I've recently been looking at a couple of different strategies for trading the NASDAQ futures.

Each of them are based on different indicators I've come up with.  The data used was from 3rd January 2012 to 31st March 2012.


The first strategy results (based on a derivative of my PDI indicator);


The second strategy results (using a $ Index based indicator);


The results from the first one here really are not good, average gain per trade is just one point, completely invalidates that indicator.

The results from the second are slightly improved but not by much, suggests there is slightly more merit to the indicator used for that one but again it wouldn't be smart to trade it when you know before you start the average yield per trade is going to be low.

Still, this is the point of backtesting.

I'll need to come up with something completely new and original.

Reached a decent milestone recently;


I've tagged the 3K mark with my running, that's since December 2008.

Had a look at a couple of charts, the first showing run distances when I started, the second is the most recent chart - showing how I've ratcheted up the distance over time.






Looking to do the same thing with my trading, steady development, build it up over time.

The case for Natural Gas technology stocks.
With excerpts from a WSJ article;

"Natural gas below $2 for first time in a decade

NEW YORK  — The price of natural gas has fallen below $2 per 1,000  cubic feet for the first time in more than a decade, a remarkable  decline for a commodity that not long ago was believed to be in short  supply.
The U.S. supply of natural gas is growing so fast that analysts worry  the country's underground storage facilities could be full by fall and  lead to further price declines.
On Wednesday, the futures price of natural gas fell to $1.984 per  1,000 cubic feet, its lowest level since January 28, 2002, when it hit  $1.91. If the price slides to $1.75, it would be the lowest since March  23, 1999." 

• With the glut in supply, arguably prices in the low single digits could hang around for an extended period.  Increasing tensionsin the middle east are likely to widen the divergence of cost per MMBtu between Light Sweet Crude and Natural Gas;

• Ratio of cost per MMBtu for Crude oil to the cost per MMBtu for Natural Gas

• In other words the cost of a standardised unit of energy, 1 MMBtu (Million British Thermal Units), is currently 9.3427 times more expensive when obtained by purchasing Crude Oil, as opposed to Natural Gas

"HOW NATURAL GAS IS USED IN THE U.S.

— 34 percent to generate electric power. (It accounts for a quarter of the nation's electricity.)

— 30 percent by industry to heat boilers or make chemicals, fertilizer and plastics.

— 21 percent to heat homes, cook, dry clothes and heat water.

— 14 percent by office buildings, restaurants and shops.

— 0.1 percent to power trucks, buses and other vehicles.

POSSIBLE USES FOR AMERICA'S GROWING SUPPLY

— Expand the production of plastics, fertilizers and other products that use natural gas as a feedstock.

— Liquefy it and export it to Asia and Europe, where it fetches far higher prices.

— Build natural gas fueling stations to encourage trucking and other  commercial fleets to use compressed natural gas or liquefied natural gas  as fuel.

— Turn it into diesel or ethanol."

• "0.1 percent to power trucks, buses and other vehicles" looks like an opportunity to me.  That and for some upstart new start to develop new technology that facilitates more efficient compression and intercontinental transportation of natural gas.

• I would argue that there should be some form of technological arbitrage take place leading to Natural Gas, where applicable, replacing technology in industry and transportation that currently runs using Crude oil.  Because the disparity in cost per MMBtu between Crude Oil and Natural Gas is so large this should narrow over time as more uses for Natural Gas are found and more techologies are developed to exploit them.

Stock ideas;


FSYS;

Fuel Systems Solutions, Inc. (Fuel Systems) designs, manufactures  and supplies alternative fuel components and systems for use in the  transportation and industrial markets. Its components and systems  control the pressure and flow of gaseous alternative fuels, such as  propane and natural gas used in internal combustion engines. The Company  also provides engineering and systems integration services to address  its individual customer requirements for product performance, durability  and physical configuration.

1 year log










CLNE;


Clean Energy Fuels Corp. (Clean Energy) together with its wholly  owned subsidiaries is engaged in the business of selling natural gas  fueling solutions to its customers, primarily in the United States and  Canada. Clean Energy is a provider of natural gas as an alternative fuel  for vehicle fleets. The Company designs, builds, finances and operates  fueling stations and supplies the customers with compressed natural gas  and liquefied natural gas

1 year log










WPRT;

Westport Innovations Inc. (Westport) is a provider of engine and  fuel system technologies utilizing gaseous fuels. The Company's  technology and products enable light- (less than 5.9 liter), medium-  (5.9 to 8.9 liter), heavy-duty (11 to 16 liter) and high-horsepower  (greater than 16 liter) petroleum-based fuel engines to use natural gas.  As of December 31, 2011, the Company sold over 30,000 natural gas and  propane engines to customers in more than 19 countries.

