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FundTrading.com

"Empower Your Trading"

 

  

 

The FundTrading Newsletter

 

Follow steps 1 through 6 to take better advantage of the weekly newsletter.

               

Step #1        Current Market Conditions

 

The U.S. stock market sold-off hard at Friday’s open but managed to recover much of its losses before the market closed for the weekend. The selling was triggered by unimpressive bank earnings and weak economic data that has dogged the stock market since March.

U.S. stock prices are extended after their rapid rise over the last few months. So for the stock market rally to continue corporate earnings will have to increase in order to support rising stock prices. Therefore the earnings reports that are released over the next three weeks will determine if stock prices can move substantially higher or decline due to worsening economic data.     

Since March the list of disappointing economic reports continue to grow:

-        ISM Manufacturing

 

-        ISM Services

 

-        Nonfarm Payrolls

 

-        Retail Sales

 

-        Consumer Sentiment

Retail sales declined in the month of March, while February’s numbers were revised lower. March sales fell -0.4% after increasing 1% in February. Analysts revised their forecasts down to zero growth in March, so a negative number surprised traders. Retail sales are watched closely because consumer spending drives as much as 70% of the U.S. economy. 

Consumer sentiment fell to a nine month low in April. The Michigan consumer sentiment index declined to 72.3 from 78.6 in March. The market was looking for a small decrease down to 77. This month’s reading of 72.3 was last seen in the summer of 2012 when the stock market had just experienced a correction. The survey showed there is an increasing concern over the long term health of the U.S. economy. However, rising stock prices and home values could lift consumer spending allowing the economy to muddle along.

Wells Fargo Bank and J.P. Morgan Chase reported their earnings on Friday morning. While they reported mixed results the financial sector initially weakened due to the underwhelming first quarter results. Wells Fargo’s earnings came in better than expected but a decline in home loans is clouding its future outlook. JP Morgan missed on revenue, while seeing a rise in profits.

Cyprus is being forced to sell its gold reserves causing gold prices to fall 5% today. Since the MTTS closed our GLD trade in December the GLD has declined almost 16%.

European markets sold off hard as they watched the morning declines in the U.S. market. The selling was heaviest in bank stocks and in the automobile sector.

The euro zone’s industrial production increased 0.4% compared to the prior month. This beat expectations of a 0.1% increase.

The Cyprus 10 billion euro bailout loan was approved by the euro zone finance ministers on Friday. But they still have a funding shortfall that we will hear more about in the near future.

Greece continues to see rising unemployment. In January their unemployment rate rose to 27.2% from 25.7% in December. Unemployment rates above 20% can lead to social unrest.

On Friday the broad market Stoxx Europe 600 fell -0.9%. The German DAX fell -1.6% and the French CAC 40 lost -1.2%. Italy’s FTSE MIB declined -1.5% and Spain’s IBEX 35 declined -1.5%.

The Asian markets closed lower in overnight trading. Even the Japanese Nikkei fell after hitting a five year high that was driven by the Bank of Japan’s new plan to spur economic growth with massive monetary easing.  

Japan saw their industry activity increase by 1% over the prior month. This was a turnaround from last month’s -1.5% decline.

Hong Kong’s Hang Seng traded marginally lower after the personal computer giant Lenovo plunged for a second day.

China’s Shanghai index continued its decline on Friday as the building sector was repriced for slower growth.

The Shanghai Composite index fell -0.6%. The Hong Kong Hang Seng index slid -0.1%. Japan’s Nikkei Average lost -0.5% and the South Korean Kospi index declined -1.3% as North Korea prepares for a missile launch.

Next week the economic data gives us a broad view of the current state of the economy. Key data includes industrial production, housing starts and building permits, leading indicators and the Fed’s Beige Book. But most important watch the earnings reports.  

 

Market Trend Trading System (MTTS)

Intermediate Trend Trades with an average duration from one to three months.

Macro hedge funds had an average return of 3.3% in the first quarter of 2013. While a handful of the top hedge funds achieved returns in the low to mid-teens they may use leverage of 30 times or more.

