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Revisiting Attain's "Hidden Gems"; 6 months later.
May 7, 2007
Our Nov. 6th, 2006 newsletter 6 months ago highlighted eight different trading systems we called Attain's "Hidden Gems". These were systems which for one reason or another were not very popular with the investing public - but which we felt had a good chance of making money and deserved your attention.
Well, here we are 6 months later, and we're happy to report that the "Hidden Gems" have done quite well. Five out of the eight systems (63%) we highlighted were profitable since November 6th, averaging a simple return of 27.5%, which works out to an average annualized return of 55%. Wow. The losers meanwhile, averaged a loss of -25.3%, but the average across all eight systems remained positive - at 7.7%, for a 15.4% annualized rate of return.
Hypothetical Model Accounts, Performance since 11/06/06
|Winners||Simple RoR||Avg Ann RoR||Max DD||Sharpe||Sterling||Sortino|
|AG Mechwarrior ES||18.69%||32.05%||10.47%||1.34||1.57||80.08|
|Bounce Index Portfolio||6.82%||11.69%||12.01%||0.45||0.53||0.52|
|Omega3 v1 DAX||-4.90%||-8.40%||21.99%||-0.6||-0.26||-1.68|
|Rho 12/12 DAX||-52.49%||-89.98%||52.49%||-3.48||-1.44||-4.16|
The qualifications for being a hidden gem are as follows. First, the system had to be released at least one year ago. Second, the systems had to have been traded at some point in actual client accounts. This requirement did not require that they were still traded, only that they were at one time. Next, we required the systems in our Hidden Gems list to have been profitable over the last 12 months. And finally - they had to be unpopular - as witnessed by less than 3 clients trading them at Attain.
The table above shows how they performed since 11/06/06, and the following list (ordered by performance) provides a brief summary of each system with a link to the overall performance summary of each and a link to the developer website.
Keystone eRL is a relatively active e-mini Russell day trading system from Founder Trading Systems. In general, day trading strategies typically perform well during periods of increased volatility and Keystone followed suit posting a 15% return in March when the $VIX.X spiked to 21.25 (up 38% from February). But Keystone isn't your run of the mill day trader which only does well on market breakouts which continue on to new daily highs or lows. The system also possesses a counter-trend logic which has served it well during some days in which the market has failed to continue on after breaking out in one direction or the other.
Just as its name suggests, these strategies from Theseus Trading use historical seasonal indicators to time the market (buying in mid April because the market has on average increased in the last two weeks of April more times than not, for example). The strategy uses the same buy and sell dates regardless of the market - so it can also be traded on the e-mini SP and e-mini Nasdaq markets, where it has also had success. The Seasonal program is a truly unique system - using no technical indicators at all - and as such is a great diversifier for those utilizing technical based trading systems and CTAs.
AG Mechwarrior is a swing trading strategy that tends to do well in times of higher volatility. The proof of that came in February when the market sold off heavily and AG benefited by gaining +16% behind the volatility spike, and in March and April when had small losing months as volatility subsided. AG is a great option in my opinion for those thinking we're due for a correction off of these record highs or those invested in option selling CTAs who wouldn't mind having something which can do well when the option sellers will struggle (volatility spikes).
The Bounce Portfolio has been treading water for most of this year, as the market just keeps crawling higher, thereby limiting the number of bounces the system can attempt to capture. As the name suggests, the Bounce system looks to capture market "bounces" - quick, powerful moves to the upside after short to intermediate term downward corrections in the stock market. The portfolio includes a day trading strategy on the e-mini Russell and e-mini Midcap as well as a swing trading strategy on these two markets. While only gaining 6% in the last six months, this is actually the most popular of the systems listed here to due to its having the longest track record out of the Hidden Gems. (29 moths of actual client trading).
