Weekly Summary ending 17th June 2011

The past week has been another volatile 5 days for the stocks markets in which new weekly short signals were generated for the main indexes indicating the end of the current up trend and the start of a new down trend. Value is starting to correct downwards so the current strategy should be to sell into rallies until the trend reverses to the upside. The week generated:

74 New Weekly Short Signals

1 New Weekly Long Signal

That’s a lot of sell signals in one week! The indexes are looking like they are rolling over with a strong VIX bouncing off a major 4 year support level, odds favour a correction in the near term.

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Past Performance

The chart below shows the performance of the signals generated on stocks in the Dow Jones Industrial 30, Nasdaq 100, S&P 500 and Russell 1000 from 1st January 2002 until the 18th June 2011 using different money management systems. The starting balance was $10,000 and no more than 1.5% of capital was used on each trade entry and no leverage was used either. Whilst past performance is no guarantee of future returns, following a long term timeframe can result in a high return, low risk strategy without having to be glued to your screen all day long. Once you have identified the long term trend, add to your trades on shorter term retracements and let the profit run.

We aim to identify the longer term trends on stocks in the Dow 30, Nasdaq 100, S&P 500 and Russell 1000 indexes. Once identified, any number of strategies can be used to enter positions, from buying the stock outright to using various option strategies to lower risk and raise potential returns.

Weekly Signal Simulation Equity Curve Chart

The highest return was generated with the ‘Size to Equity’ management strategy, defined as:

‘The Size to Equity allocation method begins by trading with a fixed trade size in shares or contracts. A series of equity levels defined by the parameters trigger allocation changes as they are crossed. Trade size will increase and/or decrease based on when the gains or losses of the Trigger Amount are realized.’

The Size to Equity strategy returned 1115.14% over the tested period with a maximum drawdown of 13.5%. The largest drawdown on equity was 0.48% and the lowest equity amount was $9996, down from $10,000.

Each week, we analyze stocks in the Dow Jones Industrial 30, Nasdaq 100, S&P 500 and Russell 1000 to try and find new trends that are just starting to develop. You can join us by becoming a member for $49.99 a month (approx £30 or 34 Euros). Your membership includes a 1 week free trial so you can try out our signal service without committing yourself.

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We’ll post the newest signals and charts along with the Developing MoneyZone and Developing Value Line levels to help you identify the best trading opportunities in the market. We keep our strategy very simple without using predictive indicators, to identify the long term trend as seen in our free index analysis. Once a trend has been identified, you can buy the stock or use option strategies to gain exposure whilst reducing your risk.

Build a portfolio over time and use various option buying and writing strategies to increase your return. The Equity Curve above was produced by just buying stocks, without leverage, with just 1.5% capital. Imagine combining those signals with low risk option strategies over the long term!