Your Choice !

Early AM….August 24, 2015

Awoke to see Dow futures down over 600 points with SPY and Nasdaq down big time as well.

What to do ?!

As many of you know, I am committed to a timing model on SPY.

SPY’s price relative to it’s 200 day moving average ( at month end ) determines how I react to sell offs.

SPY penetrated it’s 200 day moving average support on August 20.

Why wouldn’t I sell SPY ( and stocks acquired in the positive SPY environment ) the day of the crossover instead at month end ?

Here is  back tested data ( Courtesy of ETF Replay )  going back to January 3, 2000.

Sell day of crossover…..60 trades…..14 winners……46 losers.

Sell at Month End……   6 trades………5 winners…….1 loser

No one can deny this sell off has been ferocious.  BUT……..the market has been churning for 7 months and it seemed as though which ever way it broke,up or down,  would be a doozy.  I said in an Archived Post that Apple was my canary in the mine.  But, it still cost me $5,000 to bury my canary !

I have been saying in Posts that China looked like a Black Swan masquerading as a Dragon.  And, yes, Dragons are dangerous.  But, not being in the SPY model and not feeling my every equity sale should be tied to it, I’ve lightened up considerably,as I informed you.and have  more than 70 % of my funds in cash for deployment.

The big question for me  is….how much blood needs to be in  the street before I begin to buy ?  Reminds me of the time in high school that I caught a fly ball but didn’t know which base to go to with my throw.  Only this time I’m not day dreaming !

The answer for me is…. to recognize how difficult it is to pick market bottoms…..if the present situation persists, and SPY is under water on August 31,  I’ll prune almost all my remaining positions   back to ground level and then wait for SPY to cross its 200 day moving average to the upside before I re-deploy.

Richard Maurice Gore

 

 

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