Thursday, October 09, 2008

Buy Bonds Friday Close

So the flip side to selling the Qs on Friday is buying TLT, the 20 year treasury bond fund.
This system is even more abbreviated that the Qs/IWM Friday sell system . . . here we buy TLT on Friday's close and exit the position on Monday's close.
TS2000i code is:
If DayofWeek(Date) = 5 Then Buy This Bar at Close;
If BarsSinceEntry = 1 Then ExitLong This Bar at Close;
As with the Sell Friday system, you don't even need a computer to figure out this trade.
This might be a nice pair trade for the weekend . . short the Qs and long the TLT in equal dollar amounts. The Qs system gives you more bang for your buck, but the TLT side may smooth out drawdown when the Qs trade doesn't work.
Of course, if market momentum turns up and the Qs LR30 channel goes upslope, all bets are off and we need to reverse the buys and the sells. We could add a simple moving average filter to confirm the trades . . . in the case of the Qs if the current close is less than the 17 DSMA then performance improves a few percent, we cut total number of trades to 23 and overall return is knocked down by $1000, so my preference is to trade it without the filter. Nevertheless, market momentum does require monitoring to assure than the trades are reflective of the current market bias and the 3 finger system may be one approach to accomplish that goal. I'm going to fiddle with that concept over the weekend and will post any interesting developments.

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