Omega3 v1 DAX: -4.90%, RMESA 5 eRL: -18.47%, Rho 12/12 DAX: -52.49%
Our list of "Hidden Gems" did include these three systems which have posted losses since 11/06/06. But excepting the Rho 12/12 Dax performance, there is nothing too alarming here. And that system would have been cut off at a DD of about half that level once it eclipsed our stop trade level. It's also worth noting that the R-Mesa eRL system was shown with a 88%+ DD on the initial "Hidden Gems" list, meaning it had already eclipsed its stop trade point. But we chose to list it in spite of that fact, choosing not to just cherry pick the top performers for the list, and rather to stick with the methodology and show you all the systems which emerged from the filtering.
Future "Hidden Gems" ?
We will most likely write another "Hidden Gems" newsletter in the near future, and hope more investors pay heed to those systems we think have a good chance to flourish. But knowing there are some folks out there as impatient as I am, the following brief list are systems which are close to qualifying as "Hidden Gems". Put them on your radar.
|Adaptive - waiting for more time since Release|
|PGA - waiting for more time since Release|
|Ultramini - waiting for more time since Release|
|Impetus eRL - not "unpopular enough" yet|
|Mesa Notes - not "unpopular enough" yet|
- John Cummings
IMPORTANT RISK DISCLOSURE
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US Stocks continued to trade higher into record territory in April - despite higher prices at the pump, record high exchange rates for the Euro vs the Dollar, and a softening real estate market. For the month - SP futures climbed +4.00%, NASDAQ futures were up +4.94%, and Dow Jones futures finished +5.43% higher. In smallcap trading Russell 2000 futures were up +1.35% and SP Midcap 400 futures climbed +2.62%.
Stocks aren't the only thing climbing at a record pace these days; gas prices are as well. Prices at the pump are at near record highs again, although $3.00 gasoline doesn't seem scare the market or consumers as much as it did last year. For April, RBOB Gas futures were up +10.94%, while Natural Gas and Heating Oil futures remained basically unchanged. Meanwhile, while gasoline prices are rising the price of a barrel of crude oil is falling (-4.57% in April), suggesting that the higher prices are a result of production inefficiencies and not a lack of crude supply.
Elsewhere in commodity trading, metals continue to rally at a torrid pace. Copper futures rose 13.05% in April, Palladium futures were up +4.69%, Platinum futures gained +3.36%, and Gold climbed +2.17%. Grains and softs headed in the opposite direction with Corn futures falling -4.95%, Soybeans down -4.58%, Cotton falling -10.92%, Sugar down -8.17%, and Coffee losing -5.35%, wow. Wheat prices rallied +9.44% due to a drought in China.
Finally in currency trading the Euro continues to dominate the greenback, gaining +2.11% last month. Even EU lawmakers have given up trying to cool the currency off; at least for the time being. The Dollar Index fell another -1.63% for the month while Yen futures fell -1.84%.
***Commodity Trading Advisors (CTAs)***
In the better late than never category — April was an impressive month for those CTAs containing trend following components. Topping the charts was Dekker Capital 3x, which returned an impressive +9.7% and is now ahead 10.4% for the year. Dekker has been live since late 2004 and has seen an impressive run up in both return and equity he is averaging +36.4% and is now managing just over $200 Million dollars. Other CTAs with trend following components posting gains included Attain Portfolio Advisors up (+2.8%) and Nu Wave up +1.0%.
Elsewhere amongst non stock index trading CTAs - FCI had a great April, positing gains of +7.1% behind gains in the metals and energy markets, while Phoenix Energy finished the month roughly even (-0.36%). NDX's Abednego and Shadrach programs were both down just slightly (only an amount equal to the management fee) - having no trades in either program as they wait for Hog prices to come back in line with their desired levels - after they became out of whack due to high feed prices due to Ethanol demand.
Over in the option markets, Zenith Resources Diversified program was Aprils top Index performer gaining +2%. Zenith Index also posted gains of +0.9% thanks to the continued run up pulling the short put premium out of his positions. Raithel Investments also earned +2% - Raithel is a new CTA to Attain and by his own right is new to investors as well. Raithel boasts of a 20 month track record returning 20.16% coupled with a -9.23% drawdown. Their core strategy involves selling naked options on the S&P 500, while they will put on covered spreads from time to time also.
