S&P500 resistance

[sevensisters]

Gents,

thanks for your feedback.

Both technical and fundamental approaches are valid. Georg’s SPY-IEF market timer seems to have the risk profile in line with current circumstances.

I take a similar standpoint as Andreas: I don’t try to time the market. Therefore I put great emphasis as a designer to develop models that are fit across a variety of market conditions.

Happy trading!

[plan_trader]

Great post Andreas. The average retail investor seriously underperforms for the exact reason you outline.

[InmanRoshi]

I am not saying I do not time the market, get out when the 200 Ma is broken and Performance lots of my Systems improve as well (though not all,
some agressive 5 Stock modells do actually not care based on Performance (though mdd gets better with Timing).
Get out when the earnings are trending down and they improve even more.

My Point is: what if your Timing is wrong? Are you prepared for a 50% Drop?, if not, your are in Trouble, because if you can not
get trough it and give up at the wrong Moment, lets say 30% drop of you port and get into cash and see how your Modell snaps
back in no time, THAT will break your Performance much more, maybe even your ability to invest ever again (I got a lot of friends who got burn
2008 and they still wait for the next drop to get into the market again, they missed a multy year bull market!!!) And that is why most Investors “do not make it”.

And I got friends who get nervous, when the market Drops 10%, sorry, but that is plain nuts. If you can not controll your emotions, then
your need to work on them.

We are in a ring with a Gorilla, he will swing hard and we will knock you down one day. To believe to be able to controll all 100% of those swings
gets you in Trouble (as well as leverage) Be prepared for a 50% drop and follow your Modell even then trough.

All great Investors have their emotions in check. To have your emotions under controll is 100% of the game, it is a kick out
criteria (e.g. criteria not fulfilled = no sucess). You can have an average Modell + emotions controll = Success.
Best Modell in the wold + emotions not in check = no sucess!

That is the reason why everybody is in search of modells with 45 dregree angle going up with no dds, they
search a Modell where they do not need to have their emotions in check.
Well that road leads to deasaster.

I mean look at the modells of he great Investors. The free modells of p123 are mostly better then theirs.
They could not care less, because they just be able to make 10-20% year after year and ride out the bumps in between.

Think about it: why does buffet not time the market? Why could he not care less? In his case, he only cares
about the value of his stocks and he knows, that Long term the value will determine Price, he simply waits
until the market is “rationale” again. And so far that has worked since 1870.

I think it is okay to time the market, get out if the 200 ma on the markets are broken,
get out if the sp500 does not make a new high for more then 12 Months etc.

Fine! But be prepared when you are wrong, for that Moment you need to be prepared.
Work on your emotions!

Regards

Andreas

If I could go back in time and give one piece of advice to my former, naive self when he first joined P123, I would tell him to absolutely relegate all model trading to tax advantage accounts, especially to start off. Not just because of the simple math (turns out slippage + bid ask deltas + transaction costs + tax man’s cut at regular rates = A very formidable accumulative hurdle for even good models to overcome out of sample), but I’m still (relatively) young(ish), and I can’t touch this money for quite a while anyway without penalty. I’m able to ride out drawdowns much easier. It’s allowed me to just sit back, let my model do the work for me and not allow myself to get caught up in small market timing devices that whipsaw me out of rebounds. As long as my model has built up enough active return in the good days to provide cushion on the bad days to ultimately beat my benchmark in the long run, I’m happy. This gets easier as time goes by.

I recently read a speech by Charlie Munger where this really hit home.

if you’re investing for 40 years in some pension fund, what difference does it make if the path from start to finish is a little more bumpy or a little different than everybody else’s so long as it’s all going to work out well in the end? So what if there’s a little extra volatility.

In investment management today, everybody wants not only to win, but to have a yearly outcome path that never diverges very much from a standard path except on the upside. Well, that is a very artificial, crazy construct. That’s the equivalent in investment management to the custom of binding the feet of Chinese women. It’s the equivalent of what Nietzsche meant when he criticized the man who had a lame leg and was proud of it.

That is really hobbling yourself. Now, investment managers would say, “We have to be that way. That’s how we’re measured.” And they may be right in terms of the way the business is now constructed. But from the viewpoint of a rational consumer, the whole system’s bonkers and draws a lot of talented people into socially useless activity.

Y Combinator

[WERNER]

Just bumping this to the top.
Interesting read for “predicting” the stock market about a year and a half ago.
And what do we learn from this?

[judgetrade]

That the IWM had a 37%DD and that I had a very hard 2015, and so far a great 2016;-)
Who would have thought that small caps are back in such a strong way. Unbelivable, but
very enjoyable

Regards

Andreas

[sevensisters]

Who would have thought that small caps are back in such a strong way. Unbelivable, but
very enjoyable

I completely agree, Andreas! In particular regarding the attached, which I bought back in June for 7.6$ a share. I’m so glad that I did hold on to it

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[Jrinne]

HI IQ. Named after some of P123’s SA designers: you know who you are.

[davidbv]

And what do we learn from this?

For me, that “perceived” government future policies can affect the stock market “sentiment” (ie, forecasts), in the short term, in a dramatic fashion. It shows the effect of government (fiscal and monetary) policies on the private sector. I think it is a much larger effect now than say 50, or even 20, years ago.

The interesting thing to me is that my models (which have all done well since the election) don’t use any sentiment factors/formula (except short interest). And no technicals. Just financial statement basics and valuations. None have bond hedges.

I think this optimism has created a sector rotation like effect and maybe even changed where we are in the business cycle. Don’t know. Facebook, Amazon, Alphabet, etc were all down today. Big Tech seems to have lost leadership.

It would be interesting to review in a year’ s time after things have actually happened. Could be better or worse.

[judgetrade]

As I posted around a year ago when small caps where in the abys. The size effect usally works (e.g. small caps outperform big caps) over the
long run an it is one of the strongest effects that can be used to generate alpha.
Combine this with low liquidity, value, a bit of momentum and some tweaks on the earnings side in the buy and sell filter and
with a relative small account and you have huge weapon (Thank you P123!!!). Easy to write but hard to do (same as
you loos weight if you work out and eat healthy, very easy to say, hard to implement).

Then the following is needed: “We do not have to be smarter then others. We do need to be more diciplined”. (Waren Buffet).

Discipline was the key to get through the big DD on the russel and to wait until small caps are in favour again.

Regards

Andreas

[judgetrade]

…and discipline is needed not to get overexited, things could change fast, so follow your system