Trading the diversified S&P 500 using our leveraged strategy with the Market Trend Trading System returned 17.1% in the first quarter. During periods of elevated market stress our trading system hedges risk by moving you to cash. Since our system signals only lower risk trades advanced traders can consider using leveraged strategies or trade without leverage for even greater safety. But the key to lower risk and higher returns is to only trade the funds when they have a strong intermediate trend.   

Our health care trade in 2013 has returned 18.2% or 36.5% with leverage.

The health care fund has the strongest intermediate trend of the 25 funds that we track. It is almost the perfect trade with high returns and minimal downside risk. But the unusual strength in defensive stocks also tells us there is something fundamentally wrong with the stock market’s structure. However, the market can always repair itself if the proper leadership returns.

The U.S. stock market lacks leadership. A healthy stock market will be led higher by either the financial sector or the technology sector. However, the current rally is being led by defensive sectors as investors from Japan, Europe and the U.S. look to replace poor performing bond holdings with the higher yields from investing in the U.S. stock market. 

Institutional investors limited the recent pullback to about 3% as they stepped in to buy on the dips in price. They are continuing to buy on the intraday price dips because they are not overly concerned about getting the lowest price. This is because they are seeking yield instead of high returns that are typical of growth investors.

Institutional investors can double their current yields by buying defensive stocks. Their behavior is easy to understand when you consider a 4% annual yield on a stock can be more than double of what they expect to see from their existing bond investments. But with Europeans and now the Japanese coming to invest in America some of these trades are getting crowded.

Comparing Yields

-        10 year Treasury    1.8%

 

-        Muni Bonds            2.2%

 

-        U.S. Credit             2.6%

Utilities and consumer staples are now getting over extended. But the health care sector remains fairly priced due to its low starting point. If the market structure improves in the coming days and weeks the defensive sectors will slow and the riskier sectors will advance. We will know when this happens because the MTTS will trigger new Buy signals.

The question is can the increase in institutional buying keep the stock market from correcting due to a deterioration in economic and earnings data? Remember, the institutional investors are not necessarily the smartest money, but they are the big money that moves the market.      

 

Editor's Recommendations

An optional trading strategy to lower risk when trading the MTTS.

When the Editor recommends taking some profits, what does this mean?

We have two trading methods as discussed in this newsletter under Step #6 below.

The MTTS Trading Method is a simple to follow buy on the enter signal and sell on the exit signal. This is for the trader that likes to make one buy and one sell. The “Hold or Reduce” recommendation can be ignored. This is as simple as it gets in trading. So with the  MTTS Trading Method you remain 100% long until the trade closes.

For more conservative investors we have the Editor's Trading Method: This method scales into trades and scales out of trades. It requires one or two buys and two sells for each trade. This will get you closer to how professional traders manage a trade to reduce risk.

When a signal is indicated you can enter the full trade or enter it in 50% increments as we explain in step #6 below. Then follow the Editor's recommendation to reduce the position by 50% when recommended in the Trading Chart. A slowdown in the intermediate trend will trigger the 50% reduce recommendation. Sell the remaining 50% when a sell signal is indicated.

Scaling in and out of your trades can result in more consistent returns over time by reducing the risk from a sharp drop in price. However, the results can vary depending on the type of market being traded. It will work best in a choppy market where the intermediate trend never fully develops and price reversals are common, this is what we call a flat or consolidating market.

The two trading methods can be compared for each trade for the S&P 500, Nasdaq 100 and Russell 2000. Visit the website and under the Performance tab click on their trade detail. We suggest just comparing the data from January 2011 forward, since this time period reflects the updated trading system that we are using today.

The HOLD recommendation is an industry standard recommendation to refrain from adding to a current position. While we do not cancel hold recommendations, a member can still add to a position by following our late entry points for new members. Just keep in mind risk is elevated when adding to trades late.

The two trading methods will tend to equal each other in returns over time. However, the Editor’s Method provides the consistency of profitable trades that most conservative investors strive to achieve, in other words, more trades that are profitable with smaller losses and gains but earning the same overall return as the MTTS Trading Method.

