SD-2020 TRADING WITH THE TIDE

[sd]

3.9.20 Historic day- circuit breakers kicking in shortly after the open.... President Trump is on tv this pm to try to reassure americans that small businesses and workers will be supported-during this crisis....

[ira85]

Yes indeed, a big day today. My opinion is free here, and worth every penny. I didn't get any sense today that the sellers were done. All of Italy was locked down. It's going to take awhile before we can be confident nothing like that will happen here. Until then we will likely have more days like today. And if we do, expect to see faster trading, bigger volume, and more incidents of suspended trading.

Back to an unfinished discussion. This discussion is about trying to make an algorithm to avoid getting whacked on days like today. Logic tells me this isn't going to work very well. If it was easy to make a very effective algorithm it would have been used until traders figured out ways to beat it. Here's the discussion.

Recently I've written about the appeal of using an objective algorithm to make buy and cell decisions. One such system is described in an article at proactiveadvisormagazine.com/moving-averages-leverage-long-run/

The system: a “buy” signal is a close above the 200 day SMA of VOO, our proxy for the S&P 500. We would go 100% long SPUU, a 2x leveraged S&P 500 ETF. A “sell” signal is a close below the 200 day SMA. A sell would cause us to sell our SPUU and go 100% long TLT, our proxy for the 20 year Treasury Bond.

Through February 26 the market had been on a long standing buy signal. So we started this test of the system 100% long SPUU. Then February 27 the VOO closed below the 200 day SMA giving us a sell signal. We sold SPUU and bought TLT. We are ok on February 28 as VOO was below the 200 day SMA all day. But VOO closed above the SMA March 2, giving us a new buy signal. We sell TLT and buy SPUU. The next day, March 3, we get a sell signal. We sell SPUU and buy TLT. The very next day, March 4 a new buy signal. The next day AGAIN, March 5, we get a reversal and a new sell signal March 5. March 5 is the important one because the market took a spanking on Friday March 6 and then and took a wicked dive today, Monday, March 9. We sold on March 5 and were in the safety of TLT on March 6 and March 9.

The first 3 trades went against us March 2, March 3, and March 4. Three quick, small whipsaws. Then the March 5 sell signal went our way, at least through today. We dodged a big one. And not just dodged it, but TLT was in the black on the 2 big down days. The system got off to a frustrating start with it giving us daily alternating buy and sell signals. I've never tried to make 100% of the portfolio trades. I can imagine there would be issues with clearing funds to be in position for the next change.

I think it may have potential for a possible real world trial. Some modifications would probably be needed. Perhaps using the un-leveraged VOO instead of the 2x leveraged SPUU. I've always heard old heads give advice to stay away from leverage. It can turn a bad situation into a disaster very quickly.

Any observations or comments? -ira

[sd]

Interesting tally- but there are several issues- as you noted- One is the required clearing of funds -typically a 3 day process or you will get restricted if trying to make a trade out of "borrowed funds-" and another more recent issue -- Vanguard will no longer allow the execution of leveraged funds- and even my Interactive brokers acct- now has put new restrictions on someone trying to use leveraged or short style funds-
Finally, any market approach that flips and flops on this kind of volatility needs to have some kind of circuit breaker- that puts one on the sidelines until a market direction is actually determined.

Another note regarding the daily whipsaws- you have documented- - The goal of such an approach should not be to make one react on a daily basis- but to take advantage of larger market swings that last for weeks- or months-There would need to be a smoothing mechanism that would eliminate a day by day reaction. In some of the moving average crossovers- backtesting that Arthur Hill had demonstrated- it also included a holding period once a set of criteria was met that initiated a trade decision. The up and down whipsaw cycles - if reacted to on a daily basis- would only eat away at one's account- I think in one example it required a 2% movement in the other direction- choose your flexibility-but there should be a way to minimize the whipsaws.
If considering such an approach- compare the Perf chart - also- it broadly compares performance over a period of time intervals- based on the starting # of days- In the attached example based on a 200 day look back starting period - there are 6 crossing periods- but to get a real advantage, one would likely want to react based on price crossing above or below a moving average ....

