” SPY ” buy signal remains in force

April 29, 2016

SPY closed April at $206.43 per share which is above its 200 day price  moving  average of $ 199.76.

That means the SPY model Buy Signal remains in the GREEN…I’m to.be long the ETF…. SPY. ( a basket of 500 shares which trade as one share ).

If you had followed the dictates of the month end  SPY model, you would have sold your SPY position on January 4, the first trading day of 2016 in response to the Sell signal generated December 31 as the price of SPY violated its 200 day moving average on a closing basis that day.

We are tracking to see how much of your theoretical investment of $1,000,000 you would have now by ignoring or following the dictates of the model.  The model has been wrong only once since the year 2000…..and right 5 times…..and far more profitable than Buy and Hold.

Following the model, you would have sold all 4,905 SPY shares and received $983,500 leaving you with a realized loss of $16,500.

You would have stayed on the sidelines until March 31, 2016 when a Buy signal was generated ( still in effect ).  You would have used your $983,500 to purchase 4,786 shares of SPY… the number of shares you have today.

As of the close today, your 4,786 shares of SPY would be worth $987,973.  Versus the $1,000,000 you started with on January 1,2016.

On the other hand

If you had ignored the December 31, sell signal because you preferred to Buy and Hold,  your 4,905 shares held since January 1, would now be worth $1,009, 664. resulting in an unrealized profit of $9,664 , ….instead of a realized  loss of  $12,027,  a net difference of  $21,691.

This doesn’t mean this is how the year will end , with Buy and Hold , on top as a strategy, because the next sell signal, if ignored might trigger a disaster where better than 50% of your investment could  vanish ( at least temporarily ). I believe my stomach isn’t strong enough to deal with being under water to that degree.

I follow the model specifically because it results in fewer trades, smaller losses  and has been right 5 times and wrong only once over a period of 16 years.

When you factor in fundamentals such as historically low interest rates and consider Professor Martin Zwieg’ s theory that stocks tend to go up when interest rates are low and go down when rates begin to trend higher, then, I’ve reached my comfort level to invest. Zweig is famous for calling the 511 point one day crash in 1987 which he predicted on the previous Friday’s Wall Street Week and for owning the top floor of the Hotel Pierre, Fifth Avenue….which was acquired by following his own advice.

On the other hand ” Play till May, then Go Away” is only a day or two away and I am already respecting it and moving to the sidelines on some volatile stock positions I have been holding

 

Richard Maurice Gore.

Leave a Reply