Christmas Rally Starts Monday! - My ETF Trading Strategies

By: Chris Vermeulen | Sun, Dec 8, 2013
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Tis the Season for the most powerful seasonality trade of the year!

With the stock market up big in 2013 and most participants are speculating on a pullback in the next week or two, I have to say I am on the other side of that bet. Being a technical trader I focus on patterns, statistics and probabilities to power my ETF trading strategies. So with 37 years of stats the seasonality chart of the S&P 500 index paints a clear picture of what is likely to happen in December.

If you do not know how to read a seasonality chart, I will explain as its very simple. The simply shows what the index has done on average through each month over the past 37 years. December typically has the strongest up trend and probability of happening any other time of the year.

S&P500 Seasonal 37-Years Chart


The Big Board

The NYSE also referred to as the Big Board, is an index with the largest brand name companies. Most individuals do not follow this, but to me its as close to the holy grail of trading than anything else I know. I use many different data points from this index (momentum, order flow, trend) for my ETF trading strategies.

You must follow the trend of this index if you want to be on the right side of the market. While I follow and track the New York Stock Exchange closely and it has its own fund NYC but it's an ETF trade I do not use. These big stocks are what really move the market (S&P 500) I think so I always trade with this index trend in mind.

NYSE Composite Index Weekly Chart


S&P 500 Weekly ETF Trading Strategy - Bullish

The chart below is self-explanatory I think... But let me recap.

The overall trend is up, so your ETF trades should be to the long side buying on the dips. The chart below goes back three years so the candles are a little condensed and small, but what you need to know are these two points:

1. After a correction within a trend, probability says that price is more likely to continue rising than it is to reverse. Notice the market just had a running correction through the summer months.

2. A reversal candle on the weekly chart (bullish reversal candle) generally indicates a 2-3 week rally is likely to happen.

Conclusion: Seasonality says higher prices, weekly chart below shows bullish reversal candle... Oya!

SPY Weekly Chart


The Bigger Picture: 3 -6 Months Out...

This is a quarterly chart and BIG picture outlook. Over the next 3-6 months we could see the stock market start to become choppy and rollover into a minor bear market for a couple years. That is the best case scenario I think... The other scenario is a major crash back down to the 700-1000 level on the SP500 which would cripple the baby boomers from retiring and getting a job would be impossible for almost everyone - full blown recession way worse that what everyone is saying we are in now.

Things are going to be really interesting over the next few years and things for south you better be prepared to make a killing during the next bear market or life will not be fun. The nice thing is that you can take advantage of these moves without ever having to lift a finger with my automated trading system.

SPX Quarterly Chart


ETF Trading Strategies Holiday Conclusion:

In short, I think we have a couple good weeks ahead of us. Holiday season, quality family time and a rising stock market paints a nice picture in my mind.

Anyway, I hope this report was helpful and somewhat educational. I always appreciate feedback and things you would like me to write about how I interpret, trade or analyze things. I am here to help and new topics to write about are always welcome!

Cheers,

 


 

Chris Vermeulen

Author: Chris Vermeulen

Chris Vermeulen
President of AlgoTrades Systems
www.TheGoldAndOilGuy.com

10126 Hwy 126 East, RR#2
Collingwood, ON, L9Y 3Z1

Chris Vermeulen

Chris Vermeulen, founder of AlgoTrades Systems., is an internationally recognized market technical analyst and trader. Involved in the markets since 1997.

Chris' mission is to help his clients boost their investment performance while reducing market exposure and portfolio volatility.

Chris is also the founder of TheGoldAndOilGuy.com, a financial education and investment newsletter service. Chris is responsible for market research and trade alerts for of its newsletter publication.

Through years of research, trading and helping thousands of individual investors around the world. He designed an automated algorithmic trading system for the S&P 500 index which solves his client's biggest problem related to investing in the stock market: the ability to profit in both a rising and falling market.

AlgoTrades' automated trading systems allows individuals to investing using either exchange traded funds or the ES mini futures contracts. It is supported by many leading brokerage firms including:

- Interactive Brokers
- Trade MONSTER
- MB Trading
- OEC OpenECry
- The Fox Group
- Dorman Trading
- Vision Financial

He is the author of the popular book "Technical Trading Mastery - 7 Steps To Win With Logic." He has also been featured on the cover of AmalgaTrader Magazine, Futures Magazine, Gold-Eagle, Safe Haven,The Street, Kitco, Financial Sense, Dick Davis Investment Digest and dozens of other financial websites. His list of personal and professional relationships approaches 25,000, people with whom he connects and shares is market insight with out of his passion for trading.

Chris is a graduate of Seneca College where he specialized in business operations management.

Chris enjoys boating, kiteboarding, mountain biking, fishing and has his ultralight pilots license. He resides in the Toronto area with his wife Kristen and two children.

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