Turning Points and Timing | Felix Zulauf Outtake | Real Vision Video

[Saltynuts]

tomorton, thanks. I just plugged a 20 and 50 day EMA in the yahoo finance chart for SPY. These will be very rough numbers.

But for the 2008ish bear market, it looks like SPY peaked in October 2007 around 154. It looks like the 20 day EMA went south of the 50 day EMA in October/November 2008. By then the price of SPY had dropped to around 90. It looked like the bottom occurred in February of 2009 around 73. The 20 day EMA did not pull above the 50 day EMA until Feb/March 2011. At the time the SPY had already risen to 132ish.

So on SPY, using these MA crossovers, it looks like very roughly one would lose 41% of their value (90-154)/154 in the bear market, have been saved from 19% further downside (73-90)/90, but then missed out on a 46% rise in SPY (132-90)/90.

Not sure why I did SPY instead of just hitting the S&P500 index iteself, but I would think the results would be very similar.

Does this seem roughly accurate to you? I want to make sure I fully understand you and SunTrader's differing views. Thanks!

 

[SunTrader]

The simple rule would have got the trader out of US equities before 16 of the 20 largest single-day falls in the Dow since 1900 -
sell when price and the 20EMA close below the 50EMA.

This would have included the worst single day crash and the subsequent bear markets in 1929, 1987 and 2007, 2008. Also 9-11.

I already posted 1987 illustrating that it didn't warn. I also looked at but didn't post 1929 same thing. How many instances have you looked at? Or are you just assuming it does or taking some pundit's word that 2 EMA's magically work a high number of times?

Price doesn't lie.

 

[sss12]

The simple rule would have got the trader out of US equities before 16 of the 20 largest single-day falls in the Dow since 1900 -
sell when price and the 20EMA close below the 50EMA.

This would have included the worst single day crash and the subsequent bear markets in 1929, 1987 and 2007, 2008. Also 9-11.

Ok, but the obvious question is, and I'm not trolling, how many of crosses of this type in totality just reversed leading to whip saws. Again, serious question, do you have the data, I don't.

 

[tomorton]

Ok, but the obvious question is, and I'm not trolling, how many of crosses of this type in totality just reversed leading to whip saws. Again, serious question, do you have the data, I don't.

I don't know, but as getting out and getting in again should not be not expensive it seems a low-cost way to avoid the majority of the most damaging market episodes like the series I mentioned.

Surely, everyone has some sort of scenario in their minds which would make them get into cash form all of their long equity positions? If not, why not?

 

[tomorton]

I already posted 1987 illustrating that it didn't warn. I also looked at but didn't post 1929 same thing. How many instances have you looked at? Or are you just assuming it does or taking some pundit's word that 2 EMA's magically work a high number of times?

Price doesn't lie.

Sorry, I haven't seen your post on 1987.

The 1987 featured Black Monday, which printed a 22% fall in the Dow, the worst single day's performance by the index since 1900. The 20EMA crossed and closed below the 50 one week earlier, on the 12th. But warning lights had been in evidence since August when price started to make closes below the 50 and the two EMA's started to converge as the 50 flatlined and the 20 fell. Getting out at the close of the 12th would have avoided an aggregated loss of 29%.

Of course the index recovered within 2 years from its 1987 high, but obviously, the majority of investors did not know it would do so at the time. If they had, the index would have recovered in a month. They were probably comparing 1987 with 1929, when the index took 25 years to recover.

 

[tomorton]

tomorton, thanks. I just plugged a 20 and 50 day EMA in the yahoo finance chart for SPY. These will be very rough numbers.

But for the 2008ish bear market, it looks like SPY peaked in October 2007 around 154. It looks like the 20 day EMA went south of the 50 day EMA in October/November 2008. By then the price of SPY had dropped to around 90. It looked like the bottom occurred in February of 2009 around 73. The 20 day EMA did not pull above the 50 day EMA until Feb/March 2011. At the time the SPY had already risen to 132ish.

So on SPY, using these MA crossovers, it looks like very roughly one would lose 41% of their value (90-154)/154 in the bear market, have been saved from 19% further downside (73-90)/90, but then missed out on a 46% rise in SPY (132-90)/90.

Not sure why I did SPY instead of just hitting the S&P500 index iteself, but I would think the results would be very similar.