 

If fear is keeping you from entering your trades, scale into the market. For example, if you want to invest $100,000 you would be risking $6,000 assuming the worst case and your trade is stopped out. But by reducing the entry amount to $50,000 the maximum loss falls to $3,000. If this loss is still too much reduce the entry amount until you can sleep at night.

If you start the trade with $10,000, your potential loss falls to $600 dollars. Then start adding to you position after you have earned a profit. The profit will reduce the chance of incurring a loss. Once your self-confidence increases you can scale into your trades with larger amounts.

The important point is to exit the trade when the Market Trend Trading System indicates it is time to close the trade. This will allow you to capture your profits or minimize a loss.

Following the Editor’s Exit Points to lock in profit or reduce exposure is a good strategy to follow, since the market can always drop 20% from an unexpected correction.

We capture some profit through the trade to protect our capital from a quick pullback in price. For this to work, it is important to follow our best practices and enter the trade within two days of a signal, so you have profit to take early in the trade.

 

Options for Income and Returns

An optional MTTS strategy for advanced traders. This strategy is for advanced traders because it requires options trading experience and possible adjustment of the set-up due to price changes at time of entry.

We have a great covered call trade that will close in Mid-May, so it should end before the summer sell off. It is low risk because it is an in-the-money trade and it only uses the broad market SPY instead of our normal three fund trade. If you are entering late adjust the strike so you are just in the money as shown below.

We are running a real-time example of the income strategy using the Core Income Portfolio. We will run the trades on a monthly cycle to allow you to see exactly how it works. Our income producing trades only require adjustment once a month, unless there is a major market event.

Our goal is to provide a consistent 1% monthly return or a 12% annual return to provide steady monthly income.

To increase monthly income without using margin we may use one low risk company stock that trades much like a utility. This could be Visa, GE or Blackstone for example.

The Income Portfolio: The funds in the income portfolio may change over time due to where the economy is in its economic cycle. The Core portfolio consists of two index funds and a company stock. The example shown below reflects 3/15/2013 closing prices. The trade ends when the options expire in May.

                                                                                     Profit or Loss

Symbol         ETF Price    Strike   Month   Premium    Max.   Actual

SPY                 $155.77        155     May           $3.45       1.8%    TBD

 

By adding a company stock the premium return is increased, without the risk of using margin.

*Maximum profit if price at expiration is above the strike price. The premium also helps to protect you if the market moves lower.   

Investors needing a steady monthly income are advised to use an income strategy to cover their monthly expenses, while using equity market trades to provide growth to their savings.

It is a best practice not to spend the full monthly premium to ensure your capital continues to grow. This will protect your earnings power. For the Core Income Portfolio cap the monthly withdrawal at 0.5% and 1% for the Aggressive Income Portfolio.

We use conservative funds in our portfolio to reduce the risk of losing capital. Also, defensive funds often appreciate in weak markets as traders move away from risky asset classes and into defensive funds. If the market is close to a major sell-off, then even defensive sectors are at risk. At these times the Market Trend Trading System alerts us to close the funds and move to cash. Because of the defensive nature of the funds this should only occur once or twice a year.

The aggressive portfolio includes a company stock to increase monthly returns. While returns can also be increased by using margin of 25% to 50%, using a conservative stock with a higher return can reduce risk. We never use 2x or 3x leveraged funds in the portfolio, because they do not always track the index well over time in volatile markets.

Advanced traders can use covered calls to hedge their long positions. When you sell calls against your position you are short the market, creating the hedge.

This is also a great strategy for slow moving markets, since returns of about 2% a month can be made even if the market does not change in price. To learn more visit the website: How to Trade / Trading Tips / #9

The goal of using covered calls is to lock in a return of 2% or 3% over a 30 day period. It is also a great way to hedge against a pullback. Professional traders use this strategy often, because it pays you a return while offering protection.

 

 

Step #2         Market Performance for the Week

 

Major Index Performance

MONDAY

Nasdaq Comp.

+0.6%

S&P 500

+0.6%

 

TUESDAY

Nasdaq Comp.

+0.5%

S&P 500

+0.4%

 

WEDNESDAY

Nasdaq Comp.

