In our last blog post, Benefits of a rules-based trading system, we said the following: “On May 1 (Tuesday), the combination of heavy volume selling in the Nasdaq, bearish “stalling action” in the S&P 500, and a “distribution day” (higher volume selling) the prior day forced us to cut long exposure in our model swing trading portfolio from approximately 38% down to 17% by the following day’s open (May 2). While we tried to give the current rally the benefit of the doubt on Wednesday, Thursday’s (yesterday’s) weak action pushed our market timing model into a sell signal, forcing us to cut exposure from 17% to zero long positions (cash) on the open today. ”
Summarizing the above, our market timing model is working perfectly this week because it enabled our subscribers to take a shot with long positions when the market was bouncing, but then prompted us to immediately lighten long exposure when receiving the proper sell signals, before finally exiting 100% out of our long positions on today’s open (just before the big intraday sell-off that is presently taking place).
In addition to exiting all long positions at the ideal time, our market timing model prompted us to take on a bit of short exposure as well. Shortly after today’s open, we added our second short position in The Wagner Daily model portfolio, through buying the inversely correlated UltraShort Emerging Markets ETF ($EEV). As of the time of this writing (11:39 am ET), our other short position in Direxion Semiconductor Bear 3x ($SOXS) is already showing an unrealized gain of 8% since yesterday’s entry. EEV is already showing a gain of 2% since our morning entry. So, as the market gets slammed today, our subscribers are obviously happy that all long positions were closed before the heavy selling began, and that our our market timing model generated signals that simultaneously enabled subscribers to begin taking short exposure as well (through two inverse ETFs). It may be a bad day for long-term “buy and hold” investors, but it’s shaping up to be a great day for trend-following swing traders such as ourselves.
Have a great weekend everyone and see you back here again soon.
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