Using the Stock Trader’s AlmanacUsing the Stock Trader’s Almanacto Swing Trade LETFs to Swing Trade LETFs (leveraged ETFs)(leveraged ETFs)
Results Updated (slide 26) on Feb 2 for presentations at:Results Updated (slide 26) on Feb 2 for presentations at:
Free Market Traders- Free Market Traders- Jan 24, 2011Jan 24, 2011
Tuesday WebinarTuesday Webinar- Jan 25, 2011- Jan 25, 2011
OC TradersOC Traders- Jan 29, 2011- Jan 29, 2011
Wally EaterWally Eater
((Thank YouThank You to to Rick EdwardsRick Edwards & & Brian CoxBrian Cox
for scanning Stock Traders Almanac pages)for scanning Stock Traders Almanac pages)
DISCLAIMERS• Not a professional trader
• Presentation is for information only
• Not selling or soliciting anything
• Viewers hold presenter harmless
• ALL leveraged ETF sites state VERY clearly they are for day trading ONLY -- NOT for holding for extended periods
• Not an offering per SEC Acts of 1933-34
WHAT I’LL COVER• What is the STOCK TRADERS ALMANAC?
• How I used the Almanac to identify a swing trade for leveraged ETFs (LETFs) 11/8&9 - 2/2/11
•
• RESULTS from swing trading LETFs
• What I learned-- & would do differently
• POSSIBLE NEXT TRADES using the Almanac?
• Q&A- HOLD questions until end, in BIG type so you can see at back
WHAT ISTHE STOCK TRADERS ALMANAC?
• “Stock Traders Almanac 2011”, Hirsch & Hirsch, Wiley Publishing. companion “Commodity Traders Almanac 2011” Hirsch & Person (Person’s Pivots).
• “The Almanac is a practical investment tool… that alerts you to patterns and tendencies on which shrewd professionals enhance profit potential.”
• 20 yrs data back tested:Dow, S&P, Nasdaq, RUT• Amazon ($25.31) or StockTradersAlmanac.com.
HOW I USED THE ALMANAC
• Updates investment knowledge & informs you of new techniques and tools
• Is a monthly reminder and refresher course
• Alerts you to seasonal opportunities / dangers
• Supplies forms for portfolio planning, record keeping and tax preparation
2011 ALMANACEXAMPLE PAGES
on next slides(title only, no format discussion)
Page 7- Calendar
Page 18- Jan may forecast the year
Page 22- performance during mo
Page 32- 3rd yr of election cycle up
Page 40- if Dow 1Q close <Dec close,a warning sign
Page 44- Nov, Dec & Apr best mos
Page 50- MACD leverages returns 3x
Page 52- down Fri & down Mon are warnings
Page 68- stocks lower Mon & Fri
Page 72- 1Q most bullish
Page 80- seasonal corrections
13 HYPOTHESES p 1/4Market up 11/8-9/10 thru 2/2/11 due to
(green = occurred, black= pending, red = did not occur):
• Seasonality per Almanac (Nov-Jan best 3 mos of the year; 3rd yr of election cycle)
• Elections will favor freer market Senate
• Quantitative Easing 2 will be implemented
• Bush tax cuts extended by Congress
13 HYPOTHESES p 2/4 Market up 11/8-9/10 thru 2/2/11 due to
(green = occurred, black= pending, red = did not occur):
• Short rates will remain at .25%
• Sideline cash continues shift to stocks mid-late Jan / early Feb as bond holders see big declines after receiving Dec and Jan statements
• Economic data improves (jobless claims, GDP, housing, etc)
13 HYPOTHESES p 3/4 Market up 11/8-9/10 thru 2/2/11 due to
(green = occurred, black= pending, red = did not occur):
• Hedge funds behind benchmarks will take additional risk at year end to obtain bonus, save their job & deploy new monies in early Jan & Feb
• Emerging market growth continues
• No one time event (ie, 9/11, etc)- Tunisia, Egypt
13 HYPOTHESES p 4/4 Market up 11/8-9/10 thru 2/2/11 due to
(green = occurred, black= pending, red = did not occur):
• 4Q10 earnings > estimates
• Oil will be >$90/barrel
• USD further declines (EU problems tended to negate USD decline)
HYPHOTHESES I’D ADD p 1/2
