U.S. stocks in free fall

Discuss all general (i.e. non-personal) investing questions and issues, investing news, and theory.
User avatar
LadyGeek
Site Admin
Posts: 49280
Joined: Sat Dec 20, 2008 5:34 pm
Location: Philadelphia
Contact:

Re: U.S. stocks in freefall

Post by LadyGeek » Thu Oct 25, 2018 5:03 pm

edgeagg wrote:
Thu Oct 25, 2018 4:56 pm
willthrill81 wrote:
Thu Oct 25, 2018 3:37 pm
letsgobobby wrote:
Thu Oct 25, 2018 3:01 pm
How much have stocks typically fallen by the time those indicators tell you to move out of stocks?
The point of trend following is not to get out at the peak because that's impossible to do on a regular basis. The point is to minimize downside risk, particularly those nasty 40-50% declines that happen every now and then, without a compensatory reduction in upside potential.
I think that I cannot put it any better than what WillThrill81 said. I did use the inversion data in my IP to move to a 50/50 AA from my (then) 70/30 in 2007 and I am very definitely a stay the course kind of guy. There have been plenty of threads on BH as well as articles from the Fed on the phenomenon and economics behind this, so I won't recap it here. FWIW I am now at 60/40.

A reasonable question to ask is: When do I get back to 60/40 if I rebalance to 50/50? Obviously inversions are of no use. Don't have a good answer there.
Ignore the noise and do it whenever you'd rebalance normally, like once a year.

The wiki has some background info. See: Rebalancing
Wiki To some, the glass is half full. To others, the glass is half empty. To an engineer, it's twice the size it needs to be.

MotoTrojan
Posts: 2643
Joined: Wed Feb 01, 2017 8:39 pm

Re: U.S. stocks in freefall

Post by MotoTrojan » Thu Oct 25, 2018 9:14 pm

Wild sequence. Futures show another drop. Maybe I’ll get my TLH chance after all.

BogleBoogie
Posts: 575
Joined: Tue May 13, 2014 11:15 am
Location: AK

Re: U.S. stocks in freefall

Post by BogleBoogie » Thu Oct 25, 2018 9:44 pm

cpan00b wrote:
Thu Oct 25, 2018 9:52 am
MotoTrojan wrote:
Thu Oct 25, 2018 9:35 am
Yesterday was the first day in my investing career that my portfolio balance has dropped below my total contributions. Pretty neat!
Same here. I started investing in April of 2017 and have my entire networth in the market. Yesterday was the first day I went into negative territory. Sucks that the market has wiped out all of the gains I ever made (albeit only had about $15k gains) and I could have just started investing today and been in a better position.
20 years later when you look back, April 2017 and today will look virtually the same in terms of the price you bought in at.

finite_difference
Posts: 1089
Joined: Thu Jul 09, 2015 7:00 pm

Re: U.S. stocks in freefall

Post by finite_difference » Fri Oct 26, 2018 7:21 am

DanMahowny wrote:
Thu Oct 25, 2018 8:38 am
Today's "bounce back" will be short lived. Pretty soon, the market will roll over and go deep red.
Why?

There are some known issues like the growth of C.L.O.s, tariffs, Italy, etc.

But unless you are betting on the Halloween specter of a full-blown trade war, which I think is unlikely, since that would be tremendously damaging for everyone, akin to falling in your sword, then I don’t see it.

The US economy is looking good (knock on wood).

If you want to be scared or something, be scared of making changes to your portfolio.
The most precious gift we can offer anyone is our attention. - Thich Nhat Hanh

User avatar
loves2read
Posts: 136
Joined: Wed Aug 27, 2008 11:43 am

Re: U.S. stocks in freefall

Post by loves2read » Fri Oct 26, 2018 7:28 am

"Free fall" is a strong "trigger" word isn't it?

MotoTrojan
Posts: 2643
Joined: Wed Feb 01, 2017 8:39 pm

Re: U.S. stocks in freefall

Post by MotoTrojan » Fri Oct 26, 2018 7:29 am

finite_difference wrote:
Fri Oct 26, 2018 7:21 am
DanMahowny wrote:
Thu Oct 25, 2018 8:38 am
Today's "bounce back" will be short lived. Pretty soon, the market will roll over and go deep red.
Why?

There are some known issues like the growth of C.L.O.s, tariffs, Italy, etc.

But unless you are betting on the Halloween specter of a full-blown trade war, which I think is unlikely, since that would be tremendously damaging for everyone, akin to falling in your sword, then I don’t see it.

The US economy is looking good (knock on wood).

If you want to be scared or something, be scared of making changes to your portfolio.
Because the success of his IPS requires it. All cash until DOW 16K (correct me if wrong Dan). Also curious how your TSLA short is doing lately.

hdas
Posts: 407
Joined: Thu Jun 11, 2015 8:24 am

Re: U.S. stocks in freefall

Post by hdas » Fri Oct 26, 2018 8:02 am

Another Friday morning, and another overnight session down ~1%. A couple of notes:

> Markets don't like to bounce on Friday. There's a persistent momentum pattern at the end of the week.
> Friday - Monday pattern in play
> Still waiting for VIX to truly spike. Seems that >30 is the signal we are looking for
> Media and investors are already over-weighting perceived negative inputs
> Next significant level is around 2630 > Lowest monthly close for 2018

Be careful out there !!
Stay the course and buy some more.

