Close of Markets April 13th, 2020

A new week begins. As I mentioned in the Weekly Round up, I wanted to spend a few words on returns. Most investors I interacted with through the years had difficulty with the idea that returns in the markets did not occur in a smooth fashion. In other words they would see a summary of returns for mutual funds such as average return for three years was 12% per year. They would invest in February and see that at the end of the year their holding returned 15%, but their money had not increased a penny. The entire return for the year happened in January.

You need to understand that all markets except instruments such as T-bills move in spurts. You could have an entire year’s return happen in one week, or one month. It is why you must be patient when engaged with most markets. Don’t force things. Let the returns come, or not. Follow your process and be happy with the results. If the returns are not enough, then you need to make adjustments to your process and the instruments you are using. The tendency is to run around in all directions, hoping and wishing – don’t do that!

S&P 500: the blue EMA (21 exponential moving average) is below the brown EMA (55 EMA). Our trigger, red EMA (8 ) has crossed above the 21. Nothing to do here, yet.

If a trade is triggered, I show the updated chart and details per our process. Scroll down if you want to take a look at the chart.

Gold: still in an uptrend. Gold was kind enough to give us a trade which is still alive with a trailing stop protecting us. The trailing stop was placed just under support when the trade triggered. It was $5.18 below the market price. Just to demonstrate how a trailing stop works, the high for UGL our stock market proxy for gold had a high of $63.71. We will continue to be in this trade unless the price falls more than $5.18 from the most recent high, when you will be stopped out of the trade.

We entered the trade at $56.65. On subtracting $5.18 from the high we find the result is $58.53 and are quite happy to note that our trade is profitable. That means that even if the price was to fall back quickly we would still make a little money. This is our goal. Probe with modest controlled trades. If a big move i.e. a trend of some significance unfolds, we will add to this position without taking on more risk. We will discuss this should it occur.

Oil: This slippery customer is triggering a short trade in the futures contract. Our futures proxy is SCO.

SCO

As we look at the chart of SCO above, our conditions are not met. SCO is an inverse ETF (exchange traded fund). It rises as oil declines. We need the 21 (blue) to be above the 55 ( green) – check; the price above the 8 (red). The price is actually below all three EMAs. We will wait for our conditions for a trade to be met before acting.

USD/EUR: this currency pair triggered us into a trade using the stock market proxy EUO. We are still in this trade. We have a trailing stop keeping an eye on matters.

Bitcoin: The cryptocurrency is in a downtrend: the blue (21) is below the brown (55). The price closed above the 21 and then crossed back below the red (8). We have a short trade. A stop-sell is on our books as a theoretical trade. If we are triggered in, a chart and details will be provided.

The stock market proxy is GBTC.

Apple: The price has closed above green (55); the red (8) is trying to close above the blue (21). We need the 21 to cross above the 55 to change over to an uptrend which will cause us to look for the conditions for a long trade.

Any questions or comments, please drop me a line at charlesgoddard2020@gmail.com. For more explanation of basic trading, go here: https://howtotradeprofitably.gr8.com/offer_page.html

TTFN,

Charles

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