ROQ Alert: Status Change, Leverage Removed
The ROQ Wave-State Model's first leveraged episode under Version 3.0 is now closed. The defensive stop triggered today, which calls for removing leverage at tomorrow's open and transitioning the portfolio to the unleveraged Bullish Continuation allocation. The episode ran six trading days, massively outperformed our benchmarks, and exited exactly as the rules prescribed. Here's the full account.
The Entry
The setup was described in last week's post. After nearly three weeks of base-building, the breadth signal and momentum indicator turned up sharply on Wednesday May 20. Thursday confirmed. The leveraged position engaged at Friday May 22's open with VIX at 16.90 — well clear of the gate.
The Episode
Six trading days. Here's how it played out:
May 22: +1.49% (portfolio) vs +0.39% (SPY)
May 26: +3.40% vs +0.66%
May 27: −0.07% vs −0.02%
May 28: +1.70% vs +0.55%
May 29: +0.50% vs +0.25%
June 1: +0.62% vs +0.27%
Episode total: +7.85% leveraged vs SPY +2.13% — outperformance of +5.72pp in six trading days.
The Stop Triggered Today
Friday May 29 both indicators declined simultaneously for the first time since entry. That was Day 1. Today, Monday June 1, both fell again. Day 2 confirmed. The stop triggered.
This is worth pausing on. The stop mechanism exists precisely for this moment — not to prevent losses, but to exit a leveraged position when the signal that justified it is no longer present. The position entered at deeply oversold levels, rode an orderly advance to overbought levels, and the stop found it at a natural top. That's the sequence working as intended.
Tomorrow's open the portfolio transitions to Bullish Continuation — same ETF allocation, no 3× instruments. The unleveraged growth posture stays in place until either the signal deteriorates into Defensive or a new Bullish Entry setup forms.
Where Things Stand
ROQ Portfolio (inception to date): +18.27%
S&P 500: +10.78%
EW4 Passive Benchmark: +12.93%
Alpha vs SPY: +7.49pp
The first V3.0 leveraged episode contributed approximately +6.96pp to the cumulative return. The remaining lead over SPY — built entirely through allocation rotation since December — now stands at +7.49pp in total. Both sources of alpha are on the scoreboard.
The model moves to Bullish Continuation tomorrow, and the model could quickly switch to Defensive. Watching for what comes next.
Market analysis and this blog post were conducted and written with the assistance of AI analysis under human oversight.
The information provided here is for educational and informational purposes only and should not be considered financial advice. I am not a licensed financial advisor, and my portfolio may not be appropriate for your financial goals or risk tolerance. All investments involve risk, including the potential loss of principal. Historical data and market models are not indicative of future results. Please consult with a licensed financial professional before making any investment decisions.