MotoTrojan
Posts: 2643
Joined: Wed Feb 01, 2017 8:39 pm

Re: U.S. stocks in freefall

Post by MotoTrojan » Fri Oct 26, 2018 8:06 am

hdas wrote:
Fri Oct 26, 2018 8:02 am
Another Friday morning, and another overnight session down ~1%. A couple of notes:

> Markets don't like to bounce on Friday. There's a persistent momentum pattern at the end of the week.
> Friday - Monday pattern in play
> Still waiting for VIX to truly spike. Seems that >30 is the signal we are looking for
> Media and investors are already over-weighting perceived negative inputs
> Next significant level is around 2630 > Lowest monthly close for 2018

Be careful out there !!
I’ll get my TLH chance after all?!? I halted yesterday mornings attempt.

User avatar
oldcomputerguy
Posts: 3555
Joined: Sun Nov 22, 2015 6:50 am
Location: In the middle of five acres of woods

Re: U.S. stocks in freefall

Post by oldcomputerguy » Fri Oct 26, 2018 8:36 am

And the beat goes on .... five minutes in, S&P 500 down 1.75%

Hang on for the bumps.
It’s taken me a lot of years, but I’ve come around to this: If you’re dumb, surround yourself with smart people. And if you’re smart, surround yourself with smart people who disagree with you.

User avatar
DanMahowny
Posts: 533
Joined: Sun Aug 06, 2017 8:25 pm

Re: U.S. stocks in freefall

Post by DanMahowny » Fri Oct 26, 2018 8:50 am

MotoTrojan wrote:
Fri Oct 26, 2018 7:29 am
Because the success of his IPS requires it. All cash until DOW 16K (correct me if wrong Dan). Also curious how your TSLA short is doing lately.
I retired when I was 42. And made lots of money over the last 10 years, 100% stocks. There is no reason to remain in equities. I can live very well on dividends and interest. Of course, if the market drops 40%, equities will look interesting. Buy low. Sell high.

TSLA short is doing very well. My largest short position is at $380 per share (remember "funding secured"?). Lots of others showing profits as well. I do have one short position at $292? that is showing a small loss at present. If I covered all short positions today, my profits would be VERY LARGE. But, I'll wait for the upcoming bankruptcy.
Funding secured

BoggledHead2
Posts: 54
Joined: Tue Jun 12, 2018 6:50 pm

Re: U.S. stocks in freefall

Post by BoggledHead2 » Fri Oct 26, 2018 8:58 am

I am in no way attempting to make this political nor sparking a debate, but I have to assume the upcoming midterm elections are contributing quite a bit to these recent spike in volatility ...

I know this is "noise" - but interesting nonetheless.

https://www.marketwatch.com/story/heres ... 2018-09-11

finite_difference
Posts: 1089
Joined: Thu Jul 09, 2015 7:00 pm

Re: U.S. stocks in freefall

Post by finite_difference » Fri Oct 26, 2018 9:04 am

DanMahowny wrote:
Fri Oct 26, 2018 8:50 am
MotoTrojan wrote:
Fri Oct 26, 2018 7:29 am
Because the success of his IPS requires it. All cash until DOW 16K (correct me if wrong Dan). Also curious how your TSLA short is doing lately.
I retired when I was 42. And made lots of money over the last 10 years, 100% stocks. There is no reason to remain in equities. I can live very well on dividends and interest. Of course, if the market drops 40%, equities will look interesting. Buy low. Sell high.

TSLA short is doing very well. My largest short position is at $380 per share (remember "funding secured"?). Lots of others showing profits as well. I do have one short position at $292? that is showing a small loss at present. If I covered all short positions today, my profits would be VERY LARGE. But, I'll wait for the upcoming bankruptcy.
So you retired in 2008, that’s gutsy!

Changing your AA based on need to take risk makes sense, so here you don’t need to take risk and thus don’t need as much stock (although I’d recommend always having at least 30% stocks).

But shorting is both extremely risky and speculative. Why would you ever short if you don’t need to take that risk? Anyway, I wish you the best of luck but I also hope I get a chance to buy one before they go out of business. :beer
The most precious gift we can offer anyone is our attention. - Thich Nhat Hanh

User avatar
willthrill81
Posts: 6535
Joined: Thu Jan 26, 2017 3:17 pm
Location: USA

Re: U.S. stocks in freefall

Post by willthrill81 » Fri Oct 26, 2018 9:11 am

oldcomputerguy wrote:
Fri Oct 26, 2018 8:36 am
And the beat goes on .... five minutes in, S&P 500 down 1.75%

Hang on for the bumps.
More good news for us accumulators! 8-)
“It's a dangerous business, Frodo, going out your door. You step onto the road, and if you don't keep your feet, there's no knowing where you might be swept off to.” J.R.R. Tolkien,The Lord of the Rings

gmaynardkrebs
Posts: 937
Joined: Sun Feb 10, 2008 11:48 am

Re: U.S. stocks in freefall

Post by gmaynardkrebs » Fri Oct 26, 2018 9:16 am

willthrill81 wrote:
Fri Oct 26, 2018 9:11 am
oldcomputerguy wrote:
Fri Oct 26, 2018 8:36 am
And the beat goes on .... five minutes in, S&P 500 down 1.75%

Hang on for the bumps.
More good news for us accumulators! 8-)
I agree, but can't decide whether to increase my equity allocation now. The falling knife....

