Using the Stock Trader’s Almanac to Swing Trade LETFs (leveraged ETFs)

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)

- Calendar

Jan may forecast the year

performance during mo

3rd yr of election cycle up

if Dow 1Q close <Dec close,a warning sign

Nov, Dec & Apr best mos

MACD leverages returns 3x

down Fri & down Mon are warnings

stocks lower Mon & Fri

1Q most bullish

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


• 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)



• 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



• 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.

Using the Stock Trader’s Almanac to Swing Trade LETFs (leveraged ETFs)

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