As you have noted- in this recent market volatility- this is perhaps not as cut and dried an approach as first suggested- However, the general theme has merit in that one can take action to position themselves in a better Risk:Reward scenario- It simply is not as black and white in it's application as it may first seem .
Correspondingly- I'm not reacting to try to time these undulations- My TLT position stopped out for a gain, and I'm holding mostly cash to see where this may level out-
As Kenny Rogers pointed out- There's a time to Hold em, a time to walk away.... Having more in cash than at the table lets one sleep easy.


i.imgur.com/l7jjiN8.png

[sd]

3-11- Official Bear market means we've closed -20% off the recent highs- There will be a Presidential news conference this 9 pm.
The spread of the disease has accellerated and the Fed DR Fauchi- has said this is 10x more fatal than the Flu- which already has killed close to 30,000 people this year-
Containment is the key to reduce the spread- and already the March madness basketball games are closed to the public- and large gatherings are discouraged- financial impacts are just being realized across a wide spectrum- and even this may precipitate a recession- Even Cramer is being a fatalist - expecting the worse is yet to come-
Dr Gottlieb suggesting tonight that this is expanding- and the World Health Organization just today declaring a global pandemic- belatedly of course.

Vix $53.90
I had lowered my limit buy-orders- and perhaps a greater decline will still occur- There are Health concerns and the politicians have economic/political concerns-
It's amazing how quickly this has unfolded from just one month ago! The instability is huge- and so is the potential psychological impact that the market participants will come away with- even when this is just a memory- I'm not trying to second guess the bottom at this point- You can pick an arbitrary target % down- and is -30% too low?
What does that suggest for the valuations we were trading at just a month earlier?
We are likel;y going to see a reset to 14x earnings- vs the 24x we were trading at. So, where does one put a limit order? -10% lower from here?
Dr Gottlieb suggests this will continue for 2 months.
GS thinks a -15% decline- BA down to $189....
A lot of indecision as to where the credit worthiness of large companies lies to weather this storm- BA acted to use it's full line of credit!

[sd]

Historic lowest down day for the Dow- I started to BUY- Mistake? Perhaps... only time will tell- Recession starting?


With the markets hitting another circuit breaker this week, and everything down -20% from the highs, I elected to start to put some of my cash back to work- but with the realization I am buying into a decline- and that there is no sign of a bottom at this time- and prices will likely go lower from today.
Essentially I put 25% of my cash position to work- I am aware that this Covid virus impact will take many months to play out- and the potential for a large economic shock and recession are certainly there in ways we have never experienced in this country- Add to this a political election year and a divided congress. and it seems a recipe for a much greater downside .
That being recognized, I went ahead and made 5 purchases today using Vanguard ETF's -
Instead of simply trying to buy the momentum sector in favor- I bought 100 VIG @ $102.54- Vanguard dividend appreciation fund- down from the $130 range!
50 Voog - The Vanguard S&P 500 growth ETF $146.63 down from it's high $190.00.
100 VPU- the Utilities- $124.89 down from it's high 155.00
40 VGT Tech- $207.69 down from it's high $270.00
100 VFMV - min volatility $ 76.69 down from it's high $94.00
Unfortunately, these early afternoon buys did not capture the lower prices as the markets dived lower going into the close.

That said, I was prompted by the gap down lower open of everything- and asked where would the bottom actually be found? No idea, but i elected to put some skin back in with a different perspective- I intentionally purchased some "safer" funds here- and some that intentionally have dividend elements - VPU, VIG- and I think VFMV-
What I was surprised about is the deeper decline that VIG has seen- when I would have thought it to be a "Safer" investment- Perhaps there is no safety- or simply the dividend payment drives the net price lower.
I was/am interested in considering a dividend portion but am hesitant to try to consider any individual stock in this extreme market environment- so I elected to use the broader ETFs that do some of that homework already-

Clearly , this situation with this virus will become an economic & societal shock to our society not seen since in decades- - nothing that most living now have ever experienced - and the
impact will likely be as severe as the 2008 market collapse as it's not only about the investment losses, it will be the economic shock of one of the best labor markets in history getting devastated by work place closings, losses of jobs, and a fractured and damaged populace.

To illustrate how ignorant and unprepared I was, today i gave a safety talk to employees on the job site about staying home if you are ill, don't shake hands, yet we passed around a sign-in sheet with everyone using the same pen to sign in with- It was only after the fact that we realized we potentially possibly contaminated the 30 or so people in attendance- all sharing the pen and sign-in- board-

I felt i did well in timing the market as it lost in Dec 24- 2018 down almost -20% and I was fortunate to do some buying with cash I had accumulated by stopping out early-
At that time, it was a V bottom and a vertical recovery- This time will be different-
Sports all closed their public activities- NBA stopped sports games to the public- March madness not open - Schools across NC- Duke, UNC all are closed to open classrooms- all going virtual....
This is only the beginning- Italy has suffered a huge spread- and the death toll of 30% is primarily elderly - and Italy rations their medical care to those that have the most opportunity for survival- suggesting that if you are in a high risk group- you are likely not going to get extensive care to allow you to survive -...

