simple guy Posted February 7, 2003 Report Share Posted February 7, 2003 SG posting up his own annotated SIMPLE view chart of the Rydex Venture 100 fund, which I own. This fund goes 200% short the QQQ. If the fund drops 3%, I make 6%, and so on. With that said... the 6 month chart below shows a simple way to determine when to consider taking profits near term, and waiting out the mild E wave retrace. I've discussed 22.30 to 22.50 ranges many times as my targets to take profits. So tonight I looked at the fund I own, and its amazing how its predicting about the same range near term... See bottom of this page for my version, and you may want to stand aside when it hits this level. As far as today's action... It was beautiful e wave stuff. 24.45 got within 3 cents of my 61.8% Fibo Nacho retrace ABC x ABC x wave 2 estimate. As that wave ended, minuette wave 3 began to unfold. The first leg of which was straight down to 23.85, or a 60 cent drop. Wave 2 was a perfect ABC corrective wave up, ending at 24.06... almost a 38.6% retrace... close enough Wave 3 (this will be 5 waves in nature) began to unfold. The first wave was a beautiful 5 wave pattern, text book Elliott Waves... brought tears to me eyes. They ended at 23.68 perfectly... and retraced an A B C wave 2 to 24.84 near the end of theday... also a perfect 38.2% retrace. Wave 3 of this 3rd, will unfold in 5 waves starting on Monday I think.... with my initial bottom at 23.19 range expected.... Staying short over the weekend at 200% as usual via the fund below... see my annotation to see how the fund actually agrees with my E wave prediction of the 22.30 to 22.50 range near term... Link to comment Share on other sites More sharing options...
Yoshaviah Posted February 8, 2003 Report Share Posted February 8, 2003 Here's my chart. The target is the 200 ma. This will require about a 4.6% further decline in the Qs from today's close to about 22.72. http://stockcharts.com/def/servlet/SharpChartv05.ServletDriver?chart=ryvnx,uu[w,a]daclyyay[d20020401,20020117][pb52!b26!b13!b9!d20,2!h.02,.20!b200][vc60][iub14!la12,26,9!lj[qqq]!lh14,3!lk14!ll14!lm12!ld14][j9639598,y] RYVNX should top at 79.90, although a breach of the 200 ma might be possible, but if MAXPAIN is to be at 25 then the Qs will have to rally 10%, which would put RYVNX back to 64 before it's time to short again. A 10% rally is enough to tempt a man to go long. Will RYVNX really fall back to 64 before options expiration in 2 weeks? Well, you know they might want to jam it before the war. So why not suck in some shorts just below 23 on the Qs? Can this be right Link to comment Share on other sites More sharing options...
BigWave Posted February 8, 2003 Report Share Posted February 8, 2003 I waited all week for a tear to come to your eye....the perfect way to ring the bell. Tanks a MM for the efforts... BW Link to comment Share on other sites More sharing options...
PileDriver Posted February 8, 2003 Report Share Posted February 8, 2003 it brings a tear to my eyes too, as well as a ... BIG FAT Roll of Dough ...into my trading account. Thanks! Link to comment Share on other sites More sharing options...
onelegstool Posted February 8, 2003 Report Share Posted February 8, 2003 SG: Thanks a lot for your hard work and enthusiasm. I really enjoy your thread. Question: Why set up your e-waves off the RYVNX then convert to QQQ? Why not set up off QQQ in the first place? Another one: I have set up a spreadsheet with QQQ, UOPIX(200% of QQQ) and USPIX (200% inv QQQ) side by side. I calculate what the two funds should be and compare them to their actuals. I take today's QQQ % price change and double it. Then I multiply this by yesterday's calculated UOPIX and add it to yesterday's calculated UOPIX to get today's calculated "true" value. As a starting point for the series, I use the first day's actual fund value. I do the same with USPIX except subtract it from yesterday's calculated value (since it's inverse). The difference between these calculated values of the funds and the actual values I call the slip in the funds. And slip they do. Especially USPIX. Currently USPIX is 5.22% below what it should be (bad) and UOPIX is .54% below (OK). I started these series on Nov 11, 02. (I haven't tried this with RYVNX.) Do you see something wrong with this analysis? If not, have any idea why this happens? Does the slip reflect time value loss on options used to balance the funds? Lest you doubt this actually happens, I noticed when the QQQ was at 24.31 on Nov 11 and then at 24.37 on Dec 31, USPIX was at 62.95 and 56.25 respectively. With no slip, the USPIX numbers should be virtually identical. So this is an actual 11% slip. If anything, the method I use above under estimates! TIA Link to comment Share on other sites More sharing options...
