My Second Escape Route
November 14, 2013
I should have mentioned in yesterday’s post that I do have a planned route to escape a loss should VTI plunge below it’s 200 day moving average with more than 5 days remaining till month end. If less than 5 days remain, I do nothing.
The only reason for this is that I am not yet a full cycle member of the VTI trend trading club. This is an untested solution that seems reasonable to me and in keeping with rule number 1, preserve capital. I have already witnessed how fast this market can turn to wipe out a profit.
With today’s price of VTI at $93.03 and my average cost $87.01, I am ahead 6.5%. If I placed a 5% trailing stop loss, chances are I would be out with a small profit or a very small loss. Of course I am hoping this doesn’t happen until the stop loss would trigger at least a 10% gain.
Then, if VTI’s price re-emerged above its 200 day trend line by month end, I would acknowledge that I out smarted myself and plan how to get back in step. If the price didn’t re-emerge, I’d smile and wait for the next month end buy signal when I would become a full member of VTI’s trend trading club !
As the market edges higher, low interest rates notwithstanding, the chances of a 200 day violation increase. At present, ( S&P 500 ) is ahead 162% since it’s low in March 2009. Before Black Monday 1987 occurred, ( 20% S&P decline in one day ), the market had run up 176% since 1982. ( This data per last week’s Barron’s )
So, here I am with one eye on VTI’s leash and the other scanning the horizon for a rogue event that will cause this market to upchuck profits before it can resume its climb on a settled stomach.
As of today’s VTI close $ 93.03….my 5% leash would trigger a market sell order at $88.38 ( until November 25th ). After that, no action till month end. Then, starting Dec 1, the leash goes back on until December 25.
Richard Maurice Gore