I saw tonight a doctor kinterviewed on CNBC that suggested that people should have 3 months of supplies at home- food- ... Sounds like a nuclear war.....
Futures are again down for tomorrow-
Hmm wish I had bought 1/2 today- and maybe another 1/2 tomorrow....
Scary times as we are in uncharted waters- Financially, this will be a real hardship for the majority of our citizens that have monthly debts - student loans- and jobs that may shut down-
This is the time for our government to take radical steps to help our citizens to survive this contagion's financial disruption- Both of my daughters are self-employed with their business reliant on customer sales- They have substantial overhead costs with retail storefront expenses and employee costs- A 60 - 90 day virus slowdown will be devastating to their business survival..... and small business is the life blood of our economy along with consumers spending- If consumers jobs are shutdown, children are not at school, and the family income is disrupted, the economic engine of our economy goes into cardiac arrest....

[sd]

3.13 Friday- Market rallies, President Trump takes action- announces a plan-

[ira85]

Update on the test run of the buy/sell algorithm. In the first week using the algorithm we had 3 false buy/sell signals with 3 daily changes from buy to sell or sell to buy. In real world accounts daily changes like that can't be done because such quick trades don't allow enough time for trades to clear. Changing 100% of your portfolio from VOO to TLT and then changing it all back to VOO can't be done that fast. We would have to allow at least 3 days before accepting the next buy or sell change. For now we will just collect data and see if any other problems arise.

Here's what we have so far: Feb 27 sell, Mar 2 buy, Mar 3 sell, Mar 4 buy, Mar 5 sell. No further changes through today, Mar 13. We have been on the sell signal from March 5. VOO closed March 5 at $277.95. VOO closed today, March 13 at 247.31. From the sell signal March 5 through today, the VOO is down 9.4%. But our test investment has been short VOO so it's ahead for that period. Seems like a pretty effective system. But with only 2 weeks of testing it's too early to reach any conclusions. We'll have to add a waiting period after a signal change to make it possible to use this system in the real world. Then we'll have to see if that hurts results.

A couple of thoughts about the current turmoil in the markets. We have seen extreme volatility this week with extremely heavy volume in both up and down days. It seems the bulls and the bears are pretty evenly matched. When the market is falling fear rules and sellers are dumping shares. The next day the bulls are buying the dip and seem convinced the selling is over done and it's a good time to buy. Like a war, when the two sides are evenly matched the war can continue. Peace takes root when one side or the other gives up and the victors have their way. The evenly matched struggle this week showed neither the bulls nor the bears were ready to give up. If the number of Americans dying from the virus continues to grow market volatility will continue. The public seems to want to see the government take effective action to stop this disease because they fear the danger it poses for the economy.

During times of heavy volume and big price changes we hear pundits advising the public to remain calm, don't sell, just hang in there and let the selling end with you still holding your portfolio. When the Dow moves up or down by a thousand points in a few minutes, is that John Q Public, individual investor? It seems the pros give advice they don't follow in their own accounts.

For the past several years we have seen many variations on lowering interest rates, quantitative easing, easy money, expanding the money supply, etc. Whenever there's a problem, one of these monetary solutions is trotted out to deal with it. I've often wondered, what will happen if some day there is a problem that can't be fixed by lowering interest rates? What if this disease just keeps infecting people and doesn't seem to be intimidated by the mighty power of QE8? What then? Reminds me of an old saying . . . If your only tool is a hammer, then every problem looks like a nail. -ira

[sd]