• Use leveraged ETFs that ALL have a HIGH correlation w/each other. AGQ had a very low correlation w/DRN, ERX & TNA. (source for correlations: www.ETFscreen.com)
• Bump from BHO State of the Union
• Major currencies: Yen, EU; possibly CAD, AUD
HYPHOTHESES I’D ADD p 2/2
• Ireland, Greece &/or Italy do not substantially worsen
• 94% of S&P profits for 2010 were on the first day of the month- thanx to Eric Severance- posted to OC TRADERS in Jan (http://www.greenfaucet.com)
• Weather anomalies affecting: mining, crops, oil, etc (Australian floods were an outlier)
SWING TRADE OBJECTIVES11/8-9/10 thru 2/2/11
• 12.3% profit for LETF portfolio (50% APR)
• Capture overnight gaps
• Hold thru late Jan or 2/2- w/o taking trading profits/losses
• Sell if “extraordinary” event
• Do not exceed amount allocated for trading
• Run model by Free Market Traders for input prior to buying
WHAT LETFs I BOUGHT(approximate equal dollar amount in each)
• DRN (3x real estate REITS), 11/8, $61.16
• ERX (3x energy), 11/9, $46.25
• AGQ (2x silver), 11/9, $142.84
• TNA (3x RUT 2000), 11/9, $59.95
RESULTS($/share, % APR based on 252 trading days / yr, green color /
not sold- held yet as of 2/2/11 close, approximate equal amounts invested in each ETF below)
BUYDATE
SELLDATE(trading days)
BUY$ /share
SELL$ /Share
PROFIT$ /share
PROFIT%
APR%As of 2/2
DRN 11/8/10 2/2/11 61 days
61.16 62.35 1.19 1.9% 8%
ERX 11/9/10 2/2/1160 days
46.25 74.86 28.61 61.8% 260%
AGQ* 11/9/10 2/2/1160*days
142.84 127.992/2*price
-14.85 -10.4% -44%
TNA 11/9/10 2/1/1159 days
59.95 77.66 17.71 29.5% 124%
* $127.99 was 2/2 close. AGQ was held to be sold later.
WHAT I’D DO DIFFERENTLY & WHAT I LEARNED p 1/2
• BUY using my day trading technicals. All 4 leveraged ETFS would have been a better BUY a week later had I used my technicals for entry.
• SELL when objectives are met-- or track daily for ongoing profits
• SELL if quick run up, BUY back at drop using day trading technicals, ie Jan 3 would have been a SELL & Jan 4-7 a BUY BACK.
WHAT I’D DO DIFFERENTLY & WHAT I LEARNED p 2/2
• BUY TYH, 3x tech, week before Thanksgiving (ie, the old buy “Comdex” & sell May buy model) thru at least 2/2.
• DAY / SWING TRADE during 11/8/10 - 2/2/11. Estimated returns would have been 2-3x greater day / swing trading rather than buying / holding.
POSSIBLE NEXT LETF TRADES BASED ON THE ALMANAC p 1/2
• Do not hold an LETF for more than 1, or 2-4 days max and ALWAYS trade w/the trend.
• For the S&P: there are only a several to back 4 bull or 4 bear days* in a row: Feb 10-22 (4 & 4 days), Apr 1-6 (4), July 7-14 (5 of 6 days), Nov 23-Dec 5 (6 of 9 days, no bear days during the 9 days). There are no 4 back to back bear days or 4 out of 5/6 bear days for the rest of 2011.
* one day is when the S&P is up/down t least 60% of the time on that trading day for the last 20 yrs.
POSSIBLE NEXT LETF TRADES BASED ON THE ALMANAC p 2/2
• FAS, buy early Jan & trade thru early Jun• DRN, buy Jan & trade thru early Jul• ERX, /UCO (2x oil), buy early Jan & trade
thru early Jul• TYH, 3x tech, buy early Jan & hold thru May
3• Weather (rain, freeze, tornado, hurricanes,
El Nino, etc)
CONCLUSIONS / QUESTIONS p 1/2
• Almanac provided edge for swing LETF trades
• Almanac also provided an edge for 10 profitable 0-3 day LETF swing trades. Held most longer than normal (1-3 days if trend) to capture daily gaps. Have 1 LETF position, AGQ: BUY- Thurs & intend to SELL by Tues.
CONCLUSIONS / QUESTIONS p 2/2
• Closely monitor other items that could undermine trade: political events, economic news (US / EU / China), industry news, etc
• This presentation will be at xsprofits.com and be replaced with updated results page when DRN, ERX, AGQ and TNA are sold.