+1.8%

S&P 500

+1.2%

 

THURSDAY

Nasdaq Comp.

+0.1%

S&P 500

+0.4%

 

FRIDAY

Nasdaq Comp.

-0.2%

S&P 500

-0.3%

 

Dow Moves this Week in Points

Monday

+48

Tuesday

+60

Wednesday

+129

Thursday

+63

Friday

-0.1

Net Change

+300

 

 

Index/ETF One Week Market Return

Open MTTS Long Trades in Green

Open MTTS Short Trades in Red

                             

(Friday to Friday closing price)

Index/ETF

 Return %

Return w/ 2x Margin %

Nasdaq 100

3.1

 

6.1

 

Russell 2000

2.1

 

4.2

 

S&P 500

2.3

 

4.6

 

S&P 400

2.3

 

4.5

 

Bond Fund - HYG

0.8

 

1.6

 

Gold Fund - GLD

-5.8

 

-11.6

 

 

 

International

   Brazil     

1.6

 

3.2

 

  Canada     

0.4

 

0.9

 

China

1.0

 

2.0

 

Emerging Markets 

0.7

 

1.3

 

Germany  

2.2

 

4.4

 

India

-0.6

 

-1.3

 

Pacific  

2.9

 

5.9

 

 

U.S. Sectors

   Consumer Disc.     

3.5

 

6.9

 

  Consumer Staples

2.7

 

5.3

 

  Energy

0.9

 

1.8

 

Financial

2.4

 

4.9

 

Health Care  

3.3

 

6.6

 

Industrial

1.9

 

3.9

 

Materials  

1.1

 

2.2

 

Technology

2.1

 

4.2

 

Utilities

1.9

 

3.8

 

 

Industry Funds

   Dow Jones REIT     

2.5

 

4.9

 

Pharmaceuticals

2.3

 

4.5

 

  Retail     

4.1

 

8.2

 

 

 

 

 Step #3         Review Trade Performance

 

 

Friday’s Major Index Performance

 

 

DOW

0.0%

 

Nasdaq

-0.2%

 

S&P_500

-0.3%

 

Rus_2000

-0.4%

 

DOW

14865.06

 

Nasdaq

3294.95

 

S&P_500

1588.85

 

Rus_2000

942.94

 

 

 

 

 

Today’s Trading Chart

 

 

No funds had a change in status on Friday. When “Market Alert” appears in the subject line of the e-mail this indicates there is a change to one or more funds.

 

Check the “Trend Strength” column; a “Blue Box” indicates a change in the funds status today.

 

Trend Strength:            B = BUY - Strong Long Trend

                                     H = HOLD or REDUCE - Slowing Trend

                                     C = CLOSE - Move to Cash

                                     S = SHORT - Strong Short Trend

 

We only recommend entering trades during the Strong Trend period indicated by a “B” = Buy or “S” = Short.

 

The colored box identifies the most recent action.

The Core Portfolio includes the Nasdaq 100 and S&P 500.  

*Index / ETF font color identifies its trading risk: Green = low risk, Blue = medium risk, Dark Red = high risk

 

Trend Strength Status

Index / ETF*

Trading Symbol

Buy / Long

Short or Cash

Hold or Reduce

Close / Cash or Short

Change Today %

Trade

Return %

Return w/

2X Margin

U.S. Funds

C

Nasdaq 100

QQQ

  Buy/Long

11/19/2012

Stop 6%

Hold or Reduce 1/2 Position

12/20/2012

Close / Cash

3/19/2013

-0.1%

 

8.4%

 

16.7%

 

C

Russell 2000

IWM

  Buy/Long

11/26/2012

Stop 7%

Hold or Reduce 1/2 Position

12/20/2012

Close / Cash

3/19/2013

-0.4%

 

17.2%

 

34.3%

 

C

S&P 500

SPY

  Buy/Long

11/19/2012

Stop 6%

Hold or Reduce 1/2 Position

12/20/2012

Close / Cash

3/19/2013

-0.3%

 

11.7%

 

23.3%

 