During times of heavy volume and big price changes we hear pundits advising the public to remain calm, don't sell, just hang in there and let the selling end with you still holding your portfolio. When the Dow moves up or down by a thousand points in a few minutes, is that John Q Public, individual investor? It seems the pros give advice they don't follow in their own accounts."
"
There is some validity to the advice- The retail investor that tries to react and time the market usually sells near the lows and waits to get back in - amplifying a lower performance
record compared to those that typically buy and hold through- This particularly seems to be true during this past bull market since 2009 despite several -20% dips along the way, the upside recovery has been relatively quick- Those selling up through Dec 24 2018 never expected the snap back rally that followed-
And - The big money does not adhere to that advice- After all- they get paid by the investor whether the investor makes money -or not-
I would also have to point out the obvious- It's not necessarily how much gain you may have on paper- what counts is what % of that gain can you retain if the market turns South as it has done here in 2020- and quite quickly it reached -20% - "Bear" territory- It's a double edged sword to employ a stop-loss approach. As IRA noted- the changing volatility
For myself, I have been an advocate of tight stops and found that I underperformed the broad market in 2019- 18% return vs (29% return for the S&P) despite holding and overweighting some tech positions that substantially outperformed The S&P 500 - SPY- A good amount of that lag in performance was due to raising aggressive stop-losses and having to reenter the positions at a higher price following what turned out to be minor declines - until recently- While I have been aware of this overall performance lag, it has also allowed me to take more aggressive positions that normally would not be considered in a portfolio. With my account stopping out at higher levels, the opportunity to BUY at a -10 --15% discount to my exit makes sense. However, there were a number of other minor declines that had me chasing and reentering at higher prices the past year. This type of more active participation is not what most people would care to engage in- and shouldn't- if they have 5-10 years ahead before retiring. If someone is managing a trading account, I would recommend a hard stop-loss approach for all trades as a proper discipline. Just my personal opinion.

Regarding the whipsaw signals that IRA is analyzing- I believe adding a simple moving average analysis to whether one weights one position over the other- despite the daily fluctuations- would act as the necessary smoothing of the signals. Applying Basic TA using moving averages tells us what the predominant direction is- If the price is declining and downtrending- with price below a declining 20, 50 ema, any positive whipsaw signals should be viewed with skepticism. Conversely, If price is trending higher- with the emas in proper ascending sequence above an increasing 50 ema- that's where the Long signals should be applied....and ignored in the fund that is still not seeing an upturn cross of the ema's.
Typical Declines predominate , with quick impulse reactions higher, but the predominant direction typically continues until a base is made, attempt to react higher fails, and a new higher- base is made-- Sometimes there is a sharp V bounce- but equally often, a basing period evolves-
It has become my firm belief that greater trading success comes by Trading WITH the predominant Trend - and yet there are times when the market is trendless- and undecided- So I would also suggest that one's approach should consider having the ability to pause- go into neutral in a decision on taking a position- until a trend direction is ascertained. The markets are not always trending - and perhaps a deeper analysis would suggest that there are times that are undecided- and the best decision is to not force any decision at all until the direction is clear-- I think this is where applying TA analysis- the Price action relative to the moving averages -truly gives a better picture because it smooths out the one day volatility- and gives a graphic picture of trend direction that is worth understanding-.This also would reduce the signals to change from one position, to the other and then immediately back again- violating the clearance requirements- I would also suggest that the signals should not be viewed on a daily basis, but in the context of the predominant trend- which may suggest ignoring a daily chart and reviewing the weekly .
Note the attached screenshots -
VOO IS IN A CLEAR DECLINE AND DOWNTRENDING lONG SIGNALS IN VOO SHOULD BE VIEWED AS MINOR ATTEMPTS TO BREAK THE DECLINE - wAIT FOR A TURN OF THE 5 EMA OVER THE 10 & 20 BEFORE GOING LONG.

i.imgur.com/idxkWLl.png

nOTICE THE Trend in TLT has been up since early 2020- Primarily a rising fast ema above the 50 ema- and just this week, Price started to break down lower- On big momentum surges - as seen with TLT this past week, price gapping up and pulling the fast ema up with a widening momentum gap- this is not sustainable momentum- One doesn't know when it will turn- but it can offer the opportunity to trail a stop-loss behind - and when price momentum stalls- consider tightening that stop to capture some of that excess momentum-

i.imgur.com/pjpBofM.png

We just finally see the fast 5 ema drop below the 10 ema for TLT- So the momentum has clearly favored TLT for the past months.

- viewing the price action relative to the moving averages provides a decent perspective of whether price is improving or declining.
This should be used when considering short term - or daily- price movements as perhaps not predictive- just random volatility- so a longer perspective- with a wider movement will actually prove to define the ultimate trend swing direction-


For investment portfolios- the daily charts are likely just noise and should be ignored - the primary trends evolve on weekly charts and hold more substance .
In hindsight, the weekly trend often proves to be the predominant trend- because it averages out the daily volatility into a one week summary- but those of us trying to interpret the daily price action in real daily time get pulled by the daily volatility- and we may end up on the wrong side of where price settles out at the end of that week..

