The end of second quarter and start of third quarter give a couple of good trading opportunities for our ‘Seasonal Trader portfolio. The first day of July has a bullish tendency and so far, mid-day on July 1st, it is progressing as expected. The second trading day of July, on the other hand, has bearish tendency. Although, the downside probability for the second trading day is not as great as the upside probability for the first trading day, it is still a trade-able opportunity.
There is a greater chance that Dow and S&P 500 will decline on the second trading day of July as compared to NASDAQ and Russell 2000. However, the percent move is bigger for NASDAQ and Russell.
Since 2000, using 1X and 2X index ETFs, our strategy produced 56 trades with 61% success rate. The average gain is 0.9% for two-day holding period giving an annualized return of 220%.
| Seq. | ETF | # of Trades | Win % | Avg. Return | Avg. Days | Annualized |
| 1 | DIA/DXD | 14 | 71% | 0.8% | 2 | 177% |
| 2 | SPY/SDS | 14 | 71% | 1.0% | 2 | 222% |
| 3 | QQQ/QID | 14 | 50% | 1.3% | 2 | 299% |
| 4 | IWM/TWM | 14 | 50% | 1.0% | 2 | 231% |
Our strategy calls for going short on market close on July 1st. The flip-side is to buy ultra short ETFs.
- Buy DXD, ProShares Ultra Short Dow 30
- Buy SDS, ProShares Ultra Short S&P 500
- Buy QID, ProShares Short Short QQQ
- Buy TWM, ProShares Ultra Short Russell 2000
We will exit on the close of July 2nd.
Update: July 2nd:-
This year this trade was not a great success. DXD lost 0.2%, SDS and QID lost 0.3% but TWM gained 1.0%. The net effect was almost wash-out – all four trades gained a net of 0.05%.
