Breakin' it Down

A quick overview of where I am at now.

Trading by the BPI with sector ETFs

Bull trading - Use the S&P 500 trend based on the 30/20/10 BPI entry rules for bull trades
- the over sold condition cannot remain oversold for long

Bear trading - Use the S&P 500 trend based on the 70/80/90 BPI entry rules for bear trades
- unlike the over sold condition, over bought can remain in force a lot longer so entries need to have tighter stops and stricter trade management overall

Compare sector performance at each point to determine which sector is leading the charge, or is losing the least ground if it is early enough
- this is a relative measure to determine which sector to focus on

Compare the ETFs within the leading sector to determine which is performing the best overall
- this is the same relative measure to determine which ETF to trade or focus on

Trade the sector ETF based on the S&P500 trigger
- assuming good liquidity or, if options, enough selection and liquidity in the option chains

Alternately compare constituent stocks within the ETF to trade
- this might be due to an expensive ETF, a desire to only trade options or an attempt to boost returns by using the stock that is driving the ETF that is driving the sector that is driving the market

This can mostly be set up ahead of time to make life easier. Stockcharts.com uses strings of ten symbols for it's performance chart, free or otherwise, so setting up strings to be able to cut and past will make life easier. Tracking the market to be ready for a change in trend and tracking sectors for the same reason is a good daily practise while waiting for the initial trade setups. Checking ongoing trades in order to maximize earnings by perhaps selling one ETF/stock/option in order to play a better performer can be done monthly.

Jeff.