla_gorilla]

DVI value is a weighted average of two components: DVIS and DVIM. So I'm not sure it makes sense to trade both DVI and DVIS/DVIM.

[Dave]

Thanks Skrilla

You're probably right on that.

[Emil]

Let the sortino ratio weight the indicator signals and use that as an adaptive meta indicator.

Keep the good posts comin'!

[North Face Down]

Don't know what is wrong what is rite but i know that every one has there own point of view and same goes to this one

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