mksloth Posted February 8, 2003 Report Share Posted February 8, 2003 oneleg, this slippage is a fairly well known phenomenon. There are a couple of sites that calculate the slippage on a daily basis. You are right in that it is a function of the efficiency of the managers... Link to comment Share on other sites More sharing options...
strikerm3 Posted February 8, 2003 Report Share Posted February 8, 2003 good question oneleg. I was wondering the same thing. Also why use RYVNX over USPIX. Is there ant difference at all???? Link to comment Share on other sites More sharing options...
Hoodwinked Posted February 8, 2003 Report Share Posted February 8, 2003 You can go to any chart site and do an overlay of the two funds. USPIX and RYVNX are almost identical. What you will notice is that USPIX does experience more "slippage" at times than RYVNX. http://finance.yahoo.com/q?d=c&c=uspix&k=c...=s&l=on&z=m&q=l Leg... good post Link to comment Share on other sites More sharing options...
Down Jones Posted February 8, 2003 Report Share Posted February 8, 2003 good question oneleg. I was wondering the same thing. Also why use RYVNX over USPIX. Is there ant difference at all???? Striker, One difference between Rydex and Pro Funds is that Rydex gives you the ability to enter or exit RYVNX twice a day (10:30 AM as well as their PM cut-off), while with USPIX you can only enter and exit in the PM . I believe that the morning cut-off time (and the morning price) is only available if an account is established directly with Rydex. When their funds are traded through a broker you are limited to the afternoon closing price. I think the account minimums are different too. $15,000 is the minimum amount required to open an account @ Pro Funds, while Rydex's minimum is $25,000. Hope this helps. Link to comment Share on other sites More sharing options...
marketneutral Posted February 8, 2003 Report Share Posted February 8, 2003 onelegstool what you refer to slip is the primarily due to the effects of using leverage--compounding of returns plus costs of using leverage and decay/slippage effects. let's see if I can illustrate Compounding of Returns through an brief example of 200% INVERSE index funds, which are geared to return twice the daily movement of an index, the NDX in this case. let's say the QQQ (as a substitute for the NDX) is currently trading at $30. let's assume that for the next 5 trading days, the QQQ declines 2%. At the end of the period, your initial holding is now worth $27.12, for a return of 9.6% if you're short. If you were using leverage of 200%, your return would have been 19.2%. The maximum return without leverage is 100% (QQQ goes from 30 to 0). during the same period, you're invested in one of the 200% INVERSE index funds. Let's assume the NAV of the fund at the beginning of the 5 trading days was $30. After 5 trading days its NAV increases to 36.5 and will have returned, 21.7%, which exceeds by 2.5% the 19.2% you would have returned by shorting the QQQs with 200% margin. Let's look at an extreme example, where the QQQs lose 2% everyday until it loses 99% and is only worth $0.30. In this case, you'd make 99% return on a short position, or 198% with double leverage. For the INVERSE index funds, you'd return an unbelievable 764794%. Yes, the number is correct. Both examples above illustrate the beauty of INVERSE index funds WHEN you're on the RIGHT side of the trade. Like continous compounding, as your capital base increases (ala reinvesting the gains into your existing position), you're returns grow exponentially. In the extreme case above, you are returning 4% everyday on an increasing capital base, which yields the amazing return. Now the bad news, on the flip side--when you're on the wrong side of the market, you lose more than double the amount of the underlying instrument when the market moves against you. Of course, 200% funds involve significantly more risk than 100% or 125% funds. But going long 125% INVERSE index funds can actually be less risky than shorting the underlying index. So returns are highly dependent on the path the index takes and are NOT simply double the return of the index over the course of the investment horizon. Depending on the path taken, you could actually lose money in RYVNX while the market is down--you could actually make money while the market is up. Crazy stuff... Here's a link to a webpage describing in greater detail what I'm trying to convey above: http://www.potomacfunds.com/125_approach.jsp Link to comment Share on other sites More sharing options...