On the losing side of the ledger, while the big sell off in February and early March seemed like the event that threatened option selling CTAs, the consistent move higher in April turned out to be much more threatening to option selling CTAs - as both World Capital and Argus suffered big losing months in the neighborhood of -30% to -40%. And finally, discretionary trader Dighton is currently running an open trade drawdown of approx. 30% based on their open positions. In speaking with Dighton they are aware of the magnitude of the current open trade drawdown; however also recognize that they have been here before (their program officially hit a 30% intra month drawdown twice last year). At the present they will be looking for a bounce and opportunity to scale out profitably.
***Day & Swing Trading***
There were plenty of opportunities for trading systems to profit in the month of April, with U.S. stock indices gaining between 3 and 4 % for the month.
The day trading systems that fared the best during April were those that jumped in on some of the big rallies - but generally waited for an opportunity for the market to cool off before entering into the positions. Compass SP is designed to enter inline with a trend on a retracement in the market and that strategy paid off w/ profits of +$3,712.50 for the month. Navigator eRL, also by Mariner Futures, profited $970 for the month and is quicker to enter trades than Compass SP but generally risks much less per trade. Impetus eRL was quiet for the month with only 4 trades but made modest profits of +$268.
On the other side, several systems took a contrarian approach and attempted to go short in pursuit of a major correction in the market. This approach is bound to pay off sooner than later, but definitely was not effective in April. OPXP, a short only system, was down -$740 for the month as can be expected in such a bullish market. All of the Dax/ESX systems were down for the month ranging from -$118 to -$1,300 and continue to dig deeper into drawdown.
Swing systems continue to outperform their day trading counterparts due to these deliberate, trending markets and had another bout of solid performance in April. Top performer amongst the swing traders was SeasonalST ES - which held long for the majority of the month for profits of +$2,627.50. Tzar ES bailed on its short position and entered long a little later in the month, but still managed to tack on +$1,357.50 in open and closed trade profits. SeasonalST eRL, meanwhile, didn't see the returns of the ES program but still managed profits of +$1,004.54 in open and closed trade profits
Elsewhere, Tzar NQ and eRL held on to their short positions for too long and lost -$1,908.42 and -$2,349.09 but made back some of the losses on the current long positions. Bond markets were stagnant for the month and Mesa Notes held its signature long position for small gains of +$203.12.
April activity in the Long Term systems picked up a bit. A few markets did actually have decent moves, although the norm for most Long Term systems is a concrete trend before entries are elected. Market worries on the welfare of world economies kept the financial sector volatile and choppy. Other sectors like the livestock and soft commodities did see some movement and portray signs of new possible trends as the market focus seemed to turn to oversupply situations in some areas of the commodity related contracts.
The grain markets seemed to calm down a bit, although soybeans did hit new 3-month lows on ideas that some of the projected corn acres could revert back to soybeans due to wet weather as the heart of corn planting comes into focus. Weather turmoil should make for an interesting trade in this complex for the month ahead with most of the Midwest very wet heading into corn planting season. Oversupply was also a catch phrase for the month in items such as cotton, sugar, and coffee as these commodities moved to multi-month lows. Aberration is long Bean oil with a gain of +436.00 (open trade), short cotton with a gain of +$2635.00 (open trade), and short sugar with a loss of -$212.80 (open trade). Aberration was stopped out if the long live cattle position during the moth with a -$380.00 loss.
The interest rate sector stabilized during the past month as small gains were seen on ideas that the Fed would have to cut rates sometime this year. The sector will be watching the upcoming May FOMC with a keen eye after the Fed did change some wording in their minutes from their last meeting. . March was very quiet as far as long term systems go as current market conditions seem to be keeping the long term trend followers on the sidelines for now. Aberration did enter a Euro-bund trade and is currently -$280.00 (open trade).
