How We See the SPZ

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In a follow up to our talk on Lunch Money today, I felt putting some numbers on the ideas would be appropriate. Here is our current matrix on the SPZ future. The pattern dates from 8/24 and is quite wide because of the big move down. The model suggests that a move above 1896 would mean exit shorts and/or go long risking 1862. The wide risk window means hunting other securities with tighter parameters could be smart. Sometimes, the trade you DON'T do is the best trade.

On 8/26 the SPZ moved back above 1896 and yesterday after the Fed the high tick was 2011.75. An aggressive pattern of this nature could lead you to move your stop up to the 1st objective of 1939.8 for protection. The re-calculating objective remains 2017.50. The risk/reward skew moves to risk 34 to make 54 on that adjustment, however  - and that is the most important point. Most traders adjust there battle plan during the game as watching profits shrink is difficult and watching positions move against you is painful. But, this is the game.

A position held to the objective has a skew of risk 34 to make 121.50. Again, this pattern is wide and other products, like the 10 Year Note, had tighter windows to play in. 1 possible tactic is to trade 3 units and sell 2 at the objective and hold 1 for the new pattern. The turn level (up/down) is the new stop. This allows a participant to book profits and remain committed to the pattern trend. Obviously, the initial monetary risk is tripled.

Unlike charts, Hooper always produces a numeric defined risk in every trade. This makes the system a helpful tool to overlay on an existing technical discipline. Also, because Hooper generates prices on both sides of the risk window, option strategies can be executed using the objectives as the proper strikes. I would advise, unlike other more "famous" option guys, the transaction costs of these strategies can be heavy when markets are chopping through the window. We call this the "dreaded red cross".

The model runs on virtually ALL exchange traded futures and currencies. We also calculate the entire SP 500 and a basket of ETFs. Yes, we even track the TLT ! Thanks again to Blake Morrow for today's interview and we hope you find "the Dog" a helpful tool.

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