For the last year or so, life’s exigencies have driven me away from stocks and toward the ETF market. My trading these days is greatly reduced and probably 80% ETFs; and I am more and more pleased with the results. As most know by now, ETFs come in all flavors and power, and I’ve settled mostly on the ProShares 2X.

There is one trade I take routinely and since we don’t recommend commodity trades for Spike, I thought I’d mention it in the Blog. I like to trade the long bond with the opposing ETFs, TLT and TBT, or the 3x ones TMF and TMV. It’s a simple trade–simple is good–I buy either ETF at the outer Bollinger Band and look to sell a couple of days later around the 20 EMA. I use the 2 RSI as a trigger, so when it gets into oversold territory, I get ready. While I use the 3X ETFs–TMF and TMV (they have crummy volume so use limit orders) to trade, I use the TLT and TBT for the pattern.

Every once in a while, the bond goes on a major trend trade as measured by the ADX (see fall 2008); at that point I try to trade the trend. But the rest of the time, the bond goes back and forth from overbought to oversold without much fuss. I usually get 2-3 of these counter-trend trades a month at the extremes. The gains average about 3-5% on the 3X in 2-3 days, with a low-risk, high percentage average (use tight stops). No one will get rich on the trade, so think of it as cigar and wine money.