Does this seem roughly accurate to you? I want to make sure I fully understand you and SunTrader's differing views. Thanks!

I suggest the close + 20EMA below the 50EMA as an exit signal, but please don't take it that I recommend using the reverse as a buy signal. Because I most definitely do not.

I'm looking at the S&P for 2007-9. The S&P printed exit signals for equity holders in March and July 2007 when the 20 joined price below the 50EMA. Whether a trader would have got back in after either of these would be a matter for the individual.

In any case, the S&P peaked on 09/10/07. Cautious traders would have exited when price closed below the 50 on 19/10/07. The 20EMA sell signal came again on 09/11/07 when it too closed below the 50. This would have crystallised a 7% loss from the high. However, the index then went on to make a 53% fall until it bottomed in March 2009. It took over 5 years to regain the 2007 high.

 

[tomorton]

But my observation about Felix stands. All due respect to him and his gut, but he surely cannot seriously expect us to believe he holds until his bowels tell him to sell?

Suggesting he holds equities long without an objective exit plan like he's some sort of guru is just disingenuous.

 

[SunTrader]

Sorry, I haven't seen your post on 1987.

The 1987 featured Black Monday, which printed a 22% fall in the Dow, the worst single day's performance by the index since 1900. The 20EMA crossed and closed below the 50 one week earlier, on the 12th. But warning lights had been in evidence since August when price started to make closes below the 50 and the two EMA's started to converge as the 50 flatlined and the 20 fell. Getting out at the close of the 12th would have avoided an aggregated loss of 29%.

Of course the index recovered within 2 years from its 1987 high, but obviously, the majority of investors did not know it would do so at the time. If they had, the index would have recovered in a month. They were probably comparing 1987 with 1929, when the index took 25 years to recover.

It's the top one of the two I posted yesterday at 6:37 pm showing crossing after, not before the top, a couple of weeks after!!! Nice of it to cross before day with biggest drop but it was already rolling down hill and had lost 9.21% by that point.

If that's not bad enough you would of lost another 19.08% waiting for cross to happen to get back in long. But why if it is good to exit not to use it to enter??IMO there are far better ways to try to time the markets, entering or exiting, than MA's.

 

[tomorton]

It's the top one of the two I posted yesterday at 6:37 pm showing crossing after, not before the top, a couple of weeks after!!! Nice of it to cross before day with biggest drop but it was already rolling down hill and had lost 9.21% by that point.

If that's not bad enough you would of lost another 19.08% waiting for cross to happen to get back in long. But why if it is good to exit not to use it to enter??IMO there are far better ways to try to time the markets, entering or exiting, than MA's.

Sure, I grant that any trader would probably have other risk management measures and not just wait in the headlights for the 20/50 cross. Which is why I got out of my US indices longs on 30/01, though the dead cross wasn't until 19/03. I've had no US indices long positions since 01/03 (found on the log my last Dow long stopped out).

To be honest, any trader who waited for 19/03 to get into cash is unfit to be loose with his own money. An investor - well that's a different case.

The dead cross is a catastrophe stop. Maybe its useful for traders who are very long-term or who don't use stops or who get in/out on fundamentals, but I'm more cautious than that. Its also relevant if a trader is long equities but their charts are individually still bullish - if the parent index goes bearish I would not wait, I would sell out the equities.

I do not advocate using a 20/50 golden cross as a buy signal.

 

[murray t turtle]

The simple rule would have got the trader out of US equities before 16 of the 20 largest single-day falls in the Dow since 1900 -
sell when price and the 20EMA close below the 50EMA.

This would have included the worst single day crash and the subsequent bear markets in 1929, 1987 and 2007, 2008. Also 9-11.

%%
I like EMAs; helpful in a good trend, can get whip sawed, like 'em anyway.If one is looking for a quicker sell signal,[I'm not usually]with more noise, a weekly record red candle[in length+ volume ] ;on for example ,SPY 52 week chart, 50 dma on volume also, can give a hint.I used IBD website for that example.With OCT usually being a bear killer in tech stocks, no need to sell last OCT. [Lagging comment] .QQQ did not really close good below IBD weekly weekly, OCT 2017,moving average, SPY did.

Of course QQQ could have gone bearish in OCT [2017]also LOL. [Lagging comment; but QQQ is a leader]