How I UsedHow I Usedthe 2011 Stock Trader’s Almanac the 2011 Stock Trader’s Almanac

for Trading 4 Leveraged ETFs (LETFs)for Trading 4 Leveraged ETFs (LETFs)

Or, can this funny looking spiral bound book give Or, can this funny looking spiral bound book give me an edge?me an edge?

Wally EaterWally Eater

(Thank You to (Thank You to Rick EdwardsRick Edwards for scanning Almanac pages!) for scanning Almanac pages!)

Brian Cox’s TOS / Investools Tues Webinar Brian Cox’s TOS / Investools Tues Webinar

Jan 25, 2011Jan 25, 2011

DISCLAIMERS• Not a professional trader

• Presentation is for information only

• Not selling or soliciting anything

• Viewers hold presenter harmless

• Not an offering per SEC Acts of 1933-34

• All leveraged funds state VERY clearly they are for day trading-- NOT for holding for extended periods

WHAT I’LL COVER• WHAT IS THE STOCK TRADERS ALMANAC?

• HOW I USED THE ALMANAC FOR TRADING LEFERAGED ETFs 11/8/10-2/2/11 (possible short term high)

• RESULTS FROM TRADING

• WHAT I LEARNED & WHAT I’D DO DIFFERENTLY

• WHAT ARE SOME NEXT TRADES?

• Q&A- HOLD questions until end

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 years of data backtested for Dow, S&P and Nasdaq

• At Amazon ($25.31) or StockTradersAlmanac.com.

HOW I USE THE ALMANAC(possible edge based on back data for 20 yrs for Dow, S&P & Nasdaq)

• Updates investment knowledge & informs you of new techniques and tools

• Is a monthly reminder and refresher course• Alerts you to seasonal opportunities / dangers • Provides historical data for 3 indicies: S&P, Dow &

Nasdaq • Supplies forms for portfolio planning, record keeping and

tax preparation

2011 ALMANAC EXAMPLESon 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 (p1 of 2)

Market 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; 3rd yr of election cycle)

• Elections will favor freer market Congress• Quantitative Easing 2 will be implemented• Bush tax cuts will be extended• Short rates will remain at all time lows ~.25%• Sideline cash will continue shift to stocks- especially

mid-late Jan when bond holders see big decline after receiving statements

13 HYPOTHESES (p2 of 2)Market up 11/8-9/10 thru 2/2/11 due to

(green = occurred, black= pending, red = did not occur):

• Economic data will be improving (jobless claims down, GDP, housing, etc)

• Hedge funds behind benchmarks will buy at year end (bonus) and early Jan (new monies)

• Emerging market growth will continue• No one time event (ie, 9/11, etc)• 4Q10 earnings > estimates• Oil will be >$90/barrel (as of presentation date)• USD further declines (EU problems negated USD

decline)

HYPHOTHESES I’D ADD

• Bump from BHO State of the Union• Major currencies: Yen, EU and possibly

CAD, AUD vs USD + or -• Ireland, Greece &/or Italy do not substantially

worsen• 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% annualized APR profit / trade)

• Hold thru late Jan or 2/2- do not trade 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 commercial real estate), 11/8, $61.16

• ERX (3x energy), 11/9, $46.25

• AGQ (2x silver), 11/9, $142.84

• TNA (3x RUT), 11/9, $59.95

RESULTS($/share, % APR based on 252 trading days / yr, green

color / not sold- held yet as of 1/25/11 close)

BUYDATE

SELLDATE(trading days thru 2/2)

BUY$ /share

SELL$ /ShareClose on

PROFIT$ /share

PROFIT%

APR%As of 1/25

DRN 11/8/10 2/2/11 61 days

61.16 59.631/25

-1.53 -2.5 -6.7

ERX 11/9/10 2/2/1160 days

46.25 63.291/25

17.04 36.8 163%

AGQ 11/9/10 2/2/1160 days

142.84 118.361/25

-24.48 -17.2 -76%

TNA 11/9/10 2/2/1160 days

59.95 71.051/25

11.10 18.5 82%

WHAT I’D DO DIFFERENTLY & WHAT I LEARNED

• BUY using my day trading technicals. All 4 leveraged ETFS would have been a BUY at a lower price a week later. Example: I bought AGQ at ~$132 as a swing trade / longer term inflationary hold days after 11/9.

• SELL if a quick run up & BUY BACK using day trading technicals. Jan 3 would have been a SELL and Jan 4-7 a BUY BACK.

• BUY TYH, 3x tech, week before Thanksgiving (ie, the old “Comdex” buy model) & HOLD thru at lest 2/2.

• DAY / SWING TRADE during 11/8/10 - 2/2/11. Estimated returns would have been 2-3x greater day / swing trading that buying and holding.

POSSIBLE NEXT LETF TRADES BASED ON THE ALMANAC

• I wouldn’t hold an LETF for more than 1, or 2-4 days max, when trading with the trend. Trading counter trend loses.

• Historical there are back to back 4 bull or 4 bear days: 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 of 5/6 bear days.

• FAS, 3x financials, buy early Jan & trade thru early Jun• DRN, 3x commercial real estate, buy Jan & trade thru early Jul• ERX, 3x energy/UCO, 2x oil, buy early Jan & trade thru early Jul• THY, 3x tech, historically buy early Jan and hold thru May 3• Weather anomalies (rain, freeze, tornado, hurricanes, El Nino,

etc)

CONCLUSIONS / QUESTIONS• Almanac DID provide an edge for Nov-Feb swing

LETF trades• Almanac ALSO provided an edge for 0-3 day LETF

day or 1-5 day swing trades (8 made, all profitable). Held longer than normal to capture daily gaps

• Closely monitored other items that could undermine trade: political events, economic news (US / EU / China), industry news, etc

• QUESTIONS?? SUGGESTIONS?- pls email me at weater@aol.com by Fri, 1/28, so incorporate your suggestions into OC Traders presentation on 1/29.