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Systems 4 And 5 Buy IWM

Nov. 07, 2018 7:34 PM ET1 Comment
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HYG hit a 20-day high in its dividend-adjusted price today. That's a signal to buy IWM. System 4 had 1851.2 shares of FLOT, and received dividends totaling $0.224. I sold it at $50.87, and so that fetched $94,585. This bought 601.6 shares of IWM at $157.20, the price I bought at. System 4 had sold IWM at $171.07 on 9/14, so it bought back cheaper.

System 5 last sold IWM on 6/29 at $163.83, and it did not buy IWM on 8/13 because of the low correlation between IWM and the financial indicator variable. It owned 1794.8 shares of FLOT, which fetched $91,703. That bought 583.3 shares of IWM.

The stop-losses for system 4 are a price drop to $84.37 or lower for HYG, or a price-drop in the Russell 2000 to 1528.69 or lower. HYG is currently at $85.03. The Russell 2000 is at 1582.16, and its stop-loss will be reset 16 points higher if it can make a 20-day high, which is currently at 1598.01.

System 5 has the same HYG stop-loss as system 4. The Russell 2000 stop-loss is 1459.16, which will be raised a lot when (if) the Russell hits its 20-day high. There is another stop-loss on the real estate/financial index that I calculate, which would require a 6% drop, but will reset higher with just a small rally in XLRE and/or XLF.

Systems 1 and 2 use 20-day highs in my financial/real estate indexes to buy IWM. The system 1 index is XLF + .139*XLRE. It closed at 31.86, and the 20-day high is 31.912. The system 2 index, which is the index also used in system 5, is the average of XLRE and XLF, and closed at 30.145. Its 20-day high is 30.175. So it is very probable they will issue buy signals tomorrow.

System 3 needs a 20-day high on the Russell 2000. System 6 needs a 22-day high on the S&P 500. The S&P closed at 2813.89, and the 22-day high is at 2894.83. The S&P closed well above its 200-day moving average today.

We have entered a very favorable season for stocks. That season is from the end of September of the second year of the Presidential cycle to the end of April in the third year of the Presidential cycle. I'm really hoping that history rhymes again.

Analyst's Disclosure: I am/we are long IWM AMJ.

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