Market Close August 27th, 2020

As both of you know this is a theoretical trading exercise that commenced in my Basic Trading blockbuster of a book. We use only one simple method and five underlying instruments that cover a broad sweep of the market place. This exercise started with $100,000 and now sits a little over $140,000.

It will continue until 2020 mercifully expires.

Those underlying instruments are typically futures which most of you cannot see except as prices. We use ETFs (exchange traded funds) as proxies in the market. There are ten of them. For each instrument there is one that will rise as the futures rise and one that will rise as the futures decline. This means that they can be used in retirement accounts, or accounts that have some restrictions on them.

I wanted to demonstrate today how this works. We had a position in UBT – the ETF for 20 year treasuries rising. We were stopped out. We keep an eye on this chart, as we do the others, but there is a chance that the stop-out could have been a mere correction: we may see a new trade trigger. In this case, well, let’s look at the chart.


On the right hand side of this chart you can see that rather than heading back up, this symbol seems to be headed down.

This, then, becomes the time we look at the inverse which is TBT.


As you can see the price on TBT – the ETF that rises as the underlying instrument declines – is at a trade stage. Before we review that I want to point out that investors in the “trading world” are at this moment trying to figure what could declining 20 treasuries possibly mean. They will listen to “experts” wax on, spouting nonsense because as an expert they are supposed to know. And, dammit, they will have an opinion. I have actually heard an expert give a reason for oil prices rising and then the very next day, give the same reason for oil prices declining.

We do not live in the magical-thinking trading world, we reside in the world of trades. If we get a trade signal based on our process, we place it. What it all means, we leave to others.

To our trade. We have the moving averages doing their work. We can see that the price and the red (8 EMA) have crossed above the blue (21 EMA). Our rules allow for us to look at the ROC as the decider if the blue has not yet crossed above the green (55 EMA), we are ok if the ROC is above the 0 line. It is. We now want to clear the level of resistance that halted the upward price move.

Our stop-buy is placed at $16.33. This is a few pennies above the $16.27 resistance level. (We don’t place trades at even numbers).

OK, make sure you come back Monday to take a look at the “Weekly Round-Up” – could be a scorcher.

Any questions:



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