User avatar
DanMahowny
Posts: 533
Joined: Sun Aug 06, 2017 8:25 pm

Re: U.S. stocks in freefall

Post by DanMahowny » Fri Oct 26, 2018 9:18 am

finite_difference wrote:
Fri Oct 26, 2018 9:04 am
So you retired in 2008, that’s gutsy!
2008 yes. Gutsy no.

I was self-employed, working as a consultant for a steel supplier in a General Motors facility. When GM entered bankruptcy, the facility was closed permanently, and my "job" disappeared.

I had no plans to retire in 2008, but that's how it happened.

When life gives you lemons, order a lobster tail.

You're correct about shorting stocks. But I watch TSLA very closely, and know the auto business very, very well. This one is a slam dunk bankruptcy.
Funding secured

jpdion
Posts: 100
Joined: Thu Feb 13, 2014 12:52 pm

Re: U.S. stocks in freefall

Post by jpdion » Fri Oct 26, 2018 9:21 am

IPS has us in 2 years of withdrawals in a money market account. Holding my nose and whistling, letting the 55/40/5 portfolio continue to work. Value on paper down, but number of shares churning out returns haven't changed (actually returns are being reinvested).

dknightd
Posts: 1038
Joined: Wed Mar 07, 2018 11:57 am

Re: U.S. stocks in freefall

Post by dknightd » Fri Oct 26, 2018 9:24 am

willthrill81 wrote:
Thu Oct 25, 2018 12:51 pm

There are two components to my trend following strategy concerning whether to be in or out of stocks. For me to move out of stocks, the unemployment rate must be above its 12 month moving average and stocks must be trading below their 7 month moving average (measured at the end of the month). The UER is still well below its 12 month moving average, and as of the last trading day of September, stocks were still above their 7 month moving average. So it's steady as she goes for me.
Once you decide to get out, how do you decide to get back in?
Thanks

BW1985
Posts: 1766
Joined: Tue Mar 23, 2010 6:12 pm

Re: U.S. stocks in freefall

Post by BW1985 » Fri Oct 26, 2018 9:48 am

willthrill81 wrote:
Thu Oct 25, 2018 1:22 pm

But I don't rely only on the UER. I also use the 7 month moving average, and don't trade unless both indicators 'tell me' to move out of stocks.
I wish I could 'subscribe' to see all your posts. I find myself always looking for them even while skimming others.
"Squirrels figured out how to save eons ago. They buried acorns. Some, they dug up, for food. Others, they let to sprout, in new oak trees. We could learn from squirrels." -john94549

User avatar
CokeSlurpee711
Posts: 57
Joined: Sun Mar 25, 2012 8:50 pm

Re: U.S. stocks in freefall

Post by CokeSlurpee711 » Fri Oct 26, 2018 10:15 am

:( I am out of my monthly commission free trades. In & out ETF trading returns 11/1/18. Volatility puts the "fun" in funny money. My way of embracing the down moves. Cancelling my $VTI limit buy $130, how's that for cheap? On the surface this seems to be lingering longer than what we saw in February & March, but stuff like SOXX & XLF looks way worse off...

MotoTrojan
Posts: 2643
Joined: Wed Feb 01, 2017 8:39 pm

Re: U.S. stocks in freefall

Post by MotoTrojan » Fri Oct 26, 2018 10:34 am

What just happened? Impressively quick rebound there.

Good thing I got all my TLH'ing in before hand!

WhiteMaxima
Posts: 1499
Joined: Thu May 19, 2016 5:04 pm

Re: U.S. stocks in freefall

Post by WhiteMaxima » Fri Oct 26, 2018 10:36 am

The beginning of End of this bull run. QE, negative real interest all gone.

User avatar
DartThrower
Posts: 851
Joined: Wed Mar 11, 2009 4:10 pm
Location: Philadelphia

Re: U.S. stocks in freefall

Post by DartThrower » Fri Oct 26, 2018 10:48 am

hdas wrote:
Fri Oct 26, 2018 8:02 am
Another Friday morning, and another overnight session down ~1%. A couple of notes:

> Markets don't like to bounce on Friday. There's a persistent momentum pattern at the end of the week.
> Friday - Monday pattern in play
> Still waiting for VIX to truly spike. Seems that >30 is the signal we are looking for
> Media and investors are already over-weighting perceived negative inputs
> Next significant level is around 2630 > Lowest monthly close for 2018

Be careful out there !!
Bogleheads have appropriate levels of caution built in to their strategy via their IPS. Therefore the admonition to "Be careful out there" is tantamount to "Don't do something, just stand there!"
A Boglehead can stay the course longer than the market can stay irrational.

hdas
Posts: 407
Joined: Thu Jun 11, 2015 8:24 am

Re: U.S. stocks in freefall

Post by hdas » Fri Oct 26, 2018 10:53 am

DartThrower wrote:
Fri Oct 26, 2018 10:48 am
hdas wrote:
Fri Oct 26, 2018 8:02 am
Another Friday morning, and another overnight session down ~1%. A couple of notes:

> Markets don't like to bounce on Friday. There's a persistent momentum pattern at the end of the week.
> Friday - Monday pattern in play
> Still waiting for VIX to truly spike. Seems that >30 is the signal we are looking for
> Media and investors are already over-weighting perceived negative inputs
> Next significant level is around 2630 > Lowest monthly close for 2018

Be careful out there !!
Bogleheads have appropriate levels of caution built in to their strategy via their IPS. Therefore the admonition to "Be careful out there" is tantamount to "Don't do something, just stand there!"
Well said Mr. DartThrower. Nobody asked but:

> Markets did bounce around the lowest monthly close of the year and already bounced 40pts or almost 2% :greedy
> Vix did not get to 30, but close 27.47
> Even though the patterns of Friday are not favorable. I see a decent chance that the pain will stop today. With an SP futures low of 2627.25
Stay the course and buy some more.

