A Discounted View

In November 2005 Cole Wilcox and Eric Crittenden of Blackstar Funds LLC* (now Longboard Asset Management) published a research report analyzing the effectiveness in using a Trend Following   trading strategy in the US equity markets.   Both fund managers were using Trend Following successfully in the futures markets for many years.   Their success with Trend Following, as well as their peer's results in similar markets , piqued their curiosity and led them to conduct this research.   The strategy tested is a long-only Trend Following program. Trend Following uses absolute price change to delineate strength or weakness in a particular security. In this case, the researchers added long exposure on positive absolute price changes that resulted in an all-time high on a one week closing basis. Before actual testing began, Wilcox and Crittenden made sure to address any data issues. For example, given the expansive time horizon for testing, the authors account ...

"The Yen has a tendency to trend, take a timeout, and then trend again" - Stanley Druckenmiller, 2015 Since the end of 2015 USDJPY has been forming a trading range between 115 and 125. This past week the currency pair closed below 115 with a breakout to the downside. Clearly, many market participants have been monitoring these levels in anticipation of a swift move out of the consolidation that lasted over a year. Accordingly, most of the initial move was absorbed this week. However, there is still some room for the pair to decline to the next level of support around 110. Some technicians may argue that the consolidation resembles a Head and Shoulders pattern. While there is some reliability in pattern recognition, I believe it is more important to identify the meaning of a pattern. In other words, a Head and Shoulders arrangement is a sign of distribution often seen around price tops. In fact, USDJPY began forming a series of Lower-Highs and Lower-Lows on a weekly b...