1 year log







STR;

Questar Corporation (Questar) is a Rockies-based integrated  natural gas holding company. Questar operates through its wholly owned  subsidiaries: Wexpro Company (Wexpro), Questar Pipeline Company (Questar  Pipeline) and Questar Gas Company (Questar Gas). Wexpro develops and  produces natural gas on behalf of Questar Gas. Questar Pipeline operates  interstate natural gas pipelines and storage facilities in the western  United States and provides other energy services. Questar Gas provides  retail natural gas distribution in Utah, Wyoming and Idaho. During the  year ended December 31, 2011, 89% of Wexpro's revenues were from its  affiliate, Questar Gas

1 year log






LNG;

Cheniere Energy, Inc. (Cheniere) is an energy company primarily  engaged in liquid natural gas (LNG)-related businesses. The Company  operates in three segments: LNG terminal business, natural gas pipeline  business, and LNG and natural gas marketing business. The Company owns  and operates the Sabine Pass LNG terminal in Louisiana through its 88.8%  ownership interest in Cheniere Energy Partners, L.P. (Cheniere  Partners). Cheniere also owns and operates the Creole Trail Pipeline,  which interconnects the Sabine Pass LNG terminal with natural gas  markets in North America. Approximately one-half of the receiving  capacity at the Sabine Pass LNG terminal is contracted to two  international oil companies.

1 year log







Further reading discussing the "Natural Gas Act", the potential of Natural Gas tech, and the risks;

Natural Gas Vehicles Driven to Outpace Oil

(Forbes)


Cheap Natural Gas Heralds an Energy Revolution

(American Thinker)




from www.sentimentrader.com
I have never seen any of these sentiment charts drop to as low as that recently, must have touched 17.5.



from CNBC
"Nat Gas Prices 'Close to a Bottom': Boone Pickens
Natural gas prices, which earlier Wednesday broke below $2, are as low as they'll get, T. Boone Pickens told CNBC.

"I have to think you're close to a bottom," the oil and gas driller and head of BP Capital Management told Street Signs before natural gas settled at $1.984. "You’ve got the rig count going down. That’s what you want to watch."Ten to 15 rigs were closed last week, he said, and more will be closed this week.

"As the rig count goes off it’s gonna cause supply to shorten up. It’ll take a little while for it to happen," he said.

Pickens  has pushed for federal legislation that would put natural gas into  commercial vehicles, so he said he was encouraged after hearing Energy  Secretary Steven Chu speak at a conference Wednesday about putting  natural gas in heavy-duty trucks.

"What  a great time to do it," he said, especially when natural gas prices are  about half the national average of gasoline at the pump."


Natural Gas with COT data - 1 year;

Natural Gas is $2.093 per MMBtu (1 MMBtu = 1 million British Thermal Units)

Crude oil is 5.6 MMBtu per barrel (from http://www.physics.uci.edu/~silverma/units.html)

Crude oil is currently at $103.25 per barrel therefore;



Cost of 1 MMBtu from oil = $18.4375

Cost of 1 MMBtu from Natural Gas = $2.093


Prices are at a ratio of 8.809 : 1  (based on actual energy content)

The ratio of Crude Oil (cost per MMBtu) to Natural Gas (cost per MMBtu);

[Chart using Dow Jones sub-Indexes - DJUBSCL and DJUBNTRG]

Performance of Crude oil futures compared to GDX over 3 years


They were reasonably well correlated for a time.



A look at the Crude Oil - GDX spread (Crude Futures minus GDX) over 3 years;


Could nearing the top of the channel signal an impending low in GDX?



Crude Oil - GDX spread with GDX


Lows  along the channel were good points to sell GDX, highs were good points  to buy, with the exception of the end of April last year, but that was  an obvious period of excess in the precious metals sector.




GLD and GDX performance over 3 years

There were three other trades today, none positive, not so good....I'll refrain from posting the gory details. All of them legitimate trades according to my strategy but none with a positive bent.

I think probably it's time for a;



It's quite disappointing to admit, but my strategy does not appear to be a big winner. At one point I was up double digit percentage points, now it's down to single digits, although I withdrew some to buy stuff.

Nevertheless I'm not disappointed about the monetary aspect, it's more the fact that my second strategy, that I thought would be a big winner, is only a slight winner. I'm not doing this because I want to make a few percentage points over the base rate, I'm doing it because I want to prove to myself I can be in that top 1%, not the top 5% or 10%.

Long at 15:25, filled at 2751.75, my custom indicator suggested a long;



Stopped out for a loss of 2 points.

Short at 16:09, filled at 2753.50, market started selling off down to as low as 2741.  Moved stop to protect 7.5 points of profit;

NASDAQ;


Dollar Index;


It looked as though the dollar index was in line to rally up and through apparent resistance at 79.52, causing a further sell off in the NADSAQ, but it didn't come (at least not yet), market rallied up taking out my stop for a 7.5 point gain.