User avatar
nedsaid
Posts: 10676
Joined: Fri Nov 23, 2012 12:33 pm

Re: U.S. stocks in freefall

Post by nedsaid » Fri Oct 26, 2018 11:07 am

This back and forth in the stock market will probably go on for a while. See-saw, up and down. Individual investors are not causing this. Probably profit taking, probably computers going crazy, probably hedge funds unwinding heaven knows what. The next time I hear about how the retail investors are dumb and the institutions are smart, I think I am going to scream. This is all caused by the institutional investors.
A fool and his money are good for business.

hdas
Posts: 407
Joined: Thu Jun 11, 2015 8:24 am

Re: U.S. stocks in freefall

Post by hdas » Fri Oct 26, 2018 11:21 am

nedsaid wrote:
Fri Oct 26, 2018 11:07 am
This back and forth in the stock market will probably go on for a while. See-saw, up and down. Individual investors are not causing this. Probably profit taking, probably computers going crazy, probably hedge funds unwinding heaven knows what. The next time I hear about how the retail investors are dumb and the institutions are smart, I think I am going to scream. This is all caused by the institutional investors.
Mr. Nedsaid,
Don't despair, the market is just getting above yesterday RTH range low, and a bountiful afternoon awaits. H
Stay the course and buy some more.

User avatar
loves2read
Posts: 136
Joined: Wed Aug 27, 2008 11:43 am

Re: U.S. stocks in freefall

Post by loves2read » Fri Oct 26, 2018 11:42 am

MotoTrojan wrote:
Fri Oct 26, 2018 10:34 am
What just happened? Impressively quick rebound there.

Good thing I got all my TLH'ing in before hand!
Maybe reaction to the GDP or algorithim

Marketwatch said S&P 500 tipped the 10% mark
Maybe that scared some people into trying to stop it going further down...
Maybe it was having the bombing suspect in custody...
(And that is just joke)...

User avatar
willthrill81
Posts: 6535
Joined: Thu Jan 26, 2017 3:17 pm
Location: USA

Re: U.S. stocks in freefall

Post by willthrill81 » Fri Oct 26, 2018 11:48 am

dknightd wrote:
Fri Oct 26, 2018 9:24 am
willthrill81 wrote:
Thu Oct 25, 2018 12:51 pm

There are two components to my trend following strategy concerning whether to be in or out of stocks. For me to move out of stocks, the unemployment rate must be above its 12 month moving average and stocks must be trading below their 7 month moving average (measured at the end of the month). The UER is still well below its 12 month moving average, and as of the last trading day of September, stocks were still above their 7 month moving average. So it's steady as she goes for me.
Once you decide to get out, how do you decide to get back in?
Thanks
Per my IPS, I get back into stocks when either the UER falls below its 12 month moving average OR stocks rise above their 7 month moving average. Hence, mine strategy is definitely 'long-biased'.
“It's a dangerous business, Frodo, going out your door. You step onto the road, and if you don't keep your feet, there's no knowing where you might be swept off to.” J.R.R. Tolkien,The Lord of the Rings

User avatar
willthrill81
Posts: 6535
Joined: Thu Jan 26, 2017 3:17 pm
Location: USA

Re: U.S. stocks in freefall

Post by willthrill81 » Fri Oct 26, 2018 11:48 am

BW1985 wrote:
Fri Oct 26, 2018 9:48 am
willthrill81 wrote:
Thu Oct 25, 2018 1:22 pm

But I don't rely only on the UER. I also use the 7 month moving average, and don't trade unless both indicators 'tell me' to move out of stocks.
I wish I could 'subscribe' to see all your posts. I find myself always looking for them even while skimming others.
I'm flattered. :beer

You can always visit a member's profile and search their posts.
“It's a dangerous business, Frodo, going out your door. You step onto the road, and if you don't keep your feet, there's no knowing where you might be swept off to.” J.R.R. Tolkien,The Lord of the Rings

User avatar
nedsaid
Posts: 10676
Joined: Fri Nov 23, 2012 12:33 pm

Re: U.S. stocks in freefall

Post by nedsaid » Fri Oct 26, 2018 12:03 pm

hdas wrote:
Fri Oct 26, 2018 11:21 am
nedsaid wrote:
Fri Oct 26, 2018 11:07 am
This back and forth in the stock market will probably go on for a while. See-saw, up and down. Individual investors are not causing this. Probably profit taking, probably computers going crazy, probably hedge funds unwinding heaven knows what. The next time I hear about how the retail investors are dumb and the institutions are smart, I think I am going to scream. This is all caused by the institutional investors.
Mr. Nedsaid,
Don't despair, the market is just getting above yesterday RTH range low, and a bountiful afternoon awaits. H
Well, it does create opportunities for the small investor. Called my broker yesterday and he was pretty excited. Lots of stuff looking pretty good to buy here. Individuals can take advantage of the follies of the institutional investors.
A fool and his money are good for business.

