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Only a little under 30 points before the S&P500 hits the 200 day MA
Old 07-27-2007, 12:40 PM   #1
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Only a little under 30 points before the S&P500 hits the 200 day MA

For those of you with strong, red market timing blood in your veins, with its losses today so far, the s&p500 seems headed for a collision with its 200 day moving average line.

Breaking the 200 day MA to the downside has been a pretty good predictor of when to get out (if you havent already). Breaking to the upside has been a pretty good predictor of when to get in...

But the practice DOES have its detractors...
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Old 07-27-2007, 12:57 PM   #2
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So are you getting out?
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Old 07-27-2007, 12:59 PM   #3
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I've been about half out since two days before the last huge drop a couple of months back. You remember? I was a genius for a week or two? People wanted to buy my newsletter?

When its fully broken the 200 day MA, and on the upside crosses over the 50 day MA, i'll be buying back in.

Thats...IF it breaks and continues to drag the average down for a while.

I'll also have a bunch of cash from selling my old house showing up pretty soon...be nice to get a little cooperation from Mr. Market...

Seriously though, seems to me in looking at that ytd chart that we peaked up in early june and all we've been getting lately is volatility.

I think this downturn is gonna keep going.
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Be fearful when others are greedy, and greedy when others are fearful. Just another form of "buy low, sell high" for those who have trouble with things. This rule is not universal. Do not buy a 1973 Pinto because everyone else is afraid of it.
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Old 07-27-2007, 01:10 PM   #4
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Interesting. Thanks.
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Old 07-27-2007, 01:14 PM   #5
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I just hope you appreciate the fact that I committed in writing that the downturn would continue.

This will almost certainly result in an immediate turnaround, the dow rising 1000 points in a day, and my becoming a moron again for a while.

I'd appreciate all of you who benefit from this sending me two dollars via paypal.
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Old 07-27-2007, 01:23 PM   #6
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Ha ha...

Why $2? Might as well ask $20, or $200, or even more. You're not going to get anything, anyway.
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Old 07-27-2007, 01:30 PM   #7
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Because almost anyone will give you two dollars if you ask them for it. Once you go over two, the compliance rate drops.

So while I technically wont get anything, at least my request was statistically reasonable.

Plus I get to run around yelling "I want my two dollars!"
Better Off Dead... (1985)
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Old 07-27-2007, 03:14 PM   #8
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Breaking the 200 day MA to the downside has been a pretty good predictor of when to get out (if you havent already). Breaking to the upside has been a pretty good predictor of when to get in...
You mean "has been pretty good predictor of when to get out of the S&P500", right?

We're only 3.9% off our ER portfolio's all-time high and still up for the YTD. Berkshire Hathaway hasn't budged much, the PowerShares International Dividend ETF (PID) hasn't moved much, we've been buying the Dow dividend ETF (DVY), and Brewer's pointed out an undervalued bargain or two. Perhaps some of them correlate to the performance of the S&P500 but...

I'd buy more small-cap value, too, but I think we have enough.
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Old 07-27-2007, 03:54 PM   #9
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Nobody on here has mentioned it yet (unless I missed it), but "growth is back". In the domestic large-, mid-, and small-cap arenas anyway (looking at YTD performance). International growth/value are neck and neck right now. Small cap value (overlaps with REITS) is actually slightly down for the year at this point. S&P 500 P/E's below 17 trailing twelve months.

Based on this, I'll keep dollar-cost-averaging into my asset allocation plan tilted towards value and small.
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Old 07-27-2007, 05:15 PM   #10
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I added some more small cap value to my Roth more JNJ, PFE, and some regional bank shares this week to my taxable...
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Old 07-27-2007, 05:27 PM   #11
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But the practice DOES have its detractors...
Not to be a detractor, but I count 4 times on your graph where the 200 dma was hit and crossed (rather than bounced). Of those 4 times, 2 were crossed and kept going down, 2 were crossed and kept going up. Mmmm,,, 50%. Oh, that 4 is out of a total of 10 200dma events, the other 6 times it bounced.
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Old 07-27-2007, 05:59 PM   #12
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The good news is if it keeps going down I'll be too poor to afford trading fees to get out

I'm amazed I'm still positive for the year after the gobs of red I've seen lately in my tracking sheets. Think I've lost about 6 or 6.5% in the last week. I'm a little sad to see the money go, but I'm sure it'll come back at some point
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Old 07-27-2007, 06:25 PM   #13
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I'm in the -- "I'm not looking mode"....I've got a great weekend planned and don't want to be concerned (knowing the specifics of my losses). I am still feeling good about 07 ending well. If it keeps falling...I will be in the "buying mode".

