…noteworthy from yesterday, the Tech Tock blog posting on RX that surfaces through lab49.  That was my first introduction to RX – the reactive framework by Microsoft, which is focused on programming patterns that can make your program “react” to it’s environment.  Very cool / interesting… beautiful to see patterns for marrying Complex Event Processing (CEP) type streams with LINQ.  I think you’ll quite like it.

…spent a little time looking at CPLEX.  Not sure how commonly used that is.  But, because it’s on my radar, I’d argue it is a contender in the Quant optimization space. 

On the brokerage front… my favorite retail broker remains thinkorswim.  PFG was popular with many of the traders.  I also think quite highly of Interactive Brokers.  Rumors of a high frequency service for retail are out in the press. 

In terms of markets… the crowd was largely focused on simple approaches towards US futures markets.  Very few even understand options strategies.  Little have interest in stocks and even claim that stocks are harder to “grasp” than commodities.  They all seem to be smart enough to stay away from the “forex” buzz.  And, I didn’t run into anyone who was playing around with any thing too complex or exotic such as high-frequency or exotic derivative or complex interest rate products.  Very few intraday traders were represented.

Popular references from the weekend:

• Ralph Vince
• Larry Williams
• Tom Demark
• Lee Gettess

• Aspen Graphics – small Colorado company specializing in trading software moves to Silverlight
• Last week I was working on a white paper on the Quant Finance Industry and was scrambling to come up with a good section on Portfolio Attribution.  I was surprised to find ClariFI has some nice portfolio attribution functionality built in.
• Team Foundation Studio 2010 introduces User Stories as a basic work item in the Microsoft Agile 5.0 template!  Now, the pressure is on development teams to start from the scenarios and really work their way down to the individual features.  This page has a very literal, screen first, approach to the user story.

• After catching up with some colleagues who returned from WPC in Washington, D.C. last week, the story remains: Azure, WP7, Dallas, OData.  I was surprised there wasn’t more on the SQL Server 2008 R2 Parallel Data Warehouse or Stream Insight.

Very cool space emerging there.  I’m looking forward to watching the CEP industry mature.  As time allows, I will explore regressions on High Frequency data sets.  Fun!

At first blush, it has everything I was looking for.  It took only a couple hours to come up to speed and get a scriptable widget dropped into my latest trading framework that enables me real-time control of the underlying libraries.  Great job Microsoft!  They are doing some powerful things with the framework.

Hardware specifications:

• Capacitive Touch: 4 or more contact points
• Sensors: GPS, Accelerometer, Compass, Light, Proximity
• Camera: 5 mega pixels or more
• Memory: 256 MG RAM or more
• GPU: DirectX 9 acceleration
• CPU: ARMv7 Cortex/Scorpion or better
• Resolution: 800 x 480

It supports Silverlight 3+… which means everything in Silverlight 3 is in the phone with two primary differences:

1. They optimized the heck of the library as they have the guaranteed GPU which isn’t the case when running Silverlight in the browser.
2. Security model is different on the phone… it’s equivalent to “out-of-browser” / “elevated trust”

Misc notes:

• You can not run a Silverlight application in the browser on WP7
• You have access to storage
• Everything installed on the phone MUST be installed through the MARKETPLACE
• Tools are free
• You can install the Windows Phone Developer Tools along side your current installation
• Emulator is an EMULATOR, not a simulator, it’s the real thing
• Emulator supports landscape mode
• You have full debugger support
• Can just plug in a phone and debug on it
• Registered developers get 5 free apps and unlimited commercial apps that can be published to the marketplace.
• Split is 70% you and 30% MS and providers on app sales
• You can write your own subscription models or advertising engines… anything goes… except working around marketplace for application updates

The new bits are out.  I managed to complete my first WP7 application.

I’ve lost the illusion of sensing I can see good opportunities on the grain markets.  And, the softs seem a wee bit off kilter for my tastes.  So, I’m pairing my focus at the start of this week to metals, currencies, and indices.

Options traders remember we have expiration coming on Friday!  The next expiration will be December expiration at which point the smarter trading community will already be taking position for the new year’s trend.  It’s not too early to start thinking about 2010.  This markets may be able to run higher, but, not forever.

While I’m on the subject of options, keep in mind what sort of traders will be rewarded this expiration.  Let’s just assume our more sophisticated traders are using rather dumb market neutral strategies.  Let’s assume the more naive players have a directional bias.  So, roughly speaking the majority of “smart” trades would have gone on around October 16th.  Let’s assume sometime around 10-15 days into the trades, IF AND ONLY IF, they were profitable, they would have taken them off.  Otherwise, smart money would be looking for those markets to be within a similar price range as we close out those contracts which will expire this week.  At which point those markets will be free to explore new ranges in ways they haven’t previously been able too.  One market near and dear to my heart is the metals market.  If this logic pans out, I could see perhaps one more sucker’s rally before a decent breather.  Time will tell.

General outlook:

As always, this is purely an empirical and a theoretical exercise.  Trading is extremely risky.  If you were to trade, you should only ever do so with money you can afford to lose.  Be well, be safe, and be warm.

• The price of gold can come down really fast.  If you haven’t been long gold past a top before, you are naive.  This is a speculative market.  It’s a small market.  And, when it is time for it to take a break, watch out.  I remember being with a bunch of trader’s in Vegas during a metals run a few years back.  Sometime during day two of our stay the market turned over.  It ruined the visit for a number of new friends.  In short, don’t fall asleep at the wheel.  Just like any other market, this one is prone to sharp corrections.
• We’ve come a long ways.  We are up about 30% since April.
• I’m seeing signs of technical divergence surfacing on the price charts.  I’d go into more detail.  But, in this case, the technique I’m using is not published.  It’s not one I came up with.  But, it’s really not mine to share presently.

I’ll I want to say is be very weary of your long positions.

Even better than some general advice, let’s take a look at some recent history so you can get a feeling for 4th quarter gold prices:

Gold at the end of 2004:

Gold at the end of 2005:

Gold at the end of 2006:

Gold at the end of 2007:

Well, that’s 4 out of 5.  In 2008, gold had started a significant pullback earlier.  It was not up to it’s usual self.  Needless to say, this year’s market is set up for an opportunity here.  But, I am definitely not encouraging anyone to be shorting gold at these levels.  Just because the opportunity may be there, it may not be the smartest trade.

It’s Sunday evening and the futures markets are testing Friday’s highs.  I love it.  That’s encouraging for the bears in the neighborhood.  I’d be looking at an opportunity to catch a short on the equities Monday through Wednesday of this week.  Of course, a big part of this observation has to do with the risk/reward.  Although new highs in equities is somewhat hard to imagine, new lows in the Dollar isn’t.  So, as always I’m quite likely wrong.  So, if you find yourself short the market and hitting new highs, get out.  Big picture: this looks like as good a risk reward as you could look for on a trade and the markets are heading towards halfway home… perhaps it’s time for a break.