User avatar
willthrill81
Posts: 6535
Joined: Thu Jan 26, 2017 3:17 pm
Location: USA

Re: U.S. stocks in freefall

Post by willthrill81 » Fri Oct 26, 2018 12:53 pm

nedsaid wrote:
Fri Oct 26, 2018 12:03 pm
hdas wrote:
Fri Oct 26, 2018 11:21 am
nedsaid wrote:
Fri Oct 26, 2018 11:07 am
This back and forth in the stock market will probably go on for a while. See-saw, up and down. Individual investors are not causing this. Probably profit taking, probably computers going crazy, probably hedge funds unwinding heaven knows what. The next time I hear about how the retail investors are dumb and the institutions are smart, I think I am going to scream. This is all caused by the institutional investors.
Mr. Nedsaid,
Don't despair, the market is just getting above yesterday RTH range low, and a bountiful afternoon awaits. H
Well, it does create opportunities for the small investor. Called my broker yesterday and he was pretty excited. Lots of stuff looking pretty good to buy here. Individuals can take advantage of the follies of the institutional investors.
I agree that this appears to be a good buying opportunity. But don't quote me on that. :wink:
“It's a dangerous business, Frodo, going out your door. You step onto the road, and if you don't keep your feet, there's no knowing where you might be swept off to.” J.R.R. Tolkien,The Lord of the Rings

letsgobobby
Posts: 11687
Joined: Fri Sep 18, 2009 1:10 am

Re: U.S. stocks in freefall

Post by letsgobobby » Fri Oct 26, 2018 2:31 pm

Continued my value averaging just a few minutes ago. I'm glad I can buy at 2017 prices and don't feel bad that I didn't lump sum. Markets are still expensive so not diving in and will continue value averaging as planned.

Zigma
Posts: 21
Joined: Mon Feb 19, 2018 6:28 pm

Re: U.S. stocks in freefall

Post by Zigma » Fri Oct 26, 2018 3:38 pm

vwgrrc wrote:
Wed Oct 24, 2018 9:11 pm
We have been on cash-heavy side for little while, is this a good time to buy in or should still wait a little bit :confused
I am waiting a bit.
Keep moving on higher ground.

User avatar
Ricchan
Posts: 60
Joined: Wed Jan 27, 2016 12:26 am

Re: U.S. stocks in freefall

Post by Ricchan » Fri Oct 26, 2018 3:42 pm

nedsaid wrote:
Fri Oct 26, 2018 11:07 am
The next time I hear about how the retail investors are dumb and the institutions are smart, I think I am going to scream.
Immediately, this image popped into my head.

User avatar
Doom&Gloom
Posts: 2345
Joined: Thu May 08, 2014 3:36 pm

Re: U.S. stocks in freefall

Post by Doom&Gloom » Fri Oct 26, 2018 5:04 pm

No sweat. It will all be over by next Friday.

I'm an irrepressible optimist :twisted:

rgs92
Posts: 2280
Joined: Mon Mar 02, 2009 8:00 pm

Re: U.S. stocks in freefall

Post by rgs92 » Fri Oct 26, 2018 6:48 pm

In my DGRO (Ishares Dividend Growth ETF) position in Fidelity, I noticed that from time I bought it on April 11th 2018, it is 0.7% higher at the close today, Oct. 26th 2018.
I would not call this a freefall. (Share price April 11: $34.03; Oct 26: $34.27.)
And I did not even re-invest the dividends.

User avatar
nedsaid
Posts: 10676
Joined: Fri Nov 23, 2012 12:33 pm

Re: U.S. stocks in freefall

Post by nedsaid » Fri Oct 26, 2018 7:15 pm

Ricchan wrote:
Fri Oct 26, 2018 3:42 pm
nedsaid wrote:
Fri Oct 26, 2018 11:07 am
The next time I hear about how the retail investors are dumb and the institutions are smart, I think I am going to scream.
Immediately, this image popped into my head.
Maybe that should be my new avatar.
A fool and his money are good for business.

finite_difference
Posts: 1089
Joined: Thu Jul 09, 2015 7:00 pm

Re: U.S. stocks in freefall

Post by finite_difference » Fri Oct 26, 2018 7:48 pm

willthrill81 wrote:
Fri Oct 26, 2018 11:48 am
dknightd wrote:
Fri Oct 26, 2018 9:24 am
willthrill81 wrote:
Thu Oct 25, 2018 12:51 pm

There are two components to my trend following strategy concerning whether to be in or out of stocks. For me to move out of stocks, the unemployment rate must be above its 12 month moving average and stocks must be trading below their 7 month moving average (measured at the end of the month). The UER is still well below its 12 month moving average, and as of the last trading day of September, stocks were still above their 7 month moving average. So it's steady as she goes for me.
Once you decide to get out, how do you decide to get back in?
Thanks
Per my IPS, I get back into stocks when either the UER falls below its 12 month moving average OR stocks rise above their 7 month moving average. Hence, mine strategy is definitely 'long-biased'.
Interesting strategy. How has it compared to simple buy and hold?
The most precious gift we can offer anyone is our attention. - Thich Nhat Hanh

User avatar
willthrill81
Posts: 6535
Joined: Thu Jan 26, 2017 3:17 pm
Location: USA

