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

[smallfil]

100%! Cor Blimey O'Riley! (as we say over here)
Why would anyone trade under those conditions?

You trade it for the leverage. Who does not want to make 100%, 200% or even 500% in a short period of time? Time is money. Banks charge you interest on your credit cards don't they because they allow you to use their credit? That said, stock options trading is not for everyone.
You have to understand what you are doing otherwise, do not do it!

 

[tommcginnis]

You have to remember that stock valuations are based on formula's that mutual funds and institutional investors have to determine the fair value prices of companies.
That formula is partially based on the cost of borrowing money. So as interest rates go up, it reduces the fair value of stock prices.
The mutual funds and institutional investors input the new interest rate into the program (as well as the stock's other critical data factors and parameters) and a new stock fair value price outputs.
If the current price is now overvalued compared to the newly computed price, they issue new reports and give those stock's a haircut. Most indexed stocks are affected.
Since roughly 80% or more of most indexed stocks are held by the above mentioned Big Guys, the market falls.

Prior to both the Bear Market of 2000-2002 and the Financial Crisis of 2008-2009, the Fed had cranked up the Fed lending rate to the 5.0% or greater. (Even higher in some prior Bear markets.)
In the link below, carefully observe the green line (Fed Funds Rate) in the lower chart.
You can touch the green line with your cursor and it will roll to various years and produce values. Check out the years 2000 and 2007.
https://www.crystalbull.com/stock-market-timing/Fed-Funds-Prime-Rate-chart/

I like your hypothesis -- and appreciate that it's a popular one, but I think it conflates the Fed Funds Rate as a causative precursor to a drop in equity valuations, without a corresponding sequence in data. For example, inflation is absent -- and so, the changes in both the Fed Funds Rate and the market valuations are colored by a palette that we can't see. (( http://www.multpl.com helps here -- would love to see them together... )) Second, when you track the market declines -- were there a mechanism *linking* equity valuations as you suggest -- the declines would stop as the FFR stopped climbing (or declined itself!)... As the market and the FFR don't track well at all, I think the linking sequence would not be apparent in the data. So, there is a *correspondence* in one direction, on big market moves up, but for flat or declines? "Meh!"

 

[Handle123]

There are my opinions and my automation don't care about my opinions, people always asks me don't you give up some when I hedge? Not only does it hedge my long dividend stocks, it goes triple the amount of shorting ES for long term commodities system, been shorting ES for couple years now and then hedging those. If this s start of bear market, I will stay firm on my position and add on deep retracements if trend changes to down, otherwise system waits for bottoming patterns to reverse hedge. Weird H&S on weekly and triple top on dailies on ES, but never the less...

 

[bln]

Did well, Long 100% in T-bills since mid august. Used the elevated volatility to sell some Cash-Secured puts in SPY today. Now I will just sit and wait until my trading model give me a signal to enter the market. I do not need to trade the market every day, week or even month, that is for you rookies.

 

[smallfil]

There are my opinions and my automation don't care about my opinions, people always asks me don't you give up some when I hedge? Not only does it hedge my long dividend stocks, it goes triple the amount of shorting ES for long term commodities system, been shorting ES for couple years now and then hedging those. If this s start of bear market, I will stay firm on my position and add on deep retracements if trend changes to down, otherwise system waits for bottoming patterns to reverse hedge. Weird H&S on weekly and triple top on dailies on ES, but never the less...

Seems you have the right idea as far as hedging goes. You got to think about risk management when you trade. That is why people get into big trouble---they assume everything will work out all the time! You should be prepared for the worst case scenario to be prepared. If it does not happen then, you lost nothing. If it does happen then, you are protected!

 

[d08]

100%! Cor Blimey O'Riley! (as we say over here)
Why would anyone trade under those conditions?

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

 

[jeffalvinson]

Before anyone panics, let me show you a good charting technique that I have used for decades to prevent moving my long term 401k assets out of stocks for no good reason, other than panic.
Below is a long term chart of the SP500, time frame: 1994 to present day (24 years).
The candles are monthly candles and the moving average is the 40 month moving average.