The dominance of the Euro was again evident in April as it scored new 3+ year highs with the U.S. Dollar and the Japanese Yen taking the brunt of the punishment as investors headed for the better yield in Europe. European economic expansion continues at a rapid pace versus other would economies sparking ideas that their rates will continue to rise versus those in the U.S. with sign of cooling, and Japan sitting with a stagnant economic outlook. Aberration is now short the dollar index with gains of + $220.00 (open trade).
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IMPORTANT RISK DISCLOSURE
Futures based investments are often complex and can carry the risk of substantial losses. They are intended for sophisticated investors and are not suitable for everyone. The ability to withstand losses and to adhere to a particular trading program in spite of trading losses are material points which can adversely affect investor returns.
Past performance is not necessarily indicative of future results. The performance data for the various Commodity Trading Advisor ("CTA") and Managed Forex programs listed above are compiled from various sources, including Barclay Hedge, Attain Capital Management, LLC's ("Attain") own estimates of performance based on account managed by advisors on its books, and reports directly from the advisors. These performance figures should not be relied on independent of the individual advisor's disclosure document, which has important information regarding the method of calculation used, whether or not the performance includes proprietary results, and other important footnotes on the advisor's track record.
The dollar based performance data for the various trading systems listed above represent the actual profits and losses achieved on a single contract basis in client accounts, and are inclusive of a $50 per round turn commission ($30 per e-mini contracts). Except where noted, the gains/losses are for closed out trades. The actual percentage gains/losses experienced by investors will vary depending on many factors, including, but not limited to: starting account balances, market behavior, the duration and extent of investor's participation (whether or not all signals are taken) in the specified system and money management techniques. Because of this, actual percentage gains/losses experienced by investors may be materially different than the percentage gains/losses as presented on this website.
Please read carefully the CFTC required disclaimer regarding hypothetical results below.
HYPOTHETICAL PERFORMANCE RESULTS HAVE MANY INHERENT LIMITATIONS, SOME OF WHICH ARE DESCRIBED BELOW. NO REPRESENTATION IS BEING MADE THAT ANY ACCOUNT WILL OR IS LIKELY TO ACHIEVE PROFITS OR LOSSES SIMILAR TO THOSE SHOWN; IN FACT, THERE ARE FREQUENTLY SHARP DIFFERENCES BETWEEN HYPOTHETICAL PERFORMANCE RESULTS AND THE ACTUAL RESULTS SUBSEQUENTLY ACHIEVED BY ANY PARTICULAR TRADING PROGRAM. ONE OF THE LIMITATIONS OF HYPOTHETICAL PERFORMANCE RESULTS IS THAT THEY ARE GENERALLY PREPARED WITH THE BENEFIT OF HINDSIGHT. IN ADDITION, HYPOTHETICAL TRADING DOES NOT INVOLVE FINANCIAL RISK, AND NO HYPOTHETICAL TRADING RECORD CAN COMPLETELY ACCOUNT FOR THE IMPACT OF FINANCIAL RISK OF ACTUAL TRADING. FOR EXAMPLE, THE ABILITY TO WITHSTAND LOSSES OR TO ADHERE TO A PARTICULAR TRADING PROGRAM IN SPITE OF TRADING LOSSES ARE MATERIAL POINTS WHICH CAN ALSO ADVERSELY AFFECT ACTUAL TRADING RESULTS. THERE ARE NUMEROUS OTHER FACTORS RELATED TO THE MARKETS IN GENERAL OR TO THE IMPLEMENTATION OF ANY SPECIFIC TRADING PROGRAM WHICH CANNOT BE FULLY ACCOUNTED FOR IN THE PREPARATION OF HYPOTHETICAL PERFORMANCE RESULTS AND ALL WHICH CAN ADVERSELY AFFECT TRADING RESULTS.