C

S&P 400

MDY

  Buy/Long

11/26/2012

Stop 7%

Hold or Reduce 1/2 Position

12/20/2012

Close / Cash

3/19/2013

-0.4%

 

14.8%

 

29.6%

 

C

Bond - High Yield

HYG

Buy/Long

11/26/2012

Stop 5%

Hold or Reduce 1/2 Position

12/20/2012

Close / Cash

1/31/2013

0.1%

 

1.4%

 

2.8%

 

C

Gold Fund

GLD

 

Buy/Long

9/7//2012

Stop 8%

Hold or Reduce 1/2 Position

10/19/2012

Close / Cash

12/20/2012

-5.1%

 

-4.8%

 

-9.6%

 

 

Trend Strength

Index / ETF

Trading Symbol

Buy / Long

Short or Cash

Hold or Reduce

Close / Cash or Short

Change Today %

Trade

Return

Return w/

2X Margin

International

 

 

C

 

 

Brazil

EWZ

 

Buy/Long

4/12/12

Stop 8%

 

Close / Cash

4/30/2012

-0.8%

 

 

-4.7%

 

 

-9.5%

 

C

Canada

EWC

Buy/Long

11/19/2012

Stop 8%

Hold or Reduce 1/2 Position

12/20/2012

Close / Cash

2/20//2013

-2.0%

 

2.7%

 

5.4%

 

C

 

China

FXI

 

Buy/Long

11/19/2012

Stop 8%

Hold or Reduce 1/2 Position

12/20/2012

Close / Cash

2/7/2013

-0.8%

 

9.8%

 

19.5%

 

 

 

C

 

 

Emerging Markets

EEM

 

Buy/Long

6/19/2012

Stop 8%

Close / Cash

7/6/2012

-1.5%

 

 

-2.8%

 

 

-5.5%

 

 

 

C

 

 

Germany

EWG

 

Buy/Long

11/26/2012

Stop 8%

Hold or Reduce 1/2 Position

12/20/2012

Close / Cash

2/7/2013

-1.0%

 

 

8.1%

 

 

16.2%

 

 

C

 

 

 

India

EPI

 

Buy/Long

4/12/2012

Stop 8%

 

Close / Cash

4/30/2012

-1.7%

 

 

-2.5%

 

 

-5.0%

 

 

C

 

 

 

Pacific

EPP

 

Buy/Long

2/19/2013

Stop 8%

Close / Cash

3/12/2013

-0.5%

 

 

0.0%

 

 

0.0%

 

 

Trend Strength

Index / ETF

Trading Symbol

Buy / Long

Short or Cash

Hold or Reduce

Close / Cash or Short

Change Today %

Trade

Return

Return w/

2X Margin

U.S. Sector

 

 

C

 

 

Consumer Discretionary

XLY

 

Buy/Long

4/12/2012

Stop 8%

 

Hold or Reduce 1/2 Position

4/30/2012

Close / Cash

5/4/2012

0.5%

 

 

0.5%

 

 

0.9%

 

 

C

 

 

Consumer Staples

XLP

 

 

Buy/Long

11/19/2012

Stop 8%

Hold or Reduce 1/2 Position

12/20/2012

Close / Cash

1/3/2013

0.4%

 

 

2.2%

 

 

4.3%

 

 

 

C

 

 

Energy

XLE

 

Buy/Long

9/13/2012

Stop 8%

Hold or Reduce 1/2 Position

9/26/2012

Close / Cash

10/10/2012

-1.7%

 

 

-3.9%

 

 

-7.8%

 

 

C

 

 

 

Financial

XLF

 

Buy/Long

1/9/2013

Stop 8%

Hold or Reduce 1/2 Position

2/21/2013

Close / Cash

3/12/2013

-0.4%

 

 

7.1%

 

 

14.3%

 

 

 

H

 

 

Health Care

XLV

 

 

Buy/Long

11/20/2012

Stop 8%

Hold or Reduce 1/2 Position

12/20/2012

0.0%

 

 

21.5%

 

 

42.9%

 

 

 

C

 

 

Industrial

XLI

 

 

