So, you were cheering for the market to crash, What do you do now?

[jeffalvinson]

I am a long term investor only for my retirement accounts and this has worked every time since around 1995. I simply exit stock funds in 401k's when a monthly SP500 candle closes below the 40 month MA and put the money in a Stable Value Fund (government backed bonds) until the monthly candle closes back above the 40 month MA, and then back into a SP500 Fund.

Here is a little tip I learned a little too late in the game that highly improves re-entry back into stocks:
Where as exiting stocks on a monthly close below the 40 month moving average prevents fake outs like September of 2011,
I must admit that re-entering stocks on a monthly close above the 40 month moving average has created a delayed re-entry into stocks that has been costly. If I could do it all over again (and that's impossible at 70),
I would have re-entered stocks on a closing monthly candle above the 20 month moving average, saving a lot of percentage points of gain between the 20mma and 40mma.
In my defense of this long term mistake on the re-entry of stocks, these moves are very infrequent (once or twice per decade), so its very difficult to accumulate experience.

 

[sss12]

I am a long term investor only for my retirement accounts and this has worked every time since around 1995. I simply exit stock funds in 401k's when a monthly SP500 candle closes below the 40 month MA and put the money in a Stable Value Fund (government backed bonds) until the monthly candle closes back above the 40 month MA, and then back into a SP500 Fund.

Here is a little tip I learned a little too late in the game that highly improves re-entry back into stocks:
Where as exiting stocks on a monthly close below the 40 month moving average prevents fake outs like September of 2011,
I must admit that re-entering stocks on a monthly close above the 40 month moving average has created a delayed re-entry into stocks that has been costly. If I could do it all over again (and that's impossible at 70),
I would have re-entered stocks on a closing monthly candle above the 20 month moving average, saving a lot of percentage points of gain between the 20mma and 40mma.
In my defense of this long term mistake on the re-entry of stocks, these moves are very infrequent (once or twice per decade), so its very difficult to accumulate experience.

Curve fitting.

 

[smallfil]

I am a long term investor only for my retirement accounts and this has worked every time since around 1995. I simply exit stock funds in 401k's when a monthly SP500 candle closes below the 40 month MA and put the money in a Stable Value Fund (government backed bonds) until the monthly candle closes back above the 40 month MA, and then back into a SP500 Fund.

Here is a little tip I learned a little too late in the game that highly improves re-entry back into stocks:
Where as exiting stocks on a monthly close below the 40 month moving average prevents fake outs like September of 2011,
I must admit that re-entering stocks on a monthly close above the 40 month moving average has created a delayed re-entry into stocks that has been costly. If I could do it all over again (and that's impossible at 70),
I would have re-entered stocks on a closing monthly candle above the 20 month moving average, saving a lot of percentage points of gain between the 20mma and 40mma.
In my defense of this long term mistake on the re-entry of stocks, these moves are very infrequent (once or twice per decade), so its very difficult to accumulate experience.

It still would have resulted in substantial profits. Can it be refined further? Probably. However, there is a point of diminishing returns after a while. It won't enhance profitability. There have been multiple studies of using moving averages and shorter term moving averages have turned up more profitable. The obvious reason is you compound your monies multiple times with the more numerous entries and exits instead, of hanging on for the very long time. Huge drawdowns on huge pullbacks are also, avoided because of the shorter time frame.

 

[tomorton]

Jeff it does indeed sound like curve fitting. Simply accelerating the in/out cycle doesn't help with a long-term investment though it looks great during a bull market.

I tend these days to be a purist re investing - a true investor in shares should seek dividend income with the intent of willing their shares to their children and grand-children: trading in and out even over periods of decades, even using huge time-frame tools like 40mma is trading, and trading is best done with leverage and on a much shorter time-frame.

 

[jeffalvinson]

From a micro trend point of view, the SP500 has a lot of overhead resistance levels:
on the Pivot Points you have
R1 (purple line) and
R2 (blue line)
and then the most important resistance level is the 400ma (top grey line).

We are also battling Volatility Implosion on the option values as the market attempts to rise.


[SP500, 2 days, 5 minute candles, 400ma, pivot points]

;

 

[CALLumbus]

This volatility gives some of the best opportunities for some people...

Exactly ! Why should a daytrader/ scalper care if the market is soaring or crashing ? For the very shortterm traders like me, the equity markets these days are just perfect. Best opportunities since the February VIX spike. So many (countless !) fast moves for several points in the NQ, minute after minute, without going too crazy. Trading conditions can not get much better than this.

I hope many of you guys (and girls) here on ET made some good $$$ the past few days.
I wish you all a nice weekend.

Greeting,
CALLumbus

 

[d08]

Exactly ! Why should a daytrader/ scalper care if the market is soaring or crashing ? For the very shortterm traders like me, the equity markets these days are just perfect. Best opportunities since the February VIX spike. So many (countless !) fast moves for several points in the NQ, minute after minute, without going too crazy. Trading conditions can not get much better than this.

I hope many of you guys (and girls) here on ET made some good $$$ the past few days.
I wish you all a nice weekend.

Greeting,
CALLumbus

If you run models that don't size based on volatility, times like these do increase fear and greed. Most of the literal newbies probably lost money though because this is the first time since 2011 we've seen moves of this amplitude, they couldn't have imagined moves like this. Personally I wasn't affected either way.

 

[jeffalvinson]

It still would have resulted in substantial profits. Can it be refined further? Probably. However, there is a point of diminishing returns after a while. It won't enhance profitability. There have been multiple studies of using moving averages and shorter term moving averages have turned up more profitable. The obvious reason is you compound your monies multiple times with the more numerous entries and exits instead, of hanging on for the very long time. Huge drawdowns on huge pullbacks are also, avoided because of the shorter time frame.

In the beginning we tried shorter time frame changes with 401k's, but each change had commissions attached. That is ok with a trading account, but with the larger amounts in a 401k
it proved too costly. Also as time went on, our employer got tired of employee's day trading their 401k's, so they installed a new rule that employee's can only make two changes a year in their 401k.

 

[jeffalvinson]

Correlation between the SP500 and VIX charts with 2 days, 5 minute candles, 400ma, Pivot Points.
The front month OTM SPY call and put options that I trade have been mostly negative for both calls and puts with only minor gains during spikes all day due to the implied volatility changes.

[SP500, 2 days, 5 minute candles, declining overhead 400ma (grey line), Pivot Points]

[VIX, 2 days, 5 minute candles, rising supporting 400ma (grey line), Pivot Points]

 

[yc47ib]

I think you have a different way of trading in the UK which would not apply to US traders so, an apples to oranges comparison. The DJIA dropped like 3.15% but, that is just 30 companies comprising that! We have 10,000 stocks in the US markets trading every day. Most traders and investors trade individuals stocks and they sure dropped more than the 3.15% so, it is not a fair comparison. With the leverage of options, 100% moves during the day is common in the US markets.

To testify that, My RTY dropped way more than 3-4%. it is getting to the Feb low soon.