Long Term Secrets To Short-Term Trading

 
Figure 10.2 Bonds buying first day of each month. 
As mentioned, the month-end up move in stocks has been written about for years; all I have done is 
figure out how to better qualify trades for this time period. Until now, the tendency for Bonds to rally at this 
same time has been known by only a few of my students. My research and actual trading over the years 
show this is also an excellent time for short-term swing moves in Bonds and Bills. 
Figures 10.3 and 10.4 should give you an overall view of this technique's strength. Figure 10.3 shows 
the growth in an account that would have 

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Figure 10.3 End-of-month T-Bonds system (U.S. T-Bonds day session 1983-1996). 
Figure 10.4 End-of-month S&P 500 (1983-1996). 

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bought one contract of T-Bonds on the third to the last trading day of each month and held for six trading 
sessions, exiting at that time or taking a loss of $1,500 with a protective stop. This chart, from one of the 
Bond market's best students Mike Stock, offers convincing proof of the phenomenon. The same opportunity 
presents itself in the S&P 500 as well as Figure 10.4 shows. 
Getting Specific 
The rally usually begins in Bonds prior to the first of the month as evidenced by the next set of 
printouts. Figure 10.5 shows the results of buying Bonds on the opening of TDM 18 with a $1,500 stop and 
exiting on the close 3 days after entry. The 139 trades, since 1986 netted $34,875 with a comfortable average 
profit per trade of $2 50. This is tradeable, despite the $8,62 5 drawdown. 
We can do better, however, by bringing a subset of the trend of the Gold market to filter out bad or 
marginal trades. As described in the works of such major contributors to our understanding of the markets as 
Marty Zweig or John Murphy (whose books are must reading), Gold exerts a great impact on Bonds. When 
Gold is in an uptrend, it acts as an impediment to Bond market rallies, conversely, when Gold is in a 
downtrend, Bonds are more apt to rally. 
Figure 10.6 reveals the power of filtering trades with Gold. In this case, trades were taken at the same 
time period with the same stop and exit as before. The difference is that trades were only taken if Gold was 
in a downtrend (i.e., the close of Gold on the day prior to entry was less than 24 days ago).