I think this is where understanding the predominant trend based on the moving averages tends to keep one on the correct side of the overall momentum- until it changes direction-
The moving averages do a good job of illustrating shifting momentum- ....

[sd]

3-15-2020

With the Corona pandemic just starting to get a foothold in the US- we likely face a 4-6 week disruption of life as we know it . Perhaps longer....
Here in NC, we have about 18 known cases in Wake county where I live- and that number will go much higher in the next weeks as the incubation period may be 1-2 weeks-
Schools are ALL Closed in NC, and also -tonight- NY closed all of their schools- Every business will be affected for the negative ....and this impact will last for months-
Fed reserve cuts interest rates tonight! This is an emergency reaction to offset what is coming.
People over age 60 with any underlying issues are particularly susceptible to severe complications. California is requiring persons age 65 to isolate themselves-
Perhaps this is a gov't formulated disease targeting the seniors to make SS solvent by killing off the beneficiaries? I hadn't heard that promoted yet- but give the democrats time....

This crisis will overwhelm the healthcare workers/hospitals and ALL normal systems-
The virus can reportedly survive up to 72 hours on surfaces? What about the can goods stocked at the supermarket and you then Buy and stock up at home- and who else touched them before you?
The best example i have is the weekly safety meeting I held on my project this past Thursday- Where the FLU is the biggest active concern- and where we pointed out we do not need to shake hands, minimize contact- if sick- stay at home.... but then we passed out a clip board and pen for everyone to share and sign in with..... and realized then we had potentially contaminated everyone in the group-
Those normal things we have always done- money exchange- drive thru for food- all need to be rethought- Even the daily Mail delivery should perhaps be suspect-
And with a virus with a 72 hour life on surfaces- That's 3 days after contact!
Since we should now fear what we cannot see and still do not understand, What is the appropriate reaction to all of the possible scenarios?
Stay at home for the next month- don't open any mail- and spray down any interlopers with a 5% Clorox solution!

That said , I will plan to purchase additional positions on a -10% decline from my entry- Not expecting a V recovery

And- it is likely that many more will die from the Flu this year than from this virus- Why should the Flu deaths be less of a major concern?

[ira85]

SD made some suggestions on 3-14 regarding building a better buy/sell algorithm: SD suggested using moving averages to identify the primary trend at the time a buy/sell signal is triggered by a crossing a 200 day moving average. I'll try to describe implementing his suggestions and see if I understand. We started our algorithm by tracking the 200 day SMA of VOO. When VOO drops below the 200 SMA we sell everything and move to TLT until we get a new buy signal. A buy signal is a close above the 200 SMA. The problem with that system is it is vulnerable to quick whip-saws with new buy and sell signals coming daily at times.

We will add a second step to confirm the direction of the primary trend. The buy or sell will only be executed when it is confirmed by the trend as follows. A buy signal is confirmed when VOO is above it's 20 day EMA, and the 20 day EMA is above the 50 day EMA. If any of those measures are not in the described configuration the confirmation is failed and the buy or sell is not executed.

A sell signal by the 200 day SMA is confirmed following a similar process. First the closing price of VOO must be below it's 20 day EMA and the 20 day EMA must be below the 50 day EMA. If any of those measures are not in the described configuration the confirmation is failed and the buy or sell is not executed.

We will see if SD confirms this procedure is consistent with his thinking. SD devotes a lot of time to this board. I hope the description above is correct and it will hopefully not take a lot of time to confirm. Thanks SD.

The virus has captured everyone's attention. The news has been so bad I expect the opening tomorrow will be ugly. I deliberately didn't want to write about the virus today. I probably don't have insights to share that are above and beyond others. Secondly, life goes on for most of us. I'm trying to learn more about managing a portfolio. My buy and sell discipline has been AWOL. Trying to be more systematic about buying and selling is one of my goals. We are writing about it with the thought there are others out there who could benefit from this project. Right now I'm leaning toward hiring a wealth management professional to manage most of my stuff. And I may keep a small chunk to manage myself, part continuing education and part recreation. Practice social distancing today. I will. -ira

[sd]

3.16.2020 Did some Buying @ 10:15 am today- I added 50 VPU, $114.70; 50 VIG $98.65 to the present positions, and keeping the focus on "safer" ETFs- with dividends. I'll continue to average down should prices drop lower- I would think that a -30% target pullback should find some buying interest-Catching the falling knife is dangerous, but less so when it's ETFs vs an individual stock position. Only time will tell .


