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

[SunTrader]

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

As your chart plainly shows the crossing down below the 40 MA in 2008 was not very much higher than the crossing up above the 40 MA in 2004.

What gives?

And then you would have gotten back in late 2010 about the same spot.

40 MA on a monthly chart is beyond belief. Better to just buy and hold if you are not going to even attempt to rationally time market moves.

 

[deaddog]

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.

Why the 40 MA.
With a little curve fitting 5ma crossing the 20ma would have worked fine.

Personally I use the 30 week ma and get out if the price makes a swing low below the 30 then trades below that swing low. I get the odd whipsaw but protecting capital is priority number one.

 

[smallfil]

Why the 40 MA.
With a little curve fitting 5ma crossing the 20ma would have worked fine.

Personally I use the 30 week ma and get out if the price makes a swing low below the 30 then trades below that swing low. I get the odd whipsaw but protecting capital is priority number one.

Thanks for sharing your info. Lots of ways to make monies in the stockmarket. Stan Weinstein also, uses the 30 Week Moving Average. I would consider him to be a position trader. Nicolas Darvas was a momentum trader, not buying until a stock took out its previous high. I have no doubt these approaches work although, I swing trade which is another method to trade the stockmarket.

 

[deaddog]

Thanks for sharing your info. Lots of ways to make monies in the stockmarket. Stan Weinstein also, uses the 30 Week Moving Average. I would consider him to be a position trader. Nicolas Darvas was a momentum trader, not buying until a stock took out its previous high. I have no doubt these approaches work although, I swing trade which is another method to trade the stockmarket.

I'm a disciple of both Weinstein and Darvas and consider myself a long term swing trader.
The easiest way to describe my strategy is that I don't hold any losing stocks in my portfolio. That being said I do have stocks I have held since 2009. The old winners run and cut losers short thing.

 

[jeffalvinson]

Why the 40 MA.
With a little curve fitting 5ma crossing the 20ma would have worked fine.

Personally I use the 30 week ma and get out if the price makes a swing low below the 30 then trades below that swing low. I get the odd whipsaw but protecting capital is priority number one.

The SP500 chart below gives the reason for exiting with the 40 month moving average as opposed to the 20 month moving average.

(1) Previously I used the SP500's 20 month average until this fake-out happened:
On the closing month candle for September 2011 (9th dark candle in Sep-2007, chart below), the SP500 closed below the 20 month moving average.
I moved the 401k's out of SP500 Funds and into a Stable Value Fund (government backed bonds).
The very next monthly candle (October 2007) closed back above the 20mma!
Due to our companies rule of only making two 401k changes per year (6 months apart),
we couldn't re-enter stock funds until 2012.
So because of using the 20mma, we missed out on a +27% rally from 1100 to 1400 and had to pay a large commission fee to boot!
Note: In September of 2011 when the month candle closed below the 20mma, that same candle was perfectly supported by the 40mma (40 month moving average).
Note: After that fake-out, we begun using a closing monthly candles below the 40 month moving average.

Further proof of 20mma fake-outs:
(2) And again to prove my point about exiting on a monthly close below the 40mma and not the 20mma, look on the upper chart below and please notice that in September 2015 closed below the 20mma, but not the 40mma.
(3)And also notice that January and (4) February of 2016, both months closed below the 20mma, but were perfectly supported by the 40mma.
Fake out after fake-out! When your moving larger amounts of money in retirement accounts,
with rules that limit your moves in and out, plus commissions, you simply cannot afford using the 20 month moving average!

And your question about moving assets on the 5mma and 20mma crossover, way to many moves for retirement assets with restrictive rules on number of changes, plus all those commission fees!


[SP500, July 2007 to Present Time, monthly candles, 20 & 40 month moving average]

 

[deaddog]

The SP500 chart below gives the reason for exiting with the 40 month moving average as opposed to the 20 month moving average.

And your question about moving assets on the 5mma and 20mma crossover, way to many moves for retirement assets with restrictive rules on number of changes, plus all those commission fees!

I see your point. Although you would have been out and in earlier 2008 and 2009

Most don't have the buy/sell restrictions or the commission concerns.

Still a better method than buy and hold.

 

[jeffalvinson]

I would find it difficult to believe the Dow 30 and NDX don't have some sort of bounce from today's closing chart setup on both:
Bounced off the 200ma (closed above), RSI dropped below 30 and starting to hook back up.

Dow 30: 50% retracement from the October High of 26,900 to Oct Low of 25,000 is 25,950.

NDX: 50% retracement from the October High of 7,700 to Oct Low of 6,900 is 7,300.

Note: The Dow 30 and the NDX (Nasdaq 100) are the only two major index that have closed today above their 200 day moving average! (That's a little spooky near Halloween ).

[Dow30, Year to Date, Daily Candles, 200ma, Pivot Points, RSI 14]

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[NDX, Year to Date, daily candles, 200ma, Pivot Points, RSI 14]

 

[SunTrader]

Bounce likely but note RSI on both charts hit lowest level just days ago. Also bottoms that hold almost always are not V bottoms.

 

[jeffalvinson]

For yesterday's rally to continue, the SP500 needs to stay above the 400ma (purple line) micro trend by the close today. So far, its bounced off the convergence of Pivot Point S1 (red line, Support 1) and the 400ma (purple line, 5 minute candles) micro trend line.

[SP500, 2 days, 5 minute candles, 400ma, Pivot Points]