Re: U.S. stocks in freefall

Post by willthrill81 » Fri Oct 26, 2018 7:56 pm

finite_difference wrote:
Fri Oct 26, 2018 7:48 pm
willthrill81 wrote:
Fri Oct 26, 2018 11:48 am
dknightd wrote:
Fri Oct 26, 2018 9:24 am
willthrill81 wrote:
Thu Oct 25, 2018 12:51 pm

There are two components to my trend following strategy concerning whether to be in or out of stocks. For me to move out of stocks, the unemployment rate must be above its 12 month moving average and stocks must be trading below their 7 month moving average (measured at the end of the month). The UER is still well below its 12 month moving average, and as of the last trading day of September, stocks were still above their 7 month moving average. So it's steady as she goes for me.
Once you decide to get out, how do you decide to get back in?
Thanks
Per my IPS, I get back into stocks when either the UER falls below its 12 month moving average OR stocks rise above their 7 month moving average. Hence, mine strategy is definitely 'long-biased'.
Interesting strategy. How has it compared to simple buy and hold?
Historically, it's outperformed BH by over 1.5% annually and substantially reduced drawdowns as well. However, there are infinite strategies that can be created after the fact that beat BH or any other strategy. How it performs going forward is the real measure, and we'll just have to wait and see. Frankly, I'm not employing this strategy as an attempt to earn higher absolute returns than BH, merely to reduce downside risk without sacrificing returns. If I achieve that, I'll be very satisfied.
“It's a dangerous business, Frodo, going out your door. You step onto the road, and if you don't keep your feet, there's no knowing where you might be swept off to.” J.R.R. Tolkien,The Lord of the Rings

User avatar
Rowan Oak
Posts: 302
Joined: Mon May 09, 2016 2:11 pm
Location: Yoknapatawpha

Re: U.S. stocks in freefall

Post by Rowan Oak » Fri Oct 26, 2018 8:48 pm

willthrill81 wrote:
Fri Oct 26, 2018 11:48 am
dknightd wrote:
Fri Oct 26, 2018 9:24 am
willthrill81 wrote:
Thu Oct 25, 2018 12:51 pm

There are two components to my trend following strategy concerning whether to be in or out of stocks. For me to move out of stocks, the unemployment rate must be above its 12 month moving average and stocks must be trading below their 7 month moving average (measured at the end of the month). The UER is still well below its 12 month moving average, and as of the last trading day of September, stocks were still above their 7 month moving average. So it's steady as she goes for me.
Once you decide to get out, how do you decide to get back in?
Thanks
Per my IPS, I get back into stocks when either the UER falls below its 12 month moving average OR stocks rise above their 7 month moving average. Hence, mine strategy is definitely 'long-biased'.
What is "UER"? Thanks!
“If you can get good at destroying your own wrong ideas, that is a great gift.” – Charlie Munger

MotoTrojan
Posts: 2643
Joined: Wed Feb 01, 2017 8:39 pm

Re: U.S. stocks in freefall

Post by MotoTrojan » Fri Oct 26, 2018 8:56 pm

Rowan Oak wrote:
Fri Oct 26, 2018 8:48 pm
willthrill81 wrote:
Fri Oct 26, 2018 11:48 am
dknightd wrote:
Fri Oct 26, 2018 9:24 am
willthrill81 wrote:
Thu Oct 25, 2018 12:51 pm

There are two components to my trend following strategy concerning whether to be in or out of stocks. For me to move out of stocks, the unemployment rate must be above its 12 month moving average and stocks must be trading below their 7 month moving average (measured at the end of the month). The UER is still well below its 12 month moving average, and as of the last trading day of September, stocks were still above their 7 month moving average. So it's steady as she goes for me.
Once you decide to get out, how do you decide to get back in?
Thanks
Per my IPS, I get back into stocks when either the UER falls below its 12 month moving average OR stocks rise above their 7 month moving average. Hence, mine strategy is definitely 'long-biased'.
What is "UER"? Thanks!
Unemployment rate: https://imarketsignals.com/unemployment ... ecessions/

BW1985
Posts: 1766
Joined: Tue Mar 23, 2010 6:12 pm

Re: U.S. stocks in freefall

Post by BW1985 » Sat Oct 27, 2018 9:09 am

willthrill81 wrote:
Fri Oct 26, 2018 7:56 pm
finite_difference wrote:
Fri Oct 26, 2018 7:48 pm
willthrill81 wrote:
Fri Oct 26, 2018 11:48 am
dknightd wrote:
Fri Oct 26, 2018 9:24 am
willthrill81 wrote:
Thu Oct 25, 2018 12:51 pm

There are two components to my trend following strategy concerning whether to be in or out of stocks. For me to move out of stocks, the unemployment rate must be above its 12 month moving average and stocks must be trading below their 7 month moving average (measured at the end of the month). The UER is still well below its 12 month moving average, and as of the last trading day of September, stocks were still above their 7 month moving average. So it's steady as she goes for me.
Once you decide to get out, how do you decide to get back in?
Thanks
Per my IPS, I get back into stocks when either the UER falls below its 12 month moving average OR stocks rise above their 7 month moving average. Hence, mine strategy is definitely 'long-biased'.
Interesting strategy. How has it compared to simple buy and hold?
Historically, it's outperformed BH by over 1.5% annually and substantially reduced drawdowns as well. However, there are infinite strategies that can be created after the fact that beat BH or any other strategy. How it performs going forward is the real measure, and we'll just have to wait and see. Frankly, I'm not employing this strategy as an attempt to earn higher absolute returns than BH, merely to reduce downside risk without sacrificing returns. If I achieve that, I'll be very satisfied.
How are you tracking the moving averages? Can you explain this a little more. TIA
"Squirrels figured out how to save eons ago. They buried acorns. Some, they dug up, for food. Others, they let to sprout, in new oak trees. We could learn from squirrels." -john94549

