Thread: Strategies

Strategies

"BEST SIX MONTHS" STILL AN EYE-POPPING STRATEGY

Our Best Six Months Switching Strategy consistently delivers. Investing in the Dow Jones Industrial Averages between November 1st and April 30th each year and then switching into fixed income for the other six months has produced reliable returns with reduced risk since 1950.

Courtesy of: www.stocktradersalmanac.com

Well for 2006 they have been right on... Attached is a jpg chart for most of this year. To see the chart simply go to the attached image and open.

The section on their page about using the MACD during the best six months is pretty good. Look at their loss about using the MACD during the worst six months!

Thought I'd share this with everyone to see what you think. It was passed on to me. A can see how this would work in that you are probably taking advantage of the fact that payroll end of month money is going into the market as well as end of month/quarter/year window dressing. Obviously we can't sell short, but it would be nice if we could. See what you think.

Calendar Studies:

We read an interesting article, Calendar Trades in Equities That Work, by Art Collins in the August 2006 issue of Futures magazine. It suggested that one of the simplest trading systems might involve simply buying and selling based upon the time of month. Art found that buying on the opening on the trading day after the 21st of the month and selling short on the opening of the day after the 6th of the month produced outstanding profits, albeit with enormous drawdowns at certain times.

Now, that is not a trading system. But, it does illustrate how the market does have pronounced monthly seasonal tendencies which might be incorporated into a trading plan. One of the simplest ways to use this information is to demand a stronger buy signal between the 6th and 21st of the month and to demand a stronger sell signal between the 21st and 6th. This would likely help keep you in tune with the monthly seasonal trend.

One of the most interesting things about the study was that the short trades were profitable. The stock market has a strong overall uptrend, so one would think that short selling would be unprofitable if done half of the time, but, no, it's not. That suggests the monthly seasonal trend is actually stronger than the underlying uptrend in the stock market.

My short term strategy-

Remain out of stocks while this baby continues it's shakeout, but be poised for a return. Wait until we've seen some solid indicators that the bottom is past. I'd say something like three or four days in a row that things are solid, before beginning to inch my way back in.

Yes, I won't buy back in at the absolute bottom. But I will get a better deal than if I had remained in. Luckily I was 30% out of stocks and into "F" fund at the moment it tanked- If I had been closely following my plan, I should have been 50% out, but, hey, we all miss nw and then.

I'd just as soon see another 5 or 6% knocked off the price.

I think the fundamentals are still good overall, except for what is about to happen with the mortgage markets from all those sub-prime loans out there. So we should get a healthy bounce back once the smoke here clears.

My short term strategy is stay in the market and wait for a sharp rise this week, and then get back on the sidelines for the second dip. Looking at previous corrections in May '06, August '05, March '05, and Dec '04, it appears that market tends to pop back up after the first part of a correction, recovering about half of it's losses, and then subsequently sharply decreasing down again, erasing the pop and then some. So I'm expecting a 2-3% gain within the next couple of weeks, before another 6% dropoff. Just take a look at some long term charts to see what I mean. Don't get caught buying after the "pop" because you see strength in the market, only to get burned.

Anybody got anything to say about the I Fund in relation to the USM as this goes into next week now?

Just wondering.

I anticipate more fear money to continue shifting out of the internationals and finding refuge in the S&P 500 and OEX. The Mrs has confidence in the AEPGX fund and will reenter sometime this month at perhaps much lower pricing. She was out $1.00 early and may reenter early.

Originally Posted by Wolverine

Anybody got anything to say about the I Fund in relation to the USM as this goes into next week now?

Just wondering.

For what it's worth, I saw Ben Stein on TV in a round table discussion as they chose which stocks to play if there is a recession on the horizon. His pick? The EFA. Sees the dollar continuing to drop.

Originally Posted by VirginiaBob

My short term strategy is stay in the market and wait for a sharp rise this week, and then get back on the sidelines for the second dip.

This is probably exactly what will happen but it will be very difficult to play. When the market starts to shoot up for a bounce, that feeling of, we've seen the bottom and it's time to buy hits us, and the fear of missing the rally usually outweighs the more logical outcome which is a trap and another move down.

It will be very tempting to buy if we are down again Monday, but can we sell again if we get a strong bounce? It will be a battle of emotions no doubt.

Originally Posted by tsptalk

It will be very tempting to buy if we are down again Monday, but can we sell again if we get a strong bounce? It will be a battle of emotions no doubt.

It always is. It is amazing how many times I can predict what is going to happen, yet fail to act upon my own prediction due to emotions. For example, the last 2 months of the cyclical market. I stayed out during the down cycles, but failed to move everything in (only moved in 50&#37 during the up part of the cycle. Although, in a way this paid off for me this week, since I made an emotional decision to stay out for one more day (Tuesday), instead of putting my money where my mouth was. But leaving my emotions out of my strategy, I should have been all-in for Tuesday. One of the rare instances of emotions paying off.

The below link is influencing my decision:

http://www.amateur-investor.net/Week...s_Mar_3_07.htm

This guy absolutely called the drop this week, so I'm going to pay more attention to him.

Looking at the sentiment survey, it actually did a good job last May and June of missing the drop, catching the bounce, then getting out again in time for the next push down. But that data is strickly based on weekly closing prices so again it would take discipline to follow.