Game On !

January 16, 2016

 

BUY and HOLD versus TREND TRADING.…….2016 Season

SPY ( ETF basket of S&P 500 stocks ) close December 31, 2015 at $203.87….Sell Signal….GET OUT OF THE WATER….NOW!

On a $1,000,000 investment BUY and HOLD unrealized loss year as of January 15……  7.86% ….$78,667.

On $1,000,000 pulled from market at the next market opening ( January 4 )…actual loss equals 1.65%………$.16,500.

BUT, this isn’t necessarily how the results will look on December 31, 2016.

I follow the dictates of the SPY 200 day moving average,  mechanical model which generated the December 31, 2015 sell signal.

Acting on WHY ( Should )is for theoreticians because the market rarely does WHAT it should do WHEN theoreticians make their WHY   pronouncements.  Trend traders follow the  dictates of their trading model which is primarily  based on the back tested accuracy of  mechanical commands,…. disregarding emotion, and  fundamentals.

In this case, the trading model said NOW even though the pundits have been issuing starker and starker warnings about the age of the bull, China, the price of oil, the future of interest rates and the strength of the dollar.  The trend traders NOW was  when the price of SPY ended the month below  its 200 day moving average .  That was the moment  of reckoning.  The next day is reserved for discussing  all the WHYs.

On January 16, today,  I am sifting through the WHYs and have concluded the most important WHY is the catalyst pronouncement of Janet Yellen that the FED would raise interest rates up  to four times  during 2016.   This pronouncement constitutes a massive injection of uncertainty in the minds of businessmen…sufficient to alter expansion plans  and cause tentative earning forecasts.

Now, I picture Ms Yellen pacing and wringing her hands on how to announce the postponement of all future rate increases until the USA economy is on much firmer ground.  But, its too late ! Ms. Yellen has already been selected, ( by me ),  as Black Swan of 2015 !

 

Richard Maurice Gore

 

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