Chart of the Week: The Futures Markets’ Sideways Bell Curve

Drilling down to the day-to-day gains & losses can be dangerous for your wallet and psyche when analyzing trend followers, but when we checked out today’s futures market performance on Finviz we noticed something unique… a sideways bell curve.

Day Performance(Disclaimer: Past performance is not necessarily indicative of future results)
Chart Courtesy: Finviz

While most people grew up excited to hear that their teacher/professor was going to grade the test (you didn’t study for) on a bell curve (the highest grade in the class becomes the 100%, and each grade is adjusted from there), this sideways bell curve means something a little different.

You see, when the futures markets work in tandem to average a gain of over 1% or average losses over -1%,  it’s referred to as a Risk On/Risk Off day. (See our most recent 2014 Scoreboard here). But this might be a perfect example of a day showing an average return of 0%, meaning, each market is zigging, while the others are zagging.

What does this mean for trend followers as well as other managed futures strategies? Well, nothing really. Trend followers love to see charts like this, but one day isn’t enough for managers to capitalize off of their trends. They want to see days like this repeat themselves for months, and hopefully even years. The wheat market is continuing its down trend over from May into June, now down 16 of the last 19 days, but managers want to see a trend like that continue for months to come, with no reversion.

Managed futures don’t just need markets moving on their own – they need them moving on their own in a consistent direction.

For example, the curve isn’t so even if you look at the YTD performance, with 22 of the 40 markets only showing a positive or negative 5% performance YTD {Disclaimer: Past performance is not necessarily indicative of future results}.

YTD performance(Disclaimer: Past performance is not necessarily indicative of future results)
Chart Courtesy: Finviz

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Forex trading, commodity trading, managed futures, and other alternative investments are complex and carry a risk of substantial losses. As such, they are not suitable for all investors.

The entries on this blog are intended to further subscribers understanding, education, and – at times- enjoyment of the world of alternative investments through managed futures, trading systems, and managed forex, and is not intended as investment advice, or an offer or solicitation for the purchase or sale of any financial instrument. Unless distinctly noted otherwise, the data and graphs included herein are intended to be mere examples and exhibits of the topic discussed, are for educational and illustrative purposes only, and do not represent trading in actual accounts. Opinions expressed are that of the author.

*The mention of specific asset class performance (i.e. +3.2%, -4.6%) is based on the noted source index (i.e. Newedge CTA Index, S&P 500 Index, etc.), and investors should take care to understand that any index performance is for the constituents of that index only, and does not represent the entire universe of possible investments within that asset class. And further, that there can be limitations and biases to indices such as survivorship and self reporting biases, and instant history.

The mention of general asset class performance (i.e. managed futures did well, stocks were down, bonds were up) is based on Attain’s direct experience in those asset classes, estimates of performance of dozens of CTAs followed by Attain, and averaging of various indices designed to track said asset classes.

It should be noted that past market performance is not indicative of future market movement.No market data or other information is warranted by Attain Capital Management as to completeness or accuracy, express or implied, and is subject to change without notice.

Managed Futures Disclaimer:

Past Performance is Not Necessarily Indicative of Future Results. The regulations of the CFTC require that prospective clients of a managed futures program (CTA) receive a disclosure document when they are solicited to enter into an agreement whereby the CTA will direct or guide the client’s commodity interest trading and that certain risk factors be highlighted. The disclosure document contains a complete description of the principal risk factors and each fee to be charged to your account by the CTA.