Are the Bond ETF Markets a Buy? ETF Strategies for the Short Term Trader
With the ETF markets moving sideways, a pullback in a large variety of country and index exchange-traded funds may be only days away. But right now, the funds on sale are in the bond ETF market.
In the short term, our research into how ETFs really work tells us that buying ETF funds after they have pulled back outperforms buying these same ETF funds after they have made new short-term highs. It may sound counter-intuitive. But thousands of simulated trades in hundreds of exchange-traded funds since inception suggest otherwise.
And the fact that our research on ETFs (published in Larry Connors’ latest book, High Probability ETF Trading) is consistent with our research on stock behavior in the short term, as well, only adds to our confidence that “buying the selling and selling the buying” is a quantified, high probability way for short term traders to trade the ETF markets.
For traders looking at the ETF market through a high probability lens, the oversold bond ETF market is among the most worth watching.
The iShares Barclays Aggregate Bond Fund ETF
PowerRating) has closed for two days in a row in oversold territory above the 200-day moving average (intraday snapshot, above). The same is true for the iShares Barclays TIPS Bond Fund ETF
PowerRating) (intraday snapshot, below).
The 200-day moving average is a key moving average. Our research shows that it is an effective “line in the sand” between those ETFs that traders should consider buying and those ETF funds that traders should consider avoiding â€” or selling short. (Click here to read more about trading ETFs and moving averages.)
We use a number of tools to measure how oversold an exchange-traded fund is. But one of the simplest is to wait for an ETF trading above its 200-day moving average to make three consecutive lower highs and lower lows. This strategy alone has been correct more than 75% in large number of widely-traded exchange-traded funds since inception.
Right now, the ETF bond market appears to represent the best potential for new trading opportunities in the short term. And if that proves to be the case, there may be no better tool for trading those opportunities than “buy the selling, sell the buying” strategies of high probability ETF trading.
With Larry Connors’ High Probability ETF Trading Software, short term traders have access to the same kind of “buy the selling, sell the buying” trading strategies that professional traders have used successfully for decades.
Click here to start your free trial to Larry Connors’ High Probability ETF Trading Software today!
David Penn is Editor in Chief at TradingMarkets.com.