December 31 SELL Signal

January 1, 2016

Thought you’d make some money when SPY was ahead 10% by mid May ? ….. Play till May ? 

Those hopes were finally dashed at 4PM yesterday as SPY slid beneath both break even and its 200 day moving average…

SPY opened 2015 at $206.33 per share  and closed 2015 yesterday at $203.87….a loss of 1.2%  (excluding the 2 % paid out in quarterly dividends during 2015 )  Net,Net a gain of 0.8% ( $8,000 )  on an investment of $1 million !  And that ignores 2015 inflation which would take a further bite of about $6,300.  Net, Net, Net for the year …$1,700 profit  on $1 million invested  !!!

This should make you feel better if you don’t have anywhere near $1 million to invest.  

On top of this, SPY generated a SELL by ending December below its 200 day moving average of $204.04.

The SPY 200 day month end / 200 day moving average model is signaling to….

GET OUT OF THE WATER…….NOW!!….

…Except for those positions so near and dear to your heart that you are willing to hold them through thick and thin ! 

Counter balancing the dictates of the 200  day month end  SPY model is the advice of Warren Buffett ( Berkshire Hathaway ) and John Bogle ( Vanguard ) who say you will beat the results of  about 90% of investment pros if you just stick with a passive index ETF such as SPY…Buy and Hold.  And, don’t forget Cramer who implores you to invest in index funds such as SPY if you don’t have the time or inclination to do the work required for investment in sector funds and/ or  individual equities.

I like the SPY 200 day model because it tells me when to be in or out of the market….not necessarily invested in SPY, because I am doing the work required to invest in sector ETFs,  individual equities and options on Index ETFs.  

At least for this year, I ( as an amatuer ) am in the exulted company of the 10% or  so of those investment pros who beat SPY, because I ended the year up 7.6% on funds actually invested, excluding dividends,  and up 4.23% on total funds available for investment, again, excluding dividends .  I’ve asked myself whether I could duplicate this result for others and the answer is no  way.

I barely have the time to invest for the two relatives who have authorized me to trade for them and these cases I only trade the SPY  model and one or two sector ETFs.  I could tell others what I am doing in general terms and show them how I use options, but I don’t have time to hold hands on an ongoing basis, act as an advisor, trade or take deposits.  I don’t have a licence to give advice and I believe I am required to tell you to disregard anything I say which could be construed as advice.

But, I can tell you this.  If you strip everything away and I didn’t have the time to research and act on sectors, individual equities and options for myself, I would most certainly focus on the SPY 200 day model to the exclusion of everything else.  I’d instruct others how  to use the 200 day model if I were unable to even think about investments or…..if I were to set up a trust for my estate or for a beneficiary I would instruct the administrator  to buy and hold  75% SPY ( big caps ) , and 25% IWM ( Russell 2000 smallest of small caps )….following Bogle and Buffet and Cramer exclusively  into passive indexes.

Richard Maurice Gore

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