DrStool Posted February 8, 2003 Report Share Posted February 8, 2003 Here we go again. Seems that virtually no one understands the concept of slippage. We had a huge discussion of the issue a couple of months ago. It has nothing to do with the manger. Has to do with redemptions on the market's way up and purchases when the market goes down. You cannot hold these funds over time. On a day to day basis there is a 200% correlation, but the % varies depending on the date you start measuring relative performance. Here is the thread. Link to comment Share on other sites More sharing options...
Guest AssMaster Posted February 8, 2003 Report Share Posted February 8, 2003 onelegstool what you refer to slip is the primarily due to the effects of using leverage--compounding of returns plus costs of using leverage and decay/slippage effects. let's see if I can illustrate Compounding of Returns through an brief example of 200% INVERSE index funds, which are geared to return twice the daily movement of an index, the NDX in this case. let's say the QQQ (as a substitute for the NDX) is currently trading at $30. let's assume that for the next 5 trading days, the QQQ declines 2%. At the end of the period, your initial holding is now worth $27.12, for a return of 9.6% if you're short. If you were using leverage of 200%, your return would have been 19.2%. The maximum return without leverage is 100% (QQQ goes from 30 to 0). during the same period, you're invested in one of the 200% INVERSE index funds. Let's assume the NAV of the fund at the beginning of the 5 trading days was $30. After 5 trading days its NAV increases to 36.5 and will have returned, 21.7%, which exceeds by 2.5% the 19.2% you would have returned by shorting the QQQs with 200% margin. Let's look at an extreme example, where the QQQs lose 2% everyday until it loses 99% and is only worth $0.30. In this case, you'd make 99% return on a short position, or 198% with double leverage. For the INVERSE index funds, you'd return an unbelievable 764794%. Yes, the number is correct. Both examples above illustrate the beauty of INVERSE index funds WHEN you're on the RIGHT side of the trade. Like continous compounding, as your capital base increases (ala reinvesting the gains into your existing position), you're returns grow exponentially. In the extreme case above, you are returning 4% everyday on an increasing capital base, which yields the amazing return. Now the bad news, on the flip side--when you're on the wrong side of the market, you lose more than double the amount of the underlying instrument when the market moves against you. Of course, 200% funds involve significantly more risk than 100% or 125% funds. But going long 125% INVERSE index funds can actually be less risky than shorting the underlying index. So returns are highly dependent on the path the index takes and are NOT simply double the return of the index over the course of the investment horizon. Depending on the path taken, you could actually lose money in RYVNX while the market is down--you could actually make money while the market is up. Crazy stuff... Here's a link to a webpage describing in greater detail what I'm trying to convey above: http://www.potomacfunds.com/125_approach.jsp Thanks for the link. Good explanation. Link to comment Share on other sites More sharing options...
