Looking Back at 2018 Market Performance

J

jeffalvinson

The 2018 market close for the major indexes finished:
SP500: -7%
Dow30: -6%
NASDAQ: -5.5%

[SP500 (black line), Dow30 (blue line), & Nasdaq (brown line) performance comparison (in percentage) for 2018]
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The point of demarcation defining a long term Bull market versus Bear market is the 40 month moving average.
When the SP500 is in a long term Bull Market, its monthly candle closes above the 40ma.
When the SP500 is in a long term Bear Market, its monthly candle closes below the 40ma.
[SP500, 26 years, monthly candles, 40ma]
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The 2018 December candle closed above the 40ma, leaving the Bull Market intact for 2018.
Note: The 2018 December candle spiked below the 40ma intramonth, pulling off a monthly closing save for the Bull Market in the last week! (very similar to Jan 2016).
[SP500, 5 years, monthly candles, 40ma]
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jeffalvinson said:
I have been following this long term investing chart technique since the 1980's and its never been wrong.
More...
As beneficiaries of this multi-decade bull market, we agree with what you said. As a intermediate term swing trader of options, I can appreciate your statements. But if we day trade options, how is it going to help us?

Happy New Year and welcome back to sunny California. :D
 
ironchef said:
As beneficiaries of this multi-decade bull market, we agree with what you said. As a intermediate term swing trader of options, I can appreciate your statements. But if we day trade options, how is it going to help us?

Happy New Year and welcome back to sunny California. :D
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Your 100% correct, it won't help the intermediate or short term trader.
I was simply trying to report the condition the market was left in at the close of 2018,
using the most time proven method that I know of.

ironchef, thanks for the welcome back to CA, but it was just a temporary visit until we can sell our WA home.
 
jeffalvinson said:
I have been following this long term investing chart technique since the 1980's and its never been wrong.
More...

I agree with your conclusion based on data I'm looking at (which could change during the year). However, in your system the candle closed above the 40-month MA in Dec. 99, Dec. 00, Dec. 08 and Dec. of last year. In all four cases, the market fell the following year. I wish there was such an easy, foolproof way to predict the trend for an entire year, but unfortunately there isn't.
 
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MKTrader said:
I agree with your conclusion based on data I'm looking at (which could change during the year). However, in your system the candle closed above the 40-month MA in Dec. 99, Dec. 00, Dec. 08 and Dec. of last year. In all four cases, the market fell the following year. I wish there was such an easy, foolproof way to predict the trend for an entire year, but unfortunately there isn't.
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Your missing my point.
This isn't an end of year predictor of a bear market.
Its anytime "whenever" the first candle that has a monthly close below the 40ma occurs, the months (or years) following that close are a bear market.
Lets look at a close up the months your referring to:

[Dec 99 and Dec 00 closed above the 40ma, but Feb 2001 closed below the 40ma and a +2 year bear market followed:
[SP500, 1/4/1999 to 12/30/2004, monthly candles, 40ma]

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Dec 08 was a mile below the 40ma, so lets back up to the beginning of that bear market
on June 08 which definitively closed below the 40ma, and a multi month bear market followed:
[SP500, 1/4/2007 to 12/30/2011, monthly candles, 40ma]
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Dec of last year did not close below the 40ma. Again, this this "is not" an end of year
indicator that predicts the following new year.
Whenever you finally see a definitive monthly close below the 40ma, a bear market usually
follows. It could happen next month, the month after....etc...or not at all.
[SP500, 1/4/2014 to 12/31/2018, monthly candles, 40ma]
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jeffalvinson said:
I have been following this long term investing chart technique since the 1980's and its never been wrong.
More...
%%
Could work long term for SPY;
as far as long term SPY, looks like hold + gets dividends works better.NOT a prediction.That 40 month moving average is pretty good on commissions LOL-true:D:D
 
jeffalvinson said:
Your missing my point.
This isn't an end of year predictor of a bear market.
Its anytime "whenever" the first candle that has a monthly close below the 40ma occurs, the months (or years) following that close are a bear market.
Lets look at a close up the months your referring to:

[Dec 99 and Dec 00 closed above the 40ma, but Feb 2001 closed below the 40ma and a +2 year bear market followed:
[SP500, 1/4/1999 to 12/30/2004, monthly candles, 40ma]

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Dec 08 was a mile below the 40ma, so lets back up to the beginning of that bear market
on June 08 which definitively closed below the 40ma, and a multi month bear market followed:
[SP500, 1/4/2007 to 12/30/2011, monthly candles, 40ma]
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Dec of last year did not close below the 40ma. Again, this this "is not" an end of year
indicator that predicts the following new year.
Whenever you finally see a definitive monthly close below the 40ma, a bear market usually
follows. It could happen next month, the month after....etc...or not at all.
[SP500, 1/4/2014 to 12/31/2018, monthly candles, 40ma]
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I meant Dec. 07. My bad. Yes, it's a lot more accurate than something like the 200-day MA, which whipsaws like crazy. There are a few whipsaws, though, such as the first half of 2008 where it closes above the 40-month MA then back above it. You'd lose a bit of money due to whipsawing if you were using the system to time your 401(k) in mutual funds or something.

Also, the exit points and re-entry points aren't too far apart. For example, you exit the dot-com crash just below 1250 and re-enter above 1100. You'd still do better than buy-and-hold if you went to cash/bonds at the exit candles, but I'd be curious how it performs relative to buy-and-hold for the last 50 years or so. My guess is about the same with some reduction in drawdowns and volatility--which is pretty good. I'm think you'd get whipsawed in the '87 crash (which fully recovered in less than 2 years) and you would've been better just holding, though. And again, I'm talking about long-term timing with funds (no leverage)...not swing or day trading.
 
MKTrader said:
I meant Dec. 07. My bad. Yes, it's a lot more accurate than something like the 200-day MA, which whipsaws like crazy. There are a few whipsaws, though, such as the first half of 2008 where it closes above the 40-month MA then back above it. You'd lose a bit of money due to whipsawing if you were using the system to time your 401(k) in mutual funds or something.

Also, the exit points and re-entry points aren't too far apart. For example, you exit the dot-com crash just below 1250 and re-enter above 1100. You'd still do better than buy-and-hold if you went to cash/bonds at the exit candles, but I'd be curious how it performs relative to buy-and-hold for the last 50 years or so. My guess is about the same with some reduction in drawdowns and volatility--which is pretty good. I'm think you'd get whipsawed in the '87 crash (which fully recovered in less than 2 years) and you would've been better just holding, though. And again, I'm talking about long-term timing with funds (no leverage)...not swing or day trading.
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To address a few of your concerns:

(1): The whipsaw that took place on March 2008 candle closing slightly below the 40ma and then closing back above the 40ma on April 2008:
A: Did you notice me mention a definitive close below the 40ma a few times?
A definitive close below the 40ma is -1.5% or greater below the 40ma.
The March 2008 close below the 40ma was less than that, therefore I ignored it.
(With any kind of logic, one needs a logic control subset to prevent finite variables.)

[SP500, 1/4/2008 to 12/30/2008, monthly candles, 40ma]
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(2): (Re-Entry) Exit points and re-entry points aren't too far apart:
A Your right.
If you look at the 26 year chart below of the SP500, monthly candles, 20ma and 40ma,
you will gain a lot of the index value by re-entering the SP500 on a monthly close
above the 20ma, and then exiting on a monthly close below the 40ma.

[SP500, 26 years, monthly candles, 20ma and 40ma]
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