The business of trends: 29% gains in under 2 months (11 trades: 100% profitable)

The business of trends, part 4.

(New Short-term forecast is below.)

Quick update: last week I had only one new closed trade (with nothing currently open), which was a 4.25% gain. (The actual price change was closer to 2%, but I traded ZSL with nearly 2-to-1 leverage, so the actual realized gain was 4.25% gross profit. See chart below.)

Last week’s gain brings the total gain to 28.9% (which would be higher with compounding). All but 1 trade was in the last 7 weeks, so the projected annualized rate of return is several hundred percent per year. All 11 trades so far have been gains.

% gain by trade (high to low): 5.1%, 4.25%,  4.15%, 3.2%, 3.15%, 2.9%, 2.9%, 1%, 1%, .9%, .35%

9-5-

Short-term forecast: What I will do next week (as in Monday /tomorrow) is probably trade for a sharp rise in the prices of US treasury bonds (which I will likely trade using TMF once again as the actual investment, which is an “ultra-bullish” leveraged bond fund managed by Direxion). Bonds have recently tested their low for the year and now several factors point to a likely rally (which I have actually been anticipating for over a month). One factor is a divergence between the prices of shorter-term bonds and long-term bonds. Another factor is two days in a row of historical extremes in sentiment (which is common at the reversal point of a trend). By sentiment, I mean the responses to a simple survey by investors when asked about their sense of optimism or pessimism about a particular investment market.

English: direxion logo

English: direxion logo (Photo credit: Wikipedia)

In other markets, I also expect the Euro forex rate to continue to decline (as the US Dollar continues to rally across all currencies in general) and I will also be watching for a sharp decline again in gold and silver, but I am cautious of the possibility of a rebound in metals that at least would test the recent highs.

For US stocks, I remain confident in a long-term decline (collapse). However, the NASDAQ 100 has continued to bounce up close to prior highs and I would not be surprised if first there is one final exhaustion rally in US stocks as a whole (S&P 500, Dow Jones 30, etc). If stocks “roll over” and plunge, I will be watching for momentum data before I conclude that a long-term high is already solidly in place. So, I am still cautiously expecting one final high- cautious because, with each new high, the exhaustion of buying pressure (demand) points to a more extreme (faster) plunge in the near future.

 

UPDATE: on September 9th @ 3:33 PST

I’ve seen enough data on US stocks to withdraw my “expectation” of a new high. I am now expecting a sharp decline to start this week (like Tuesday or Wednesday). I did enter positions today for a rally in US bonds and a rally in bonds would fit well with a plunge in US stocks.

For stocks, a new high is still possible though and, until I see both price action and actual downside momentum to confirm a long-term reversal, I am just “expecting” the decline to start- but not trading it yet. The data that led to me withdrawing my favoring of a rally to a new high is “leading indicator” data, not actual broad-based market action. If broad-based selling pressure rattles markets this week, that would confirm that all the buyers are too far in for more buying and lots of sell orders will begin to flood in like snowballs down a hill- picking up momentum and speed as the avalanche proceeds.

A United States silver trade dollar of 1873. B...

A United States silver trade dollar of 1873. Both sides shown (Photo credit: Wikipedia)

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