XLI now in Cash ?!?

[pdp-brugge]

Pascal,

I do not understand why the XLI has turned to cash last Friday.
Clearly the MF has dropped significantly and there is absolutly no reason to keep the previous "Bought Oversold".
Please help me to understand why cash and not short.

PdP

[Pascal]

Pascal,

I do not understand why the XLI has turned to cash last Friday.
Clearly the MF has dropped significantly and there is absolutly no reason to keep the previous "Bought Oversold".
Please help me to understand why cash and not short.

PdP

It is because the model does not short when in Oversold. Oversold levels often lead to sharp bounces.
However, the model does turn to short when falling back down from Overbought when the volatility level is high enough.



Pascal

[pdp-brugge]

Ok
Why did the XLB model go from bought oversold to short?
Hasn't the XLI model the equal rules as the XLB ?

[Pascal]

Ok
Why did the XLB model go from bought oversold to short?
Hasn't the XLI model the equal rules as the XLB ?

XLI is now in Oversold and therefore, cannot turn to short.

XLB went from Bought Oversold to an internal "bought protected" mode when it crossed above 0 and the to a second bought protected mode when it fell below 0 but stayed above its average. On Friday, XLB fell below its average but is staying above the Oversold level. This means that the model detected that the Buy signal failed and turned to short because "there is still room for money to move out." The XLB model will turn to cash if the MF falls into OS and will turn to buy if it crosses above the average level. We are working on the automatic settings of these levels on RT graphs, but this is taking longer than what I expected.


Pascal