CFB - There are over 3500 motorcycles going up the freeway tomarrow(Saturday) around 11am. I will be one of them - it is the Sacramento police memorial ride, alot of fun...and something worth seeing -- the police close the fast lane and all bikes cruise up to the fairgrounds in Placerville for BBQ and bands.
You might want to take your son to an overpass - all the bikers beep and wave for kids :>)
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Old 07-27-2007, 07:31 PM   #14
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Oh, that 4 is out of a total of 10 200dma events, the other 6 times it bounced.

I think if you look a little more closely, you'll see that it rarely "bounced" right off but rather dipped under a little bit or failed to cross.

In any case, if you sold when it crossed, then bought back on the uptick, worst case you spent a couple of bucks on trades and may have made a few bucks on the gap.

The "real" mechanism, IIRC, was waiting for it to have crossed and stayed there for 5 business days before you pull the trigger.

By the way, I have absolutely no faith in this as a trading mechanism. Its just sort of interesting...in a "this always seems to work but the time I do it will be the first time it'll fail" sort of way.
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Old 07-27-2007, 07:35 PM   #15
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CFB - There are over 3500 motorcycles going up the freeway tomarrow(Saturday) around 11am. I will be one of them - it is the Sacramento police memorial ride, alot of fun...and something worth seeing -- the police close the fast lane and all bikes cruise up to the fairgrounds in Placerville for BBQ and bands.
You might want to take your son to an overpass - all the bikers beep and wave for kids :>)
I wont even need the overpass...I can see a tiny little bit of route 50 from one of my 3rd story windows, and if I'm outside and a flotilla of really loud bikes goes up the highway, I can barely hear them.

So I'll wave like crazy when all y'all go by. I'll even use all five fingers, which isnt the usual.

With a little luck, I'll still be sleeping when you go by. Pretty dang unlikely with a 2 year old.
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Be fearful when others are greedy, and greedy when others are fearful. Just another form of "buy low, sell high" for those who have trouble with things. This rule is not universal. Do not buy a 1973 Pinto because everyone else is afraid of it.
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Old 07-27-2007, 07:42 PM   #16
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If enough people follow it, it’ll become a self fulfilling prophecy.
IMHO, that the way all technical analysis works.
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Old 07-27-2007, 08:11 PM   #17
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Ah, heck....I'm trying to stay in "the market goes up/the market goes down" mode......as I look toward several months in western Europe traveling this fall....sigh......and I thought the weak dollar was my biggest problem.....

Time to just sit back and trust in the allocation and rebalancing just done recently, and ride it out.

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Old 07-27-2007, 08:26 PM   #18
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Plus I get to run around yelling "I want my two dollars!"
Better Off Dead... (1985)
Great movie.....was one of my favorites in high school. Little kid threatening John Cusack with a switchblade comb....."didn't ask for a dime, two dollars!" LOL
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Old 07-27-2007, 08:51 PM   #19
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CFB has already said he's not going to try to really sell this strategy so I'll assume it was mentioned somewhat touge-in-cheek. I've yet to see someone do a nice statistical analysis that says this has really worked in the past (200 day moving avg or whatever). You have to decide the exact sell point, the next buy point, and then do the data going way back. Even if it works despite numerous small whipsaws, so what, it's just datamining. Don't know what kind of out of sample data would help to check this either.

Regarding this, Doug Fabian (senior, not sure if he's still around) use to use a 39 week moving average on a few indexes if I recall right. It put him in one of the best performing categories for many years according to Hulbert. His son took it over and last I heard a few months ago he tinkered with it and was then out of the market -- as the market went up and up and up. The only good thing about this kind of system is that it is suppose to be purely mechanical. Sounds like the son couldn't stick to a good thing or alternatively he realized its previous success was just luck. Anybody out there subscribing to Fabian's newsletter now?

Les
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Old 07-27-2007, 11:05 PM   #20
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When I look at the chart I see a classic cup-handle double-breakthrough resistance pattern. Sell! Sell! If I look at it sideways, I see a pony. Sell a pony!

When I've seen the 200 day moving average tactic discussed, I always wonder how that number emerged. Has it worked better than the 137 day or the 419 day average? What are the odds that "200 days" emerged from data mining and has now become accepted practice among chartists.
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