As IRA noted, I am also going to employ a manager for a portion of my present I-R-A Account- I've spoken with Vanguard, and for a $.30 Exp fee , they will set up a managed account-
In my case, they are recommending a 50-50 Bonds-stocks with broad ETF exposure to the global stock and bond markets-and with at least 20% in emerging markets They did a quick overview of my expenses and my sources of income- and projected out what costs are likely to be for my spouse and myself-once I am fully retired- We have another appointment this week to finalize what % of my present funds they will manage- They expect the approach they outline to be able to provide some annual income with a 99% probability through my wife's survival to age 100. Granted, this will be a modest add to the income - supplementing SS. While I could personally seek to manage those assets myself, human egos can get emotionally involved in following through on the decision making process. Having an unattached 3rd party person that can be objective about what is "best" and perhaps "safest" is worth a fee.
I will add a follow up post on TLT/VOO alternate investment approach

After hours note: Markets closed down hard going into the close. losing almost -13% -
With Closings of schools, restaurants, bars etc- millions of people will be without jobs and paychecks. Those workers will be unable to pay for their rent, mortgages, car loans....
My daughters each have their own businesses that are reliant on sales...... and with this shut down and social distancing, their business will find it very difficult to pay the rent, make ends meet.
This will be a huge economic shock for our country- and will likely be a source for social evolutions as so many will be directly affected.
I think this will also be a net gain for the Presidential race favoring the democrats- although I feel President Trump has been very proactive in getting out in front of this disease.
The loss of income, jobs just when we had the lowest unemployment in decades will be what is on so many voter's minds-
Potentially, we can easily decline another -20%- for a net -50% .....loss in the markets....

[sd]

VOO:TLT STUDY : In approaching any sort of backtest, it's important to use the same criteria for the analysis-
I'm just able to post this 1st chart at the present time - and will try to add more information as time allows-
This chart of TLT has the price bars removed for clarity- Just want to get a sense of the direction of the various moving averages-
Presuming that an entry Long position may be taken once the ema's are in proper order- and -Will continue this later

i.imgur.com/0Ocfm5s.png
The assumption taken in the above chart is that a positive up cross as the 20 turns up, then the 50 turns and they make a cross of the 200 appears to work well to identify major turns in the prior chart . In the chart example of the 1st upturn in 2014, the uptrend continued for over a year as the 20 stayed above the uptrending 50 until Feb 2015- That defined a 1 year trend.
The 2nd GO-LONG signal occurred in early 2016- and lasted until September, when price dropped below the 50 ema, which eventually pushed well below the 200 ma.
In April 2017, the 20 ema crosses above the upturning 50 ma- and it took several months for a cross of the higher 200 ma. That GO-LONG signal declined in 2018 and looked to be a no win-no-loss hold - This was followed by a late 2018 upside cross signal that quickly turned and declined- A whipsaw - that would represent a losing trade.
Following that, 2019 delivers an upside cross that has continued valid for the entire duration to the present day- with a decline in 2019- but there was not a ma cross over the lower 200 ma.
That said, I would want to consider the effects of not waiting until the 20 ma crosses the 200 to take an exit- perhaps it would be more timely to simply declare a price stop-loss at the 200 ma- Something to consider , but for now we are simply viewing with broad brush strokes to get a sense of trending periods.

Now, we can similarly view the VOO over the same time frame -:
i.imgur.com/Cc6viC5.png
VOO has given 3 buy signals and 1 whipsaw based on the crossover of the 20-50 over the 200- There were 4 sell signals during that period of time- and we just received a recent one this past week after a -25% decline.

The last chart is a performance chart of TLT & VOO
i.imgur.com/epaPy5h.png
TLT IS NOT STRICTLY AN INVERSE TO VOO- there are periods when tlt also rises as voo rises- but it definitely gains as voo declines-

The variables in these charts is the actual price movement- Since price leads and the moving averages lag, infilling the price chart with actual price bars would give a better assessment of the volatility that is not seen with the line ma charts.