Buy/Long

1/9/2013

Stop 8%

Hold or Reduce 1/2 Position

2/21/2013

Close / Cash

3/12/2013

-0.6%

 

 

6.3%

 

 

12.6%

 

 

C

 

 

 

Materials

XLB

 

Buy/Long

1/9/2013

Stop 8%

Close / Cash

2/7/2013

-1.4%

 

 

0.3%

 

 

0.7%

 

 

C

 

 

 

Technology

XLK

 

Buy/Long

11/19/2012

Stop 8%

Hold or Reduce 1/2 Position

12/20/2012

Close / Cash

3/12/2013

-0.5%

 

 

6.6%

 

 

13.1%

 

 

 

C

 

 

Utilities

XLU

 

Buy/Long

6/6/2012

Stop 8%

Hold or Reduce 1/2 Position

8/22/2012

Close / Cash

8/23/2012

0.3%

 

 

-0.7%

 

 

-1.4%

 

 

Trend Strength

Index / ETF

Trading Symbol

Buy / Long

Short or Cash

Hold or Reduce

Close / Cash or Short

Change Today %

Trade

Return

Return w/

2X Margin

Industry Funds

 

C

 

 

Dow Jones REIT

RWR

 

 

Buy/Long

7/17/2012

Stop 8%

Hold or Reduce 1/2 Position

8/22/2012

Close / Cash

8/23/2012

0.2%

 

 

-2.5%

 

 

-5.0%

 

 

 

C

 

 

Pharmaceuticals

XPH

 

 

Buy/Long

9/18/2012

Stop 8%

Hold or Reduce 1/2 Position

9/26/2012

Close / Cash

10/10/2012

0.3%

 

 

-4.0%

 

 

-7.9%

 

 

 

C

 

 

Retail

XRT

 

Buy/Long

4/12/2012

Stop 8%

 

Hold or Reduce 1/2 Position

4/30/2012

Close / Cash

5/4/2012

0.0%

 

 

0.4%

 

 

0.9%

 

 

A normal gold investment would be 5% of your portfolio not to exceed 10%. U.S. performance reflects returns based on the index, NDX, RUT, INX & IDX. Trade returns calculated using opening prices.

The 2012 individual trade detail can be viewed in the member only “How To Trade / 2012 Closed Trades” section on the website. The 2012 cumulative returns for each Fund can be seen in the “Performance” section on the website.

 

 

Step #4     Portfolio Performance

 

Market Trend Trading System Returns

 

The Portfolio Returns chart has been updated to make it more useful. Below is a view of the new portfolios on the website.  So now you can see how the portfolios updated with sector funds would have performed if they were traded over the last year or so. What is interesting is the increase in returns when diversification is reduced, ranging from the Conservative portfolio to just trading the Nasdaq 100.

How much diversification is needed? Many mutual funds trade from 20 to 50 stocks, so if you are just trading the Nasdaq 100 you will have 2 to 5 times as many stocks in your portfolio as some mutual funds. The Nasdaq 100 includes many large cap technology funds for growth, and a large concentration of large cap health care companies for stability. Since over 50% of the revenue from large cap technology companies comes from international markets, you will also have significant international exposure. That is why I often just trade the Nasdaq 100, since it is a portfolio in a fund.

Remember, the Fund Trading strategy of moving into cash during times of high stress trumps diversification every time, since all stocks go down during panic selling.

 

Global Portfolios & Core Portfolio

See the How to Trade / Portfolio Selection page on the website for portfolio details. Returns are weighted to reflect the portion of the portfolio that may be in cash, cash returns 0%.

