EDS – Page 5 – WinWayCharts

It’s Soon or Never for Bonds

May 8, 2017 | bonds, EDS, EDS code, educational newsletters, ETFs, jay kaeppel

There is great trepidation in the bond market these days. Most investors seem to have the “interest rates are sure to rise” mantra playing on auto loop in their head. And this is not entirely unwarranted. Given the historical tendency for bond yields to move in long, slow trends (20 years or more essentially in one direction is not uncommon), I for one am pretty confident in believing that interest rates will be higher 20 years from now than they are now.

But that is not the fear that is playing in people’s heads. The fear in people’s heads is that rates are rising soon (like immediately) and in a big way. This however, may or may not prove to be the case.

Figure 1 displays a history of 10-year treasury yields through about 2012 (FYI 10-yr. yields are roughly in changed since that time). Note the long-term nature of interest rate trends and that while there are “spikes” here and there, most major moves play out over time and not in “here today, sharply higher tomorrow” fashion.

Figure 1 – 10-year treasury bond yields; 1900-2012(Courtesy: ObservationsandNotes.blogspot.com)

Also, you can see in Figure 2 – one can make a compelling argument that bond yields are not “officially rising”, at least not yet.

Figure 2 – Yields still “officially” in a downtrend

Bonds are Due to Bounce – But Will They?

One way to identify important turning points in any market is when a market doesn’t do something that it would normally be expected to do. For example, here is a simple thought process:

1) The bond market is oversold

2) In the past 30 years, pretty much anytime it would get oversold a rally ensued

3) Therefore, bonds should rally soon

But will they – that is the question. And in my opinion, the answer is important.

*If bonds rally soon (i.e., over the course of say the next several months) then “the status may still be quo”.

*If bonds do not rally soon, then it may be a sign that “things are changing”

Which Way Bonds?

Figures 3 and 4 below display ticker TLT (an ETF that tracks the long-term treasury bond) with an indicator I call UpDays20. In this case we are looking at weekly bars and not daily bars, but the concept is the same.

UpDays20 is calculated by simply adding up all of the weeks that have showed a weekly gain over the past 20 weeks and then subtracting 10 (the WinWay Charts Expert Design Studio code appears at the end of this article, after the disclaimer).

If 10 of the past 20 weeks have showed a weekly gain then the upDays20 indicator will read 0 (i.e., a total of 10 weeks were up minus 10 = 0). If only 6 weeks showed a gain in the past 20 weeks then the UpDays20 indicator will read -4, etc.

What to look for: Typically (at least in the declining rate environment of recent decades) when UpDays20 rises by a value of 2 from a low of -2 or less, a decent rally in bonds has ensued.

For example, if UpDays20 falls to -4 then a rise to -2 or higher triggers a buy signal. If it falls only as low as -3 then a rise to -1 or higher is required. If it falls only as low as -2 then a rise to 0 or higher is required.

Figures 3 and 4 highlight signals since roughly 2004.

Figure 3 – Ticker TLT with UpDays20 weekly buy signals (2004-2010); (Courtesy WinWay TradingExpert )

Figure 4 – Ticker TLT with UpDays20 weekly buy signals (2010-2017); (Courtesy WinWay TradingExpert )

As you can see in Figures 3 and 4, most of the signals highlighted were followed by at least a decent short-term rally.

In 2017, buy signals from the UpDays20 indicator occurred on 1/13 and 4/14. TLT is up +0.3% since the 1/13 signal and down -1.4% since the 4/14 signal.

Summary

Either:

1) This is an excellent time to buy the long-term bond (looking for at least a short to intermediate term rally) as a rally is overdue

2) The “times they may be a changing” for bonds

So keep an eye on TLT over the next several months.

Jay Kaeppel

Disclaimer: The data presented herein were obtained from various third-party sources. While I believe the data to be reliable, no representation is made as to, and no responsibility, warranty or liability is accepted for the accuracy or completeness of such information. The information, opinions and ideas expressed herein are for informational and educational purposes only and do not constitute and should not be construed as investment advice, an advertisement or offering of investment advisory services, or an offer to sell or a solicitation to buy any security.

WinWay TradingExpert Expert Design Studio Code for UpDays20

Up1 if [close] > val([close],1).
Up2 if val([close],1) > val([close],2).
Up3 if val([close],2) > val([close],3).
Up4 if val([close],3) > val([close],4).
Up5 if val([close],4) > val([close],5).
Up6 if val([close],5) > val([close],6).
Up7 if val([close],6) > val([close],7).
Up8 if val([close],7) > val([close],8).
Up9 if val([close],8) > val([close],9).
Up10 if val([close],9) > val([close],10).
Up11 if val([close],10) > val([close],11).
Up12 if val([close],11) > val([close],12).
Up13 if val([close],12) > val([close],13).
Up14 if val([close],13) > val([close],14).
Up15 if val([close],14) > val([close],15).
Up16 if val([close],15) > val([close],16).
Up17 if val([close],16) > val([close],17).
Up18 if val([close],17) > val([close],18).
Up19 if val([close],18) > val([close],19).
Up20 if val([close],19) > val([close],20).

UpCount is (Up1+ Up2+Up3+Up4+Up5+Up6+Up7+Up8+Up9+Up10+Up11+Up12+Up13+Up14+Up15+Up16+Up17+Up18+Up19+Up20)-10.