[sd]

3-19 -2020

Time to talk about the huge impact that this virus will deliver to our economy, our way of life, and likely affect us for years to come- including our psychology - It will be a harsh lesson for those that have never experienced a sharp market decline- and this looks to be on the scale of some of the worst declines and probable recessions ..... impacting our way of life for 18 months-2 years potentially- because we went from a great and growing economy with the lowest historical unemployment- and a certain continuation of the Republican majority to a crashing and frozen economy and likely recession and political turmoil.
First of all, to date many 401 k accounts are all down -30% with the market , and many investors are wholly within company funds and mutual funds and think their advisers will be looking out for them - and perhaps managing their assets- after all- isn't why they hired them -because they are the professionals.
Millions of people are losing their employment as jobs close down, and fear and panic sets in. The government is talking about emergency payments to our citizens- Certainly that will be needed and a moratorium on student loans, mortgages, even credit card debts- as people are being forced to leave their jobs- some unemployed- some can work from home- possibly-
The spread of cases is just starting to be recognized, enough test kits are not yet available, and the contagion is wide spread- My State- NC has shut down All schools- most colleges, all sports and such- and cancelled concerts and large meetings- but unfortunately allowed 2 concerts last week where a Corona positive person walked through the concert crowd...
On my job site , I conduct a weekly safety meeting, and for the last few weeks have talked about taking precautions, hand washing- not exchanging money at the store-using sensible precautions when opening doors- entering stores etc....
Today i was informed by our inspection technician that he just found out that he was possibly exposed at a local post office by a postal employee that tested positive- the same day he was there- and -of course he and I get to stand shoulder to shoulder several times a day looking at blueprints... so, this heightens one's awareness ....He had a "virtual" consultation with Duke Doctors- and will get a 2nd virtual consultation tomorrow concerning any possible symptoms- headache- and hopefully he will be authorized to be tested to either confirm or negate the virus in him. Hopefully this will be a false alarm , and just a learning lesson, but I had to make a few phone calls to inform others that were potentially exposed to him-
Should he have the virus, and be contagious, it will have a huge impact on our personnel-self included- as our job site may then completely shut down.
While I may have my own personal concerns, tomorrow I will have to inform a County inspector that stood shoulder to shoulder with the potential infected person during a 30 minute inspection- that he may have been exposed- and just a day prior- that inspector was relaying to me his concerns about his job and his potential for public exposure, and his 91 year old mother at home-.....
That just brings the human element home, along with a spouse with COPD- so fingers crossed all is a negative-

Getting back to the investing side- Markets tried to stage a small rally today- closed up slightly- but I think the enormity of the situation and the unknowns could easily push us into a deeper decline, closed businesses, and likely recession- so perhaps buying @ -30% wasn't even close to the bottom plateau... Consider the -50% range-
I actually had my follow up with the Vanguard Adviser person tonight- a very pleasant young lady named Louisa Ochoa- as it was our 2nd call, I explained I think I will give her a % of my small account to manage- but not to do it now- because I feel we likely have further to go down before we settle into a long sideways trend.
The Vanguard investment approach is the broad investment they recommend for their own employees- Total market- VTI, International- VXUS, Intl Bonds BNDX, Total BND-
a pretty straight forward approach with just 4 funds to deal with- and relatively conservative. This is something I could potentially do myself easily enough- but the human element gets involved when managing your own money- Better If I manage 33% and others manage 66%. I hope to get my toes back in deeper- and will set some lower limit orders- Is -50% on an index too low? Potentially not-Just -20% from here.

[sd]

Attached is a screenshot of Vanguard's recommended stock-Bond portfolio for someone my age- 69- ONLY 45% should have been allocated to stocks- and 55% allocated to bonds-
I took the 4 broad funds that Vanguard suggests as the Core portfolio for their employees retirement accounts- and took a Hypothetical $100,000.00 portfolio
VTI-Total stock market $30,000. VXUS Intl stocks $15,000 Bond fund BND $40,000.00 Intl Bond fund BNDX $15,000.00

If the portfolio was allocated this way Jan 2, 2020, it would have lost about 15% in value- as of this week. The stock segment lost -30% -33% Intl- but the Bonds- lost considerably less- -1.7, -2.3% . Part of a portfolio strategy includes periodic rebalancing - particularly if any segment is 5% or more out of it's design allocation.
So, this week, the portfolio would be out of balance , with the BOND funds now at 63% vs 55%- and so 8% of the net bonds allocation would be sold and used to purchase shares in the declining VTI, VXUS- purchasing those shares at discounted valuations from Jan 2 values- If the downtrend continues deeper, more of the relatively stable Bond component would be sold to purchase the stock component- This is the way a broad asset allocation portfolio works-
The yield on those bonds- providing some income -

