It is that most exciting part of the week: the Round-up. I know you are both as excited as I am, so let’s get started. I usually kick things off with the Big Lad: the S&P 500, but let’s mix things up a little and start with the open positions.
Dollar Index: UUP = UP, UDN = DOWN
The Dollar Index is an arm wrestle between the U.S. Dollar and a weighted basket of global currencies.
If the price moves up, the U.S Dollar is strengthening, if down, the basket is in ascendency.
Our open position is in UDN which represents the U.S. dollar weakening versus the basket.
Our position in UDN was opened sometime ago. If you are curious you can scroll down for the date, etc.
The trailing stop is .51 behind the trade price. It has followed the price as it moved up. Once it stopped moving up, the trailing stop anchored at that price.
The high since purchase is $21.37. This means that the stop is anchored at $20.86. We purchased at $20.67. It also means that if the price falls causing us to be stopped out at $20.86, we would still have a profit. This trade is currently risk free, which is also known as a beautiful thing.
Oil: UCO = UP, SCO = DOWN
As you can see from the chart above, the price closed above resistance and we put in a stop-buy just above the high of that close. We were triggered in at $17.27 with a trailing stop just under support at $3.02 lower than the trade.
The most recent high was $19.64, anchoring our stop at $16.62.
As with UDN, we are still in this trade, but with a bit more needed to become risk free. You will, however, notice that the move up has taken some of the risk premium off the table. We had a risk of $3.02, it is now .65 per share.
I take no view about the prospects for oil. As I have said, if you want to become a more consistent trader, there is a requirement to take all trades your process kicks out. If you do not, you have left the world of trades and entered the trading world: a haphazard place filled with uncertainty and doubt. Don’t do it!
S&P 500: SSO = UP, SDS = DOWN
The stop out point for a recent trade is still showing on the chart. The blue EMA is still above the green EMA, which in this simple demonstration equals uptrend.
The price has pushed down below the blue EMA. If it crosses back above, we shall be on alert as some of our process will have been covered. The last bit will have to be a close above resistance. This is represented by the high around $85. If, however, any EMA crosses below the green EMA, we shall have a look at the inverse of the SSO, the SDS.
In the meantime, we shall demonstrate one of the key traits of a profitable trader: patience.
Gold: UGL = UP, GLL = DOWN
I have left the markings from a recent trade on the chart. Much like the S&P, the price fell below the 21 EMA (blue). If that should change – and it might, because we are still in an uptrend – we would need a close above the resistance at $77.07 to cause us to spring panther-like into action.
20 year Treasuries: UBT = UP, TBT = DOWN
To the chart…
I know, I know, 20 year treasuries are hardly a pulse quickener. I have selected instruments that cover a broad swathe of the market. The cylinders of the market engine are not all up – or down – at the same time. Economic factors impact each of our chosen in different ways. They are not all correlated. They don’t all move up and down at the same time, with the same intensity. This means that there is always somewhere for us to place a trade. I didn’t want you guys sitting around for too long with nothing to do – you might do something stupid.
The chart above shows us that the EMAs are having a meeting and will make a decision as to which way to go. If the red EMA (8) or the price separated from the rest of the pack to the downside, we shall look to the inverse and see if something has developed there.
Actually, I don’t usually wait. I take a look, like now…
To the chart, Robin…
Here is the inverse of TBT, the ETF representing the down of the 20 year treasuries. UBT, as you can see is in an uptrend. The price retreated below the 21 EMA (blue). Should the price rise above the blue and then close above resistance, we would switch our attention from TBT to UBT.
The portfolio that started January 1st, 2020 at the sum of $100,000 is now: $142,917.10. A gain of a little over 42%. I don’t annualise this because it implies that we can keep up the same rate until the end of the year.
We focus on our process and whatever comes out of the end of that sausage grinder, so be it. The market moves in an explosive manner. The comforting averaging that many resort to is a waste of time.
Our position is that we could be at this same level come the end of the year, or we could drop back – so be it. We don’t push things. We let the market and our trades come to us.
If you need a better understanding of some of the concepts mentioned here, take a look at my book.
I also offer at this time a free no-obligations chat on the phone regarding your trading and any challenges you maybe having. No obligations on your part.
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