I don't need luck (it works, and has worked for me/DW, over an extended period of time, over the last 30+ years).
And 20 of those 30 years encompassed the biggest bull market in history. Of COURSE it worked then. (I would genuinely be very interested to hear how you've done since 2000.)
If you believe that history will repeat, then B&H will probably work as well in the future as it did in the past. If you believe (as you might have guessed that I do
) that the next 30 years is unlikely to repeat that performance, then you might want to consider other options.
Anyhow, you come along and state you have a timing method that works. You came on a bit strong.
I guess the "delusional" comment was probably uncalled-for.
Other than that I was just trying to say that what has worked in the past is not guaranteed to work in the future, and here's an option that I believe will help people respond to down markets and sideways markets. Then I did my best to document that with hard math.
So, while I also don't believe market timing works (but, for some reason, I still harbor a hope that it does work) what's my next step? What do I look for? But, keep it real simple: no head and shoulders/candlestick stuff. Full moon stuff I'm down with.
Hey, no fair! I'm not supposed to be infecting you guys any more!! Get thee behind me!
But, well, since you asked...
As Dora said, her moon comment was a joke. I actually know a few people who use moon cycles in their trading, and they claim it works. But that's a bit too voodoo for me.
If you believe the simple method I proposed might be worth investigating, then just follow the steps I outlined. Once a month, calculate the average of the last 12 monthly closes. If this month's low is above that average, switch to "bull market" mode. If this month's high is below the average, switch to "bear market" mode. That's it. No candlesticks or patterns. No moon cycles or chicken entrails.
Right now it's in "bull" mode. The average as of the end of July is 126.21 for SPY, and this months' High was 135.70. Until the monthly High crosses below the average, it stays in "bull" mode.
You decide what you do in bull and bear markets. Maybe you switch between SPY and tbills, maybe you adjust your AA, whatever works for you. This is just a tool to help you determine if it's a good time to increase your risk in the market.
Here's a comparison of two simpleminded approaches: "buy SPY and hold" vs. "buy SPY when in bull, hold cash when in bear." I didn't include dividends or taxes. Neither approach is what you'd do in reality but it gives you an idea how this compares.
As you can see, it fell behind a bit in the fire-breathing bull of the 90's. And as I said, if you expect that to happen again, then B&H works great. If not...
But look how it does when the market isn't going into orbit. It ducked nearly all of the big dumps in 2000-2003 and 2008-2009. According to investing gurus like Warren Buffet, rule #1 is "don't lose money." This helps you avoid losing money.
This works because the market is NOT random. It tends to trend -- meaning that it tends to do what it's been doing more often than not. By far the strongest trend has been up, but the down moves also persist pretty well. If it heads down, it tends to keep heading down for a while, and that's a good time to be more conservative. (Much of the underperformance of the late 80's was due to it getting caught by the 1987 crash. It took the crash losses, then said "time to get out" -- and the market instantly took off again. That's a pretty unusual event.)
Now as I said, I have no idea how rebalancing would affect the B&H results. I need to go study Bogleheads. Probably BH&R would greatly outperform the simple-minded "buy SPY and go away" example I show here. BUT doesn't BH&R work better if you have a feeling for the market direction? Might you be able to do better at BH&R if you rebalanced into a more conservative stance when the market is in "bear" mode?
This is just a tool. I'm not saying you should buy SPY and hold it, or buy SPY in "bull" mode. This is a green-light/red-light indicator to tell you when it's safer to be in the market, and when you might want to think about lightening your risk. Many people try to do that subjectively by watching the market, reading the papers, looking at the economic situation, etc. That's tough to do well. This is an objective method that has a very good track record.
Now if you'll excuse me, I have to go practice my flouncing.