Here's my simply rule for moving out of stocks:
"When the SP500 has been in a Long Term Bull Market,"
"if a monthly candle closes below the 40 month moving average, I move everything out of stocks." (A Bear Market has followed every time in the last several decades.)

Here's my simply rule for moving back into stocks:
"When the SP500 has been in a Long Term Bear Market,"​

"If a monthly candle closes above the 40 month moving average, I move back into stocks."
(A Bull Market has followed every time in the last several decades.)

Note: Sure, you miss selling the exact top of a bull market, and entering the exact bottom of a bear market, but unless you have a Crystal Ball, its better than guessing.

 

[smallfil]

Before anyone panics, let me show you a good charting technique that I have used for decades to prevent moving my long term 401k assets out of stocks for no good reason, other than panic.
Below is a long term chart of the SP500, time frame: 1994 to present day (24 years).
The candles are monthly candles and the moving average is the 40 month moving average.

Here's my simply rule for moving out of stocks:
"When the SP500 has been in a Long Term Bull Market,"
"if a monthly candle closes below the 40 month moving average, I move everything out of stocks." (A Bear Market has followed every time in the last several decades.)

Here's my simply rule for moving back into stocks:
"When the SP500 has been in a Long Term Bear Market,"​

"If a monthly candle closes above the 40 month moving average, I move back into stocks."
(A Bull Market has followed every time in the last several decades.)

Note: Sure, you miss selling the exact top of a bull market, and entering the exact bottom of a bear market, but unless you have a Crystal Ball, its better than guessing.

View attachment 192914

Good tip my friend. I am sure long term investors would love it! Saves them from guessing. Simple approaches are the best anyways.

 

[Neuroway]

Before anyone panics, let me show you a good charting technique that I have used for decades to prevent moving my long term 401k assets out of stocks for no good reason, other than panic.
Below is a long term chart of the SP500, time frame: 1994 to present day (24 years).
The candles are monthly candles and the moving average is the 40 month moving average.

Here's my simply rule for moving out of stocks:
"When the SP500 has been in a Long Term Bull Market,"
"if a monthly candle closes below the 40 month moving average, I move everything out of stocks." (A Bear Market has followed every time in the last several decades.)

Here's my simply rule for moving back into stocks:
"When the SP500 has been in a Long Term Bear Market,"​

"If a monthly candle closes above the 40 month moving average, I move back into stocks."
(A Bull Market has followed every time in the last several decades.)

Note: Sure, you miss selling the exact top of a bull market, and entering the exact bottom of a bear market, but unless you have a Crystal Ball, its better than guessing.

View attachment 192914

Blimey! That, Sir, is long time investing. How long have you been trading your rules, if it isn't indiscrete? And what's the performance of your method? Do you leverage your moves? Any hedging? Wow. Playing the 40 months moving average. I never saw this before. You are really a slow motion trader, you.

 

[Neuroway]

Before anyone panics, let me show you a good charting technique that I have used for decades to prevent moving my long term 401k assets out of stocks for no good reason, other than panic.
Below is a long term chart of the SP500, time frame: 1994 to present day (24 years).
The candles are monthly candles and the moving average is the 40 month moving average.

Here's my simply rule for moving out of stocks:
"When the SP500 has been in a Long Term Bull Market,"
"if a monthly candle closes below the 40 month moving average, I move everything out of stocks." (A Bear Market has followed every time in the last several decades.)

Here's my simply rule for moving back into stocks:
"When the SP500 has been in a Long Term Bear Market,"​

"If a monthly candle closes above the 40 month moving average, I move back into stocks."
(A Bull Market has followed every time in the last several decades.)

Note: Sure, you miss selling the exact top of a bull market, and entering the exact bottom of a bear market, but unless you have a Crystal Ball, its better than guessing.

View attachment 192914

Erm… Yeah. Does this happen to you every time your 40 months moving average rule gets triggered?