Conversely, my spouse -who is 7 years younger than I has a recommended exposure to stocks of 55%, Bonds 45%...

i.imgur.com/Y7DALj6.png

Not to be a hyper alarmist- but the shutting down of businesses and states- with people told to shut in will only rapidly expand-in the weeks ahead-
The impact on our society will be huge- and unlike anything most of those presently living ever considered. Self included.
I may have noted this in earlier posts, but I take precautions- I carry rubber gloves, hand sanitizer, and a spray bottle of a clorox solution- and even have a mask from past construction work- I do not exchange money with individuals- swipe a card only and sanitize the card and hands afterwards- Even opening the mailbox- I use gloves, discard junk mail into the trash can, and spray the envelopes of any mail that I need to open.
Many younger people unfortunately heard that they will likely only contract this virus with minor symptoms- so some chose to ignore social distancing as not applying to them-
However, those people interact with others, only causing a greater transmission of this to their family, friends, co workers and co students.
Take steps to keep you and your family aware and safe-

[sd]

Buying today into the CLOSE-
25 VGT -tech
200 VXUS -intl broad
40 VTI total mkt
Note that both VXUS and VTI would be the 2 ETF stock positions that Vanguard would put me into
Still holding small 10 share positions in both TDOC, ZM, both up very strong today- we held these even though they had a decline from where we had entered- Both should be in high demand during the disruption of personal contact. We actually used a ZM teleconference to wish our granddaughter happy birthday this weekend=

SA pos in response:
I did some Buying today into the Close- And I also did some Buying at -20% -and that's presently a painful-part of my positioning- and- YES - I will be Buying at -40%, and at -50% up to 50% of the cash I went into at a -5% decline.
I agree with Trade In Mexico- I think at this point down- yes we may even go deeper-
but are you positioning to be a day trader or an Investor? Don't let the emotion of the moment we are in cloud the vision that we also have a way out- difficult as it may be.
They say the market looks ahead- Our vision should not be what this week's stimulus reaction will be- but where will we be in 6 months- 1 year- ? Position accordingly -It's new to me as I have spent years following momentum with trailing stops- and that got me out early- but trying to time the reaction to an event - You need to front run it or you are already late.
But now is a time to step back and reset -At least for myself-
I'll have some lower limit orders waiting if we go down another -10 or even -20- and with increased size the lower we go. But i have to believe we will see the markets in recovery mode in the next 3-6 mos. We will struggle as a Country- but this will prove to be a great Buying opportunity- for those with a few years of patience- perhaps less- As a society, we are more resourceful when pressed, with the proper backstop ....
I think this virus will impact us as much -or more- as the 2008 housing/finance collapse did- and perhaps for the better in the long run- As long as WE can come together as a society, protect our people from financial disasters on the personal and small business fronts- we become more resilient as a society because we overcame - despite our difference- a common foe- and- maybe long term positive changes come about in our society that are overdue- With every disaster comes an evolution-
I- and my spouse- personally are fine - but i have 2 daughters- Mothers each & owners of their own small businesses- that only see this as the disaster for them financially that is already here-and overwhelming- them and their responsibilities- They- Like millions of other Americans- have never experienced a set back like this in their lives- totally out of their control - and are not emotionally evolved by past experience to believe there is light on the other side- At the present time- They only have a sense of the Fear of the unknown that we are facing- Complete shut downs of their way of making a living, how do you suddenly go to not having a source of income? The Gov't shut down their jobs as non-essential- and not allowed to open their doors.... To stop social interaction to combat the spread of the virus.
Somehow- I believe we come through this united & stronger as a citizenry of a Country that protects it's people-, it's businesses, our way of life; and we will come out the other side of this -stronger and more confident in what we may have to face in the future- As long as the Gov't steps in and supports those affected.
Certainly, this will be a wake-up call for investors- Valuations may once again be a consideration-
Good luck to those that can time the market moves day by day-
We have to be getting closer to a "Bottom" - and I find I have chosen to believe that buying in at these levels is a real discount to the future earnings a year or two down the road.
Granted- I am not all in - about 45% But the lower we go- the more I am willing to BUY.