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to the short-term tutorial
One of the most simple and consistent
trading opportunities exists in following
the intermediate term cycle. It has a
cyclic motion that is typically somewhere
between 1-3 months in time. By trading
long as it moves up and then short as it
comes down we can easily see regular
profits, using a leveraged fund, of 15-30%
with each move, more if options are
employed.
A leveraged fund's profits are derived relative to the direction of the S&P, Nasdaq or other index. A favorite
of mine are two of the Rydex funds, the
Titan and Tempest, both provide a 2-1
performance ratio to the S&P 500 and
are used in the examples below.
Let's start our trading by taking a
look at the Market Forecast back in
July.
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When the intermediate line
(purple) on the Market Forecast
bottomed around 7/23-7/24, it
signaled an entry point for a
upside play. The Titan fund was
priced at 6.84. As the
Intermediate Line move up and
topped out on or before 8/28, it
signaled the exit point for the
trade.
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The fund had moved up in price to
7.98. The increase represents a
profit of 15% for one month.
Exiting a bit earlier when the
short term line (yellow) topped
out would have yielded a higher
25% profit, but would have been
tougher to call since the
Intermediate Line was still
rising.
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As the Intermediate cycle line
rolled over, we would then have
considered entering the Tempest
500 fund which provides an
inverse 2-1 relationship to the
S&P 500. The fund was priced
at 93.93. The exit came on 9/24
when Intermediate line reached
near bottom and the fund was
priced at 115.85. The trade
returned 19% for the another one
month trade.
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You can see on the charts that
returns can become significant
with the ability to play both
directions on the market instead
of just one. In a one year
analysis, a 'best case' return
for could easily exceed 100%.
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