Jorma Posted February 8, 2003 Report Share Posted February 8, 2003 I use the Profunds because with Scottrade you have to call the damn broker for Rydex funds for some reason, and the $15K limit plays into my use sometimes because unlike SG I don't go pedal to the metal all the time. USPIX, my main short vehicle peforms pretty damn good. Friday for instance it was up 2.82% while the NDX was down 1.39%. Few days are that good and there is the occasional day where it is more like a 1.5%X fund, but still,no complaint. Having a direct account is the way to go if you use these things heavily, as I have more and more. Note Scottrade and most borkers dont let you trade options or go short with IRA funds, the bulk of my speculative funds, ( investment funds according to the parlance of the day) so these short funds are the only pure bear play I am aware of that offer leverage. I will eventually transfer some I think but I hate to take the money off the table for the 2 weeks or probably more it will take to do the transfer. The twice a day option with a direct Rydex account is far superior, sometimes. I have to say I have come to appreciate the dicipline enforced by a once a day order. However on 12/2 I was dying to go short on the spike in the morning. Maybe it was Doc's comment at the time but never have I been so sure of a perfect short entry. by the end of the day I held off so missed a lot of that first downmove. I've been in short funds 80% of the time since 12/5. Turning into position trades, which as described above is not what you want to do with them. I've got SG's and some other similiar targets penciled in to exit. Looks like next week. ------ Keep up the good work SG. Don't let your posting here interfer with your analysis or process. Never worry about being wrong. Link to comment Share on other sites More sharing options...
simple guy Posted February 8, 2003 Author Report Share Posted February 8, 2003 SG chimes in on Sat afternoon 1. Why use a RYVNX chart and convert back to QQQ? Because, Im a SIMPLE GUY... DUH 2. Do I use the RYVNX for determining my entry and exits for my trading?? ... uh--- that would be NO.... 3. Why did I post the chart then? Because, it only CONFIRMED my ewave count and I found it interesting.... nothing more, nothing less.... its why Im the SIMPLE GUY who kicks the markets ass on a daily and monthly basis... BECAUSE......I KEEP IT SIMPLE!! (SOMETIMES) Remember this.... lower lows, lower highs is the trend, this is wave 3, wave 3 is your friend if you dont let your emotions screw you up. Get out of your own way, let the waves do the talking... and RIDE IT for god's sakes... Normally I do dive in and out, ducking, shucking , jiving... but on this wave... IM RIDING as long as I can.... because the downside targets that I put up, are easily blown through on a 3rd of a 3rd.... and DOVER SOLE is defined in a 3rd wave.... You aint seen DOVER SOLE yet kids.... but you will.... Link to comment Share on other sites More sharing options...
simple guy Posted February 8, 2003 Author Report Share Posted February 8, 2003 The bull market mentality and stupidity is still out there... Let me see if I can debunk the current "herd" of expert thinking going around right now... If history is a guide, rockets raining down on Baghdad could spark a rally on Wall Street. Macabre as it sounds, stock market rallies have been a consequence of war in the past. And an attack on Iraq would remove some of the uncertainty that has clouded the market. The above right off of Briefing.com this weekend Why is this thinking flawed? Several reasons... 1. The bears were running 62 to 38 over Bulls in the Pre Gulf War bomb drop era 2. Debt levels as a % of GDP were NOWHERE near where they are today 3. We didnt have a maniacal boom yet at the time, an overspending, poor allocation of capital boom... huge credit expansion boom etc.... 4. Capital spending was not spiraling down as it is today during this DEFLATION cycle... credit contraction equals deflation kids... 5. Everyone assumes the market will go up when the bombs drop... when everyone assumes that, it means it wont happen... and its already priced into the market. In fact, a short battle is priced into the market now... what if it goes on for awhile, or there are after shocks???? This line of "fuzzy" thinking, is symptomatic of public mood shifts to negative from optimistic. Fuzzy thinking is what defines a shift in social mood... Bulls are running 2 to 1 over Bears some 3 months plus in a row, the most consecutive since the bear market started!!! I think its easy to see that the "experts" here will be shocked when at best the market rallies one day when the bombs drop... and then gets back to the business of declining. Back on Jan 23rd, I sat down and sketched out my suppostions for the QQQ index for this wave.... I came up with 873 on the NDX as my target.... followed by 976 rally, followed by a bottom at about 818. That will end of the 3rd wave.... with wave 4 up to go, and wave 5 down to finish.... 20.32 or so on the Q's is when you can cover, if you wish to wait that long.... Near term, 23.19 coming with a bounce, then the 22.50 ish levels after that.... Link to comment Share on other sites More sharing options...
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