How I Used the 2011 Stock Trader’s Almanac for Trading 4 Leveraged ETFs (LETFs) Or, can this funny...
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Transcript of How I Used the 2011 Stock Trader’s Almanac for Trading 4 Leveraged ETFs (LETFs) Or, can this funny...
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 [email protected] by Fri, 1/28, so incorporate your suggestions into OC Traders presentation on 1/29.