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Systems 4 And 5 Buy IWM

Strength in junk bonds resulted in HYG surpassing its 20-day high.  That is a signal for systems 4 and 5 to sell TLT and buy IWM.

System 4 had 814.1 shares of TLT bought for $132.90 on 6/25.  Selling for $143.53 plus $.524 in dividends fetched $117,274.  This bought 781.3 shares of IWM at $150.10.  They had been sold for $151.08 on June 25; so the system got them cheaper.  On 8/13/18, system 4 had $92,221 when IWM was bought for $166.58.  So, since then, IWM is down a lot (almost 10%, although there were dividends) and system 4 is up a lot (27%).

System 5 had 738.64 shares of TLT, which had been bought on 8/5 for $138.88.  There were no dividends, and so the shares fetched $106,016 at a price of $143.53.  This bought 706.3 shares of IWM.  On 6/29/18 system 5 had $93,284, when IWM was sold for $163 .83.  So this system also had nice gains relative to the decline in IWM.

I did not sell TLT today, because I didn't own it.  I owned TMF, which I retained, and I bought TNA rather than IWM.  These are triple-leveraged funds.  So now I have full exposure to both TLT and IWM, which was also true earlier in the year.  As a result my gains have been exceptional.

The stop-loss for system 4 is quite tight.  HYG closed at $86.95.  If the price drops below $86.22 (2ATR below the 20-day high of 86.99) IWM will be sold.  When the stock goes ex-dividend at the end of the month, that stop-loss will be lowered by the amount of the dividend.  The Russell stop-loss is currently at 1460.78, 2ATR below the index value at today's close.

For system 5, the Russell's stop-loss is at the 55-day low of 1456.28, until the Russell hits a 20-day high.  The stop-loss level for HYG is as for system 4, and there is also a stop-loss for my financials/real estate index (FR1), which would entail a drop of about 4% in the average value of XLF and XLRE.

I don't know why junk bonds are so strong right now, although I did see a story that fears of IG debt being downgraded were overblown, and that much more junk is being upgraded to IG than the other way round.  The Russell 2000 is lower than the end of 2017, and well below its peak of 1740 set last August.  Is it overdue for a major rally, or is this a widening crack in the dam? Who knows?  That's why I trade.

Disclosure: I am/we are long TMF TNA amj REM PTY.