Founded on the basic observation that, in the short term, the financial markets and their components tend to move up and down, overshooting their true, underlying value in both directions, I sought to quantify and capture those short term movements. By combining technical pricing movement and trading volume observations, I developed a ranking system that identifies overextended short term price movements.
I then expanded the system to act on these signals by selecting and entering a lucrative Contrarian position using an out-of-the-money credit spread, essentially selling insurance against the continued trend. The Trend Exhaustion Trading App was born.
Very rarely can you ever time a stock’s exact tops and bottoms, but the Trend Exhaustion Trading App has proved time and time again that you can get close!
Since May 2008, I’ve been managing a Contrarian credit spread portfolio, and since this App’s completion in January 2010, the portfolio is run off a best-ideas report from the App, essentially cherry-picking the most lucrative ideas, which you can find in my stock picks section.
Download the report of trading suggestions from Feb 2010 to get a better idea of how the Trend Exhaustion Trading App operates.
Download a PDF tour of the MS Excel Dashboard used to control the Trend Exhaustion Trading App.
Recently, I’ve been asked to convert the App to be able to use stocks in order to manage a larger account, since the use of options, and even more so, credit spreads, can severely limit the size of a successful trading account. After months of development, the App now supports a stock-only, long-short portfolio which back-tested a 50.3% annualized return since January 2010, gross of costs/fees.
In November 2011, seeking to reduce portfolio volatility significantly, we migrated the Long/Short Portfolio to a Dollar-Neutral approach, maintaining near 100% Long, 100% Short weighting. So far, performance has been outstanding! Visit TrendExhaustion.com for the most recent updates.