Posted By: WS   Date: Thu Sep 27, 2007

Title: Seasonality

Message:
  Is your decision to go LONG at the close of 9-28-2007 solely based on the output of the trading model? Does it also take into account some other factors such as seasonality? ( the market has a tendency to rally at the end of each month; with a duration of about 5 trading days.)

Response:
  The model does not have an explicit seasonal input. It has no concept of a time of year. Implicitly, it does have input data that may infer seasonal factors. Seasonality is only marginally useful as you can see from our seasonal chart. Last year, the market did not have an expected decline in the September-October time frame.

  The answer to your question is yes. We do not make any judgmental changes to the model output. The model will go LONG on Friday. This is a little troublesome to me as the market has already made a significant runup. If you decide to go long, I would certainly set tight stops. We may wait until next week to change position in our accounts.