Grogs
Posts: 441
Joined: Tue Mar 24, 2015 4:55 pm

Re: U.S. stocks in freefall

Post by Grogs » Sat Oct 27, 2018 9:11 am

I took advantage of the down markets and I did my first ever TLH yesterday. I traded all of my VTSAX for the year except one lot from March into VIMAX (mid-cap fund) for a loss of ~ $1550. Right after I put in my order, the market started shooting up and it looked like some of my lots might sell for a small gain, but in the end everything ended up with a loss of 1% or more. The only bad thing is that I couldn't make my monthly contribution because it didn't meet the $10k limit for opening VIMAX. I'll have to wait until Monday after my TLH purchase settles to make the contribution.

The other 'good' thing to come from the last couple of weeks is that my stock:bond ratio is almost rebalanced. I was at over 79% (target 75%) and now I'm back down to 76%. Just a couple more really bad days and I may not need to buy or sell anything come January.

User avatar
willthrill81
Posts: 6535
Joined: Thu Jan 26, 2017 3:17 pm
Location: USA

Re: U.S. stocks in freefall

Post by willthrill81 » Sat Oct 27, 2018 9:52 am

BW1985 wrote:
Sat Oct 27, 2018 9:09 am
willthrill81 wrote:
Fri Oct 26, 2018 7:56 pm
finite_difference wrote:
Fri Oct 26, 2018 7:48 pm
willthrill81 wrote:
Fri Oct 26, 2018 11:48 am
dknightd wrote:
Fri Oct 26, 2018 9:24 am


Once you decide to get out, how do you decide to get back in?
Thanks
Per my IPS, I get back into stocks when either the UER falls below its 12 month moving average OR stocks rise above their 7 month moving average. Hence, mine strategy is definitely 'long-biased'.
Interesting strategy. How has it compared to simple buy and hold?
Historically, it's outperformed BH by over 1.5% annually and substantially reduced drawdowns as well. However, there are infinite strategies that can be created after the fact that beat BH or any other strategy. How it performs going forward is the real measure, and we'll just have to wait and see. Frankly, I'm not employing this strategy as an attempt to earn higher absolute returns than BH, merely to reduce downside risk without sacrificing returns. If I achieve that, I'll be very satisfied.
How are you tracking the moving averages? Can you explain this a little more. TIA
Portfolio Visualizer allows you to do this easily. It uses monthly data rather than daily, which I prefer anyway because it hasn't made much difference historically but results in no more than one trade per month. I have my models saved, so I just pull them up and determine what to do at the end of each month. It takes about two minutes.
“It's a dangerous business, Frodo, going out your door. You step onto the road, and if you don't keep your feet, there's no knowing where you might be swept off to.” J.R.R. Tolkien,The Lord of the Rings

hdas
Posts: 407
Joined: Thu Jun 11, 2015 8:24 am

Re: U.S. stocks in freefall

Post by hdas » Sat Oct 27, 2018 3:23 pm

willthrill81 wrote:
Thu Oct 25, 2018 1:22 pm
Almost every time that the UER has crossed its 12 month moving average, a recession has followed. The longest lead time has been 8 months. See this site for a chart and explanation.

But I don't rely only on the UER. I also use the 7 month moving average, and don't trade unless both indicators 'tell me' to move out of stocks.
There's a cadre of fellow travelers attempting same feat, see this: http://www.mathinvestdecisions.com/Easy ... Timing.pdf
When the economy takes a turn for the worse, employment declines, right? Well, not all
employment. Certainly, full-time employment declines during recessions, but concurrently parttime
employment rises strongly during economic downturns. An adept fiduciary can contrast
the two types of employment, as well as a variety of other data, and get good broad brush
investment timing decisions before an official determination of a Recession.
Using the described method enables an investor to seriously reduce drawdowns and
greatly improve the reward-to-risk ratio. This works well as a stand-alone improvement to Buy
& Hold or as an initial screen prior to other fundamental or technical analysis.
Decisions can be made monthly, weekly or even daily for those willing to do a bit more
work.
Stay the course and buy some more.

User avatar
willthrill81
Posts: 6535
Joined: Thu Jan 26, 2017 3:17 pm
Location: USA

Re: U.S. stocks in freefall

Post by willthrill81 » Sat Oct 27, 2018 3:33 pm

hdas wrote:
Sat Oct 27, 2018 3:23 pm
willthrill81 wrote:
Thu Oct 25, 2018 1:22 pm
Almost every time that the UER has crossed its 12 month moving average, a recession has followed. The longest lead time has been 8 months. See this site for a chart and explanation.

