SCOTT WELSH TRADING BLOG

Unlike the Market, This System Is Up in 2020

Unlike the Market, This System Is Up in 2020

Mar. 11, 2020

As I write this, the market is tanking hard.

Of course, you could say this about many days in the past two weeks.

Are we surprised?

If you like technical analysis, our Monday Market Report has shown that the market has been “overbought” for a long time. Also in our Monday report, we said that Fair Value for the SPY is around $273.

Interestingly, the SPY hit the $273 level on Monday. (Maybe there is some value to technical analysis after all?)

But if we turn on CNBC, we hear lots of bad news. Why is it bad news, though?

If you are Short or bought some Puts, CNBC is only telling good news.

Of course, the news is assuming that most people are Long. People have flocked to Index Funds at a historic level in the past two years, and all those people (and their trillions of dollars) are Long Only even though smart people warned them not to be. 

In that case, there’s been a lot of bad news.

This week, we’re wondering if there are ways to trade the market that actually make money in all this chaos.

To find out, we’re looking at systems that actually trade “the market” in the form of the SPY ETF and the ES Futures contract. At the end of the week, we’ll look at the EMD too (S&P Midcap 400).

First up is a system on the ES.

This one is super scary. Why?

It has a small target, a big stop, and only goes Long. Sounds like a disaster.

Here are the details:

  1. Only take trades when price is above the 96-bar SMA. If below, no trades.
  2. Don’t enter a trade before 16:00 EST.
  3. Use CCI indicator (length 21).
  4. If CCI closes into Oversold (-100) then buy next bar at market.
  5. Profit target is $70 (1 contract).
  6. Stop is $1370.

How did it do in 2020?

It’s up $184 (3% on a $6100 account). In fact, it’s up every year. Here are the Annual Returns:

While it doesn’t make a million dollars, it does win every year. And it has a 100% win rate.

How many index-funders would trade their 2020 for this system?

Actually, since 2007, this little system has returned a little more than buy-and-hold during the same period.

In our next email, we’ll look at another way to trade the market.

Talk to you soon.

 

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Disclaimer:
It should not be assumed that the methods, techniques, or indicators presented in these products will be profitable or that they will not result in losses. Past results are not necessarily indicative of future results. Examples presented on these sites are for educational purposes only. These set-ups are not solicitations of any order to buy or sell. The authors, the publisher, and all affiliates assume no responsibility for your trading results. There is a high degree of risk in trading.

HYPOTHETICAL OR SIMULATED PERFORMANCE RESULTS HAVE CERTAIN INHERENT LIMITATIONS. UNLIKE AN ACTUAL PERFORMANCE RECORD, SIMULATED RESULTS DO NOT REPRESENT ACTUAL TRADING. ALSO, SINCE THE TRADES HAVE NOT ACTUALLY BEEN EXECUTED, THE RESULTS MAY HAVE UNDER- OR OVER-COMPENSATED FOR THE IMPACT, IF ANY, OF CERTAIN MARKET FACTORS, SUCH AS LACK OF LIQUIDITY. SIMULATED TRADING PROGRAMS IN GENERAL ARE ALSO SUBJECT TO THE FACT THAT THEY ARE DESIGNED WITH THE BENEFIT OF HINDSIGHT. NO REPRESENTATION IS BEING MADE THAT ANY ACCOUNT WILL OR IS LIKELY TO ACHIEVE PROFITS OR LOSSES SIMILAR TO THOSE SHOWN.