The RANsquawk service was pointing out that today from around 16:20 onwards what appeared to be a sell program was was setting off a whole load of stops, apparently it leaves a certain pattern on the chart;

Couple of trades so far today;

An early short (too early) at 14:37 based on divergence, filled at 2783, stopped out pretty much immediately for a loss of 2 points.  Further sell signal at 14:44 again based on divergences, short filled at 2786.75, this was slightly better with the market selling off 6 points, moved stop to breakeven before being stopped out during a rally up to my stop, the market then continued to sell off down to as low as 2771.75, slightly annoying since the stop only got taken out by 0.75 of a point but that's trading.

Trade 1


Trade 2


Currency divergence in addition to sell signal for trade 2;


Close but no cigar................................

Couple of trades today, both based on divergence and both stopped out, loss of 3.25 points;

Short at 15:33 based on custom indicator divergence, filled at 2751.25, stopped out a few minutes later for a 1.25 point loss;

Took a long at 18:05, filled at 2729.  Stopped out almost immediately for a loss of 2 points.  Had divergence on both my custom indicator and between E-Mini NASDAQ and various currencies, both suggesting some upside.

Short at 17:18, filled at 2722 following some divergence on my custom indicator, market sold off slightly, moved stop close to breakeven, market rallied up taking out my stop for a 1 point loss;





Today's score

Running 1         Trading   Nil


I wasn't able to trade last week, too busy, however there was a nice set-up last Wednesday;


Clear upside fakeout.

I love this image;

Photo by Scott Olson/Getty Images

I got it printed and hung it on the door to my trading room, I got it printed by one of those companies that do these types of things.  Anyway, it wasn't the best quality (since I got the image from an internet search) and I wanted it larger so I ordered a large print from the owner of the image, it came through and I took it to my local art shop to be framed today. 



The lady owner of the shop pointed to the picture and said;

"Ahhhhhhh, so you're in here somewhere aren't you?"

"You got it in one", I said.


Not strictly correct (but I am very much in that picture).

A great moment.

Had a long at 20:34, filled at 2640.75.  Bit late in the day however there have been many late day rallies previously and I had a signal to buy.   I held on until 21:12, 3 minutes before the CME futures markets close, for a gain of 2 points.

Entry and exit


There was a story on RANsquawk that ISDA had effectively declared that Greece had indeed been through a credit event and therefore CDS would pay out and the market did nothing whatsoever, this was a situation where RAN seemed to get the news way ahead of the market.  I don't typically chase news stories but I did have a sell signal forming just prior to the sell off however I couldn't fully confirm it as a sell signal (there had also been several false alarms earlier in the day), by the time it was apparent as a sell signal it was too late.  The market only sold off a few points anyway, surprisingly.




Technical analysis of the NASDAQ today;

The den of tranquility

Opportunity for a short at 15:09, went short, filled at 2640.75. Market sold off following positive Jan factory orders and postive ISM non manufacturing for February. A classic sell the news scenario.

I had divergence on my currency divergence chart and also a divergence sell signal on my custom indicator;




I closed it after a 4 point gain. This ladies and gentlemen is a classic example of how not to trade. It was a very well executed entry married to an incredibly badly executed exit.

I didn't get a particularly great night's rest last night so I suppose I shouldn't kick myself too hard. I wasn't really in the mood for trading today and I wanted to just get some points and switch the screens off, the correct decision was of course just to move the stop much closer to the price and let the market decide whether the position continues or not.

It's a beautiful sunny day outside, I'm off out for a nice walk and some fresh air.

Took a short at 19:12, filled at 2639.25, market rallied taking out my stop for a 1.5 point loss;



Since the Russell 2000 was selling off I thought it was looking quite bearish, I didn't have a signal per se but my indicator was headed lower.  In hindsight I was just looking for an excuse to get short.

It's a marathon, not a sprint

Actually I'm not supposed to be trading this week, I'm working on a new business plan for my trading but after I arrived home I spied an opportunity...



Above is my currency divergence chart, you can see here that point A was where EUR/USD confirmed the turn that had already occurred in AUD/USD and AUD/JPY, hence this is where I went short NASDAQ futures.  In addition to this...



This chart above is what I use to compare the NASDAQ to other equity futures markets, so Dow, S&P 500 and Russell 2000.   Again at point A you can clearly see all these markets diverging away from the NASDAQ.   In addition to this my own custom indicator (bottom of next chart) was also diverging markedly lower suggesting a high probability for a turn lower in the NASDAQ.




This was really the perfect set-up, everything I was looking at suggested a short, I was filled at 2631.75 at 18:26.  Market sold off immediately, at a later point 6 points lower within 2 minutes.  Rather than close it I just moved the stop very close to the price, so as to allow continuation, if it came, whilst keeping most of the gains, if it didn't.  It turned out that that was the end of that move.  My stop got taken out at 2621.75 for a 10 point gain.

I'm pleased with that today, got in 0.75 points off the high of the day and took most of the meat that was available on the move.

There was in fact a further opportunity later for a long, but I allowed myself to be distracted, helping Miss Positive Deviant by taking (attempting to take) some pictures of the Aurora Borealis outside.  Many pictures taken, none of them very good (it was quite far away), otherwise I'd have posted it.