But I don't rely only on the UER. I also use the 7 month moving average, and don't trade unless both indicators 'tell me' to move out of stocks.
There's a cadre of fellow travelers attempting same feat, see this: http://www.mathinvestdecisions.com/Easy ... Timing.pdf
When the economy takes a turn for the worse, employment declines, right? Well, not all
employment. Certainly, full-time employment declines during recessions, but concurrently parttime
employment rises strongly during economic downturns. An adept fiduciary can contrast
the two types of employment, as well as a variety of other data, and get good broad brush
investment timing decisions before an official determination of a Recession.
Using the described method enables an investor to seriously reduce drawdowns and
greatly improve the reward-to-risk ratio. This works well as a stand-alone improvement to Buy
& Hold or as an initial screen prior to other fundamental or technical analysis.
Decisions can be made monthly, weekly or even daily for those willing to do a bit more
work.
Interesting. It's definitely a similar idea.
“It's a dangerous business, Frodo, going out your door. You step onto the road, and if you don't keep your feet, there's no knowing where you might be swept off to.” J.R.R. Tolkien,The Lord of the Rings

PFInterest
Posts: 2684
Joined: Sun Jan 08, 2017 12:25 pm

Re: U.S. stocks in freefall

Post by PFInterest » Sat Oct 27, 2018 5:20 pm

this thread was started in 2011.....and is 153 pages of literally the same rhetoric.

User avatar
JoMoney
Posts: 6296
Joined: Tue Jul 23, 2013 5:31 am

Re: U.S. stocks in freefall

Post by JoMoney » Sat Oct 27, 2018 5:25 pm

PFInterest wrote:
Sat Oct 27, 2018 5:20 pm
this thread was started in 2011.....and is 153 pages of literally the same rhetoric.
It's a great place to corral it, somewhat minimize how many new threads are started on what is essentially the same topic... I mean, you can still find plenty of new threads on it, but imagine how many there would be without this thread to grouse in.
"To achieve satisfactory investment results is easier than most people realize; to achieve superior results is harder than it looks." - Benjamin Graham

visualguy
Posts: 872
Joined: Thu Jan 30, 2014 1:32 am

Re: U.S. stocks in freefall

Post by visualguy » Sat Oct 27, 2018 5:33 pm

willthrill81 wrote:
Fri Oct 26, 2018 7:56 pm
Historically, it's outperformed BH by over 1.5% annually and substantially reduced drawdowns as well. However, there are infinite strategies that can be created after the fact that beat BH or any other strategy. How it performs going forward is the real measure, and we'll just have to wait and see. Frankly, I'm not employing this strategy as an attempt to earn higher absolute returns than BH, merely to reduce downside risk without sacrificing returns. If I achieve that, I'll be very satisfied.
I can see doing this in tax-deferred accounts, but wouldn't the tax drag be a big problem with this strategy in taxable accounts? Has it out-performed even in taxable?

User avatar
willthrill81
Posts: 6535
Joined: Thu Jan 26, 2017 3:17 pm
Location: USA

Re: U.S. stocks in freefall

Post by willthrill81 » Sat Oct 27, 2018 6:38 pm

visualguy wrote:
Sat Oct 27, 2018 5:33 pm
willthrill81 wrote:
Fri Oct 26, 2018 7:56 pm
Historically, it's outperformed BH by over 1.5% annually and substantially reduced drawdowns as well. However, there are infinite strategies that can be created after the fact that beat BH or any other strategy. How it performs going forward is the real measure, and we'll just have to wait and see. Frankly, I'm not employing this strategy as an attempt to earn higher absolute returns than BH, merely to reduce downside risk without sacrificing returns. If I achieve that, I'll be very satisfied.
I can see doing this in tax-deferred accounts, but wouldn't the tax drag be a big problem with this strategy in taxable accounts? Has it out-performed even in taxable?
You wouldn't want to actually sell equities when you wanted to zero your position in equities in a taxable account (unless you were TLHing of course). You would zero your stock position with futures contracts. This avoids nearly all of the tax implications.
“It's a dangerous business, Frodo, going out your door. You step onto the road, and if you don't keep your feet, there's no knowing where you might be swept off to.” J.R.R. Tolkien,The Lord of the Rings

MotoTrojan
Posts: 2643
Joined: Wed Feb 01, 2017 8:39 pm

Re: U.S. stocks in freefall

Post by MotoTrojan » Sat Oct 27, 2018 10:01 pm

Grogs wrote:
Sat Oct 27, 2018 9:11 am
I took advantage of the down markets and I did my first ever TLH yesterday. I traded all of my VTSAX for the year except one lot from March into VIMAX (mid-cap fund) for a loss of ~ $1550. Right after I put in my order, the market started shooting up and it looked like some of my lots might sell for a small gain, but in the end everything ended up with a loss of 1% or more. The only bad thing is that I couldn't make my monthly contribution because it didn't meet the $10k limit for opening VIMAX. I'll have to wait until Monday after my TLH purchase settles to make the contribution.

The other 'good' thing to come from the last couple of weeks is that my stock:bond ratio is almost rebalanced. I was at over 79% (target 75%) and now I'm back down to 76%. Just a couple more really bad days and I may not need to buy or sell anything come January.
Curious why you chose the mid-cap fund over large-cap or S&P500; both of which track almost identically with VTSAX?

Assuming your AA calls for total market, I would consider harvesting into one of those funds if the market goes down more in the next 30 days. They are similar enough that many (myself included) consider them identical and would hold them forever. You should always be prepared to hold your TLH partner forever, otherwise you may be forced to accept capital gains tax to transact back later on.

Post Reply