You can also download the EDS file for this at this link http://aiqsystems.com/Its_Soon_or_Never_for_Bonds.EDS

Volume-Weighted Moving Average Breakouts

Mar 21, 2017 | EDS, EDS code, Moving averages, Stock trading

The WinWay code based on Ken Calhoun’s article in the February 2017 issue of Technical Analysis ofSTOCKS & COMMODITIES, “Volume-Weighted Moving Average Breakouts,” can be found at http://aiqsystems.com/Volume-Weighted-Moving-Average-Breakouts.EDS

Please note that I tested the author’s system using the NASDAQ 100 list of stocks on daily bars rather than intraday bars from 12/31/2008 thru 2/10/2017. Figure 7 shows the resulting equity curve trading the author’s system with the cross-down exit. Figure 8 shows the ASA report for this test. The annualized return showed about a 17% return with a maximum drawdown of 19%.

FIGURE 7: Here are sample test results from the WinWay Portfolio Manager taking three signals per day and 10 concurrent positions maximum run on NASDAQ 100 stocks (daily bar data) over the period 12/31/08 to 2/10/07.

FIGURE 8: This shows the ASA report for the system, which shows the test metrics and settings.

The code and EDS file can be downloaded from http://aiqsystems.com/Volume-Weighted-Moving-Average-Breakouts.EDS , and is also shown below.

!Volume-Weighted Moving Average Breakouts
!Author: Ken Calhoun, TASC Apr 2017
!Coded by: Richard Denning 2/11/17
!www.TradersEdgeSystems.com

!INPUTS:
smaLen is 70.
vwmaLen is 50.

SMA is simpleavg([close],smaLen).
VWMA is sum([close]*[volume],vwmaLen)/sum([volume],vwmaLen).
HasData if hasdatafor(max(smaLen,vwmaLen)+10)>max(smaLen,vwmaLen).
Buy if SMA < VWMA and valrule(SMA > VWMA,1) and HasData.
Sell if SMA > VWMA.

rsVWMA is VWMA / valresult(VWMA,vwmaLen)-1.
rsSMA is SMA / valresult(SMA,smaLen)-1.

—Richard Denning
info@TradersEdgeSystems.com

Exponential Standard Deviation Bands

Feb 16, 2017 | EDS, EDS code, indicators, Stocks & Commodities Traders Tips

The AIQ code based on Vitali Apirine’s article in the 2017 issue of Stocks & Commodities magazine, “Exponential Standard Deviation Bands”

Editor note: “Author Vitali Apirine presented a method intended to help traders see volatility while a stock is trending. These bands, while similar to Bollinger Bands, are calculated using exponential moving averages rather than simple moving averages.

Like Bollinger Bands, they widen when volatility increases and narrow as volatility decreases. He suggests that the indicator can be used as a confirming indication along with other indicators such as the ADX.

Here’s a WinWay Chart with the Upper, Lower and Middle Exponential SD added as custom indicators.”

To compare the exponential bands to Bollinger Bands, I created a trend-following trading system that trades long only according to the following rules:

Buy when there is an uptrend and the close crosses over the upper band. An uptrend is in place when the middle band is higher than it was one bar ago.
Sell when the low is less than the lower band.

Figure 8 shows the summary test results for taking all signals from the Bollinger Band system run on NASDAQ 100 stocks over the period 12/9/2000 to 12/09/2016. Figure 9 shows the summary test results for taking all signals from the exponential band system on NASDAQ 100 stocks over the same period. The exponential band system improved the average profit per trade while reducing the total number of trades. Sample Chart

FIGURE 8: WinWay EDS. Here are summary test results for taking all signals from the Bollinger Band system run on NASDAQ 100 stocks over the period 12/9/2000 to 12/09/2016.

Sample Chart

FIGURE 9: WinWay EDS. Here are summary test results for taking all signals from the exponential band system run on NASDAQ 100 stocks over the period 12/9/2000 to 12/09/2016.

The EDS file can be downloaded from http://aiqsystems.com/EDS/Exponential_Standard_Deviation_Bands.EDS

and is also shown here:

!Exponential Standard Deviation Bands
!Author: Vitali Apirine, TASC February 2017
!Coded by: Richard Denning 12/11/2016
!INPUT:
xlen is 20.
numSD is 2.

!INDICATOR CODE:
ExpAvg is expavg([close],xlen).
Dev is [close] – ExpAvg.
DevSqr is Dev*Dev.
SumSqr is sum(DevSqr,xlen).
AvgSumSqr is SumSqr / xlen.
ExpSD is sqrt(AvgSumSqr).

!UPPER EXPONENTIAL SD BAND:
UpExpSD is ExpAvg + numSD*ExpSD. !PLOT ON CHART

!LOWER EXPONENTIAL SD BAND:
DnExpSD is ExpAvg – numSD*ExpSD. !PLOT ON CHART

!MIDDLE EXPONENTIAL SD BAND:
MidExpSD is ExpAvg.

!BOLLINGER BANDS FOR COMPARISON:
DnBB is [Lower BB]. !Lower Bollinger Band
UpBB is [Upper BB]. !Upper Bollinger Band
MidBB is simpleavg([close],xlen). !Middle Bollinger Band
!REPORT RULE TO DISPLAY VALUES:
ShowValures if 1.

!TRADING SYSTEM USING EXPPONENTIAL SD BANDS:
UpTrend if MidExpSD > valresult(MidExpSD,1).
BreakUp if [close] > UpExpSD.
BuyExpSD if UpTrend and BreakUp and valrule(Breakup=0,1).
ExitExpSD if [Low] < DnExpSD. ! or UpTrend=0. !TRADING SYSTEM USING BOLLINGER BANDS: UpTrendBB if MidBB > valresult(MidBB,1).
BreakUpBB if [close] > UpBB.
BuyBB if UpTrendBB and BreakUpBB and valrule(BreakupBB=0,1).
ExitBB if [Low] < DnBB. ! or UpTrend=0.