OH, Linda and all Re: Hedging per your request; What follows is very long and probably of no interest to almost everyone out there reading, and only remotely related to the thread topic, so proceed reading at your own risk (possible keyboard damage resulting from nodding heads.)
OH, I really appreciate your encouraging comments. It's new territory for me, but I think it is a promising endeavor. I try to time the S&P 500 by watching 5 minute, 90 minute, and daily charts, with the emphasis on the 5 minute. I'm mainly looking for support and resistance levels, going short when both horizontal and trendline support is broken on the 5 minute chart. I use the longer time frames to keep perspective and avoid whipsaws in certain environments. In my testing I have called the direction about 60-70% of the time. I cover on opposite signals, e.g. breaking of
resistance. I can't prove that going short based on intraday will
make one short before major declines especially since I only have
access to 30 days intraday data, but it has worked out that way in
the limited testing I've done, and it is a somewhat logical hypothesis. A 30 day intraday index chart looks like a daily bar chart of about 6 months, so one day contains trends that develop long before they show up on the daily chart. I've used this basic system for several months day trading large cap bellwether techs based on PSE intraday charts, so I have a larger mental database than an actual one. I've been mildly successful at this system but have been frustrated by the divergence between the stocks and the index, and the inability to short on a downtick. Plus that's been strictly a daytrading venture, and the opening gaps make the trading difficult.
Recently I discovered SPY, traded on the AMEX like a stock with no
uptick shorting rule and made to track the S&P 500. I haven't felt
like I'm ready for index futures, so I'm excited to be using SPY as
my learning vehicle. Because it's not leveraged like futures, I
can't hedge 100% of my holdings, but I am able to offset all my
stocks and part of my mutual funds. So last Friday I went short for "real" for the first time for a profit that very nicely offset my stock losses, and covered Tuesday afternoon despite the Japan uncertainty, because the technical resistance I'm watching was broken. With technical analysis I may be guessing, but with news analysis I know I'm guessing. I try to filter all the news etc. out of the process and just look at the charts. If I'm wrong I'll be short again on violation of important support.
I feel fortunate to have profited on my first plunge. It takes the
pressure off somewhat. Thanks for your interest. I'd be happy to discuss this further if you don't already know way more than you ever wanted to.
Esteban |