 Portfolios*

 Start Date

Trades Thru

Trading Strategy Long Only %

Trading Strategy Long & Short %

Trading Strategy Long w/ 2x Margin

Trading Strategy  Long &   Short w/  2x Margin

Conservative

1/3/2012

4/12/2013

 

 

 

15.9

 

 

 

 

 

17.6

 

 

 

 

 

31.7

 

 

 

 

 

35.2

 

 

 

Growth

1/3/2012

4/12/2013

 

 

 

13.8

 

 

 

 

 

15.6

 

 

 

 

 

27.6

 

 

 

 

 

31.2

 

 

 

Aggressive

1/3/2012

4/12/2013

 

 

 

10.1

 

 

 

 

 

11.9

 

 

 

 

 

20.2

 

 

 

 

 

23.8

 

 

 

Core

1/3/2012

4/12/2013

 

 

 

19.0

 

 

 

 

 

22.3

 

 

 

 

 

38.1

 

 

 

 

 

44.5

 

 

 

Nasdaq 100

1/3/2012

4/12/2013

 

 

 

20.6

 

 

 

 

 

23.3

 

 

 

 

 

41.2

 

 

 

 

 

46.5

 

 

 

* U.S. performance reflects returns based on the index, NDX, RUT, INX & IDX.

The 2012 individual trade detail can be viewed in the member only “How To Trade / 2012 Closed Trades” section on the website. The 2012 cumulative returns for each Fund can be seen in the “Performance” section on the website.

 

 

Step #5

Reports to Watch Next Week   We list the important reports and indicate the reports that have relevance to current market conditions under “Market Movers next Week”.

Market Movers Next Week: Empire Index, Housing Data, Industrial Production, Oil, Fed, Jobs

 Monday

 Empire Manufacturing Index, NAHB Housing Market Index

 Tuesday

 Consumer Price Index, Housing Starts, Building Permits, Industrial Production, Capacity Utilization

 Wednesday

 Crude Oil Inventories, MBA Mortgage Index, Fed’s Beige Book

 Thursday

 Initial Jobless Claims, Continuing Claims, Natural Gas Inventories, Philadelphia Fed, Leading Indicators

 Friday

 none

 

 

 

 

Step #6

 

How To Trade - Follow One of the Two Trading Strategies:

 

1. MTTS Trading Method: When a signal is indicated for a fund in your portfolio, enter the trade. Remain in the position until a Sell signal is indicated for that fund. 

2. Editor's Trading Method: When a signal is indicated for a fund in your portfolio, enter the trade in 50% increments as directed below. Then follow the Editor's Exit Points to close out the position in 50% increments. This will result in more consistent returns over time by reducing the risk from a sharp drop in price during a trade.

Follow your portfolio and enter your selected funds as indicated below:

1.   Entry: MTTS signals a trade: Enter your trade within two days using half of your trading capital for that fund

2.      Entry: If the trade is profitable after one week, invest the second half of your trading capital in the fund. If it is not profitable check again in one week intervals. Do not add to the trade unless it is profitable and watch for sell/close signals.

 

3.      Exit: Editor recommends in a Market Alert to sell 50% of your position in the fund due to a slowing trend.

 

4.      Exit: MTTS closes the trade: Sell your remaining position.

When comparing trades between the MTTS with and without Exit Points, we find using exit points can increase returns up to 20% on shorter trades during difficult markets.

Next: Use Stop Loss Orders or Hedging to Protect your Capital:

Set stops to the amount indicated in the Trading Chart to limit loses and drawdowns during a trade. During periods of high volatility, we may suggest increasing a stop loss. When using leveraged funds, stops should be increased in proportion to the leveraged amount. For example; if using 100% leverage, increase a 6% stop to 12%.  

An alternative is to hedge positions by purchasing protective puts to minimize downside risk to about 5 percent. We provide an example in the How To Trade / Trading Tips section on the website. Buying puts requires a margin account, so this trading strategy will not work in most retirement accounts.

Protective puts can work better than stop loss orders due to their greater flexibility and you will not be stopped out unnecessarily. During normal markets puts can be purchased for about 2% of the share price for U.S. funds and about 5% for international funds.

For more information on hedging visit the "How to Trade" / "Trading Tips" section on the website.

Watch for the updates in the Market Alerts, indicating the next steps to take for your funds.

It is important when an exit signal is indicated to exit trades at the next market open, since prices can change quickly. 

 

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I'm always interested in hearing your success stories and what is on your mind.

Until next week!

Roger C. Britton
Editor & Publisher
FundTrading.com, LLC
 
 
 
 
 
 
 
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