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Systems 1 And 5 Buy IWM

|About: iShares Russell 2000 ETF (IWM)

FR1 is an index I created, which is the average of XLRE (a REIT ETF) and XLF (a financial ETF).  This index hit a 20-day high today, and that is a signal to buy IWM in systems 1 and 5.  The F in FR1 is for finance and the R is for real estate.

System 1 had 752.0 shares of TLT since 5/23.  There was a dividend of $.27 and the 3.55 pm price was $130.27.  So the shares fetched $98,166, a 2% gain in 2 weeks.  This bought 654.2 shares of IWM at $150.05.  There are two sell signals for system 1.  The Russell 2000 is at 1506.79.  A 55-day low of 1460.69 would be a sell.  The FR1 value that would trigger a sell is volatility based.  FR1 is currently at 32.15 and a low of 31.195 or lower would be a sell. That's about a 3% drop.  Real estate and financials seem to be inversely correlated right now; so the index doesn't move a whole lot.

System 5 had 792.5 shares of TLT, which fetched $103,452.  That bought 689.4 shares of IWM.  The stop-losses are 1462.2 (-2ATR from the buy level) on the Russell 2000, and 31.195 on FR1, like above.  HYG (the junk bond ETF) also provides a stop-loss at its 55-day low, which is $84.47.  HYG closed at $85.70 today.  The 55-day low was hit only 3 days ago.

There are lots of divergences.  Real estate is doing well because of low long-term rates and narrow yield spreads.  Financials are not. Small cap. stocks set a 55-day low only 3 days ago, and are more than 10% below their highs of last August.  Industrial commodity prices and oil prices are well down, which is neither a good sign for the economy nor for equities.  Systems 1 and 5 have not done well the last few years, and so I did not buy IWM.  I'm following system 4, which should have me in TLT, except I made a trading error, and took a profit in it just a few hours before Trump announced the tariffs on Mexico.

HYG is at $85.70.  System 4 buys IWM if HYG surpasses $85.92, the 20-day high adjusted for dividends.  Except for the first two days and the last three days of June, June has been a bad month for small cap stocks.

Disclosure: I am/we are long REM AMJ.