Every bubble ends the same...

Yeah the problem like you say is you don't know when it will end. If it goes a couple more years, you are missing out on a great time to make money; it's very hard to make money on the downside because the biggest green days occur when volatility is increased.

There's a couple of technical things: 1) I've heard about the December low indicator which is "if the first 3 months of new year make a lower low (I think it can be intraday) than December's low then that is bearish". imo this indicator is imprecise, but it's something to watch. eg how long bearish? Does the low have to be end-of-day or can it be intraday? Says nothing about when to get back in, which is the big problem when you exit the market. etc. I'm just bringing this up because we haven't fallen below December's low (so not bearish = bullish?).

There's another one that has been tested and is the simplest timing indicator; 2) Exit market if SPX closes the last day of the month below the 10-month sma. Re-enter the market if SPX closes the last day of the month above the 10-month sma. If you follow this technical timing indicator you beat the market. It works because you seem to miss the really big drawdowns, which is what everyone wants to avoid.

Now, this indicator worked last February before things really got bad at the start of COVID, but you also missed the big rally. You ultimately missed very little (great for your Sharpe ratio) and would still beat the market. Like I said, it works at getting you out before things get really bad. This didn't do as well when you only had a 30-day bear market lol, but it shines in the real crashes like 2000 and 2008. And you only check it once a month.

 

I beg to differ with that statement. It is far easier to make money to the downside during corrections because the speed (and frequency) of the drop is much faster than the speed of increase.

In more practical terms, in 2008-2009 there were many of the "biggest green days" seen in a long time. The problem with that idea is that overall, the DJIA was dropping from 14,000 to 6,800. It was a no brainer to be short. The same was true during the 2000 Internet Bubble (market down 50%).

 

I fully agree. Panic normally outweighs confidence. Naturally we all have our different views and styles, which is very important in itself for obvious reasons. A lot of these bulls were recently caught of guard and the FUD was a excellent play to the downside. Obviously your experience drawfs mine but we are definitely on the same page.

 

Good judgement comes from experience.
Experience comes from bad judgement. :->)

And continuing with hokey statements:

"A man's got to know his limitations." ~ Dirty Harry

I agree. You have to figure out your own style of trading. Know what you want to do. Determine your risk tolerance and what you're going to do if/when it hits the fan (risk management). If you don't have this all worked out beforehand, you'll be the deer in the headlights and the market will roll you.

 

2 instances in 25 years. And you cherry picked the exact top and exact bottom in hindsight.

Easy to make money in last year's bear market? There was a steep and fast 30% drop in just 3 weeks. Of course, 30% if you shorted exactly from the top and got out exactly at the bottom.

 

A thing called options can highly leverage those plays. Up or down. Depends on how you employ them.

 

Depends on when you employ them.
Any indicators you willing to share? Of course, no indicator is 100% so your leveraged play loses sometimes right?

 

You are 100% correct. I have never and will never achieve a 100% success rate.

Most of mine are momentum or news related, obviously yield curve correlates to tech, oil prices correlate to oil stocks, short squeezes can be very successful. RKT was my biggest winner of the year so far, basically a news related play.

However, things can and do go south at times.
Friday I made 2 plays and BOTH were losers. You bring up a excellent point. NOBODY will have a 100% execution.

 

Defensive much?

You're the one who stated that "it's very hard to make money on the downside because the biggest green days occur when volatility is increased." To put it politely, that's a silly statement. And yes, I was net short for all of 2008 and a good part of 2009. If the market is dropping 50%, you have to be oblivious not to recognize it and foolhardy to expect to succeed by swimming upstream (going long).

Last March's drop was fast and deep so it was hard to transition from long to short but I don't have to cherry pick the exact top and the exact bottom. I hedge a lot of positions therefore my portfolio (I'm retired) is never whacked at any time. The options manage the timing and as long puts appreciate, they are rolled down, lowering cost basis and while managing the risk. I rode a bunch of large cap positions down more than 50% and lost a fraction of that. No cherry picking necessary. Only the good sense not to accept such losses.

 

AMEN BROTHER.

 

Not defensive at all. If you measured my defensiveness in degrees Celsius I'm -273.15.
I just stated facts in my 2nd post, and continue to stand by my 1st post that it's not easy to make money in a down market.

2 -50% drops in 25 years. Thousands upon thousands of bears predicting another -50% drop last year; heck in the last week. I don't know when those bears covered their -30% drop because they figured out it wasn't a -50% drop. Pick any week, you'll find a YouTube video. The macroeconomics were all there last year including the yield curve inversion and housing market peaks, etc.

All I'm hearing are vague strategies. And even they can work sometimes, I know.
This fool hopes you caught every cent of that bull market from 2009 to 2020 as well.

I've been at WSB since 2015. I've seen the +100,000% options plays and I've seen the -99% options plays. The trick is to know when you're in the +100,000% play, and when you're in the -99% play before it's too late. I'm open to indicators.

 

The correct statement is that it's not easy for YOU to make money in a down market.

I predict nothing. No "+100,000% options plays." No "-99% options plays." And no need to know whether "you're in the +100,000% play, and when you're in the -99% play before it's too late." Hedging manages the timing for you.

I leave the mumbo jumbo indicator talk to you. They can provide information like support and resistance, current trend, current momentum but they are a reflection of past price and/or volume movement and they predict absolutely nothing going forward. It's like looking in the rear view mirror and expecting that to tell you where you are going. Any trade that you take based on such analysis is based on the HOPE that whatever trend or momentum you have identified will continue.

 

Still laughing at the thought that I was defensive.
Do I have a reason to be defensive here?

 

I see, YOU just know but are not sharing anything. I just don't know.
A simple brush off.

Like I said, I like the 10 month sma indicator even though it is not 100% correct. It has so far though been right at getting out of the big drops.

 

Promise?

 

Some can make money in both markets,some cant.

Not being argumentive, just honest. Most of my gains are well under the mega plays, RKT was one of the RARE plays that paid off GREAT, the buys kept piling in and it being a short squeeze I simply let it ride until the momentum played out.
Those are few and far between.

Fear plays are usually best as the sellers and the short players can often make it like shooting fish in a barrel.
I have NEVER made the 100% success rate and never will.

 

Congrats on riding RKT up. I've never had the pleasure of being long during a short squeeze but it's a thing of beauty to watch. The GameStop squeeze was fascinating. I've utilized options for decades but was unaware of the gamma squeeze contribution. Good to know about and good to not be on the wrong side of one.

 

Its a mathematical thing. Fools the chartist everytime.

 

Part 1 of 4 of a classic. Traders and sphincters should watch all four. Mark Douglas, trader of futures and options and author of "The Disciplined Trader" and "Trading in the Zone", may he rest in peace.