I'm Forecasting a Down Stock Market

[Arindam]

Everyone has seen variations of the first chart.

A recent article at ZH overlays the SP500. Do Not Be Fooled. It Is The "Return To Normal" | ZeroHedge

For sure, the overlay could be dismissed as mere cleverness. But Rickards --in his own ways-- makes the same case for a crash. He also suggests portfolio allocations to survive such an eventually, which includes PMs, hard assets, a lot of cash, etc. But my thought is this: “If asset prices are headed down, why not sell short with at least a portion of one’s portfolio?”

Selling short is a hassle due to often abusve borrow fees or worse, the often inability of your borker to borrow shares, plus you’re responsible for paying the div. Fortunately, there’s a workaround, inverse ETFs, of which there are roughly 103 that cover the major sectors and asset classes. So that’s my project over the next couple of days, to see if HA Smoothie might turn a profit if applied to inverse ETFs, and then to start putting on some small, real money trades next Monday.

I invite you to jump into the thread with your own thoughts on what’s ahead for the US economy and its financial markets and how best one might deal with that.

Arindam

[Quillnpenn]

Grasshoppers !

The recession is coming and would guess that the HODLers with their 401K , Roth IRA’s or IRAs are losing about 22% in VALUE today.

The Tetter Totter will save their ASSets. But some 401k’s won’t allow the HODLers to Swing Trade. The administrators have complete control.

Whose money is it, theirs or yours.

Arindam writes in part:

“Fortunately, there’s a workaround, inverse ETFs, of which there are roughly 103 that cover the major sectors and asset classes. So that’s my project over the next couple of days, to see if HA Smoothie might turn a profit if applied to inverse ETFs, and then to start putting on some small, real money trades next Monday.”

Arindam, we call it Tetter Tottering via the BC using the ARCs or AKA smiley faces per the pairs. Or using the Simon Sez charts. “Chef’s choice”.

They both react to the same trade, same day out of the gate. Same finish line. Don’t do options and don’t short the stocks.

Just did a sample of a dirty dozen by throwing darts on the page of ETF’s pairs to trade. 12 out of 12 successful current trades with zero losses.

Have been doing the Tetter Tottering since 2006 - 2014 and have earned a substantial amount of money. Starting with a bank roll was 50K and 2014 - 2022. with 100K with skin in the game. e.g… SPXL / SPSX: QQQ / PSQ.

[buynholdisdead]

I have been looking at the SPXL and SPXS. Here is a ha smoothie with 2 months

So looking at that I should have been in on 2/10/23 and holding for a glorious run up.

But here is a look at a 5 day chart.

Many up’s and down’s in that chart. Now I am going to give the closing price of SPXS from 2/10 to 2/23

2/10 18.34
2/13 17.69
2/14 17.71
2/15 17.55
2/16 18.31
2/17 18.47
2/21 19.56
2/22 19.64
2/23 19.39

So I would have bought in at $18.34 and today at 19.39 I would have Received 1.05 cents. Which would have been 5,725 dollars on a 100,000 dollar investment for 9 days. That is pretty good in my mind, but would you have played that differently by getting in and out every day?

Andy

[Arindam]

Andy,

Your question about how one might have traded SPXS recently is exactly what I’ve been struggling with. The answer depends on what one’s purposes and opportunities are. If he/she has a day job and can’t (or doesn’t want) to be in front of a computer screen and doesn’t want to use stops or profit targets, then how he/she would trade anything --not just SPXS-- is going to differ from someone who uses stops and differ yet again from someone who monitors positions intraday and makes adjustments accordingly.

Let’s call those three differing personal circumstances: Model A, Model B, Model C.

Model A. Each evening, after market close, he/she reviews two sets of charts: one set for open positions and another for the tradables they are tracking. If HA Smoothie (HAS) says to close or to open a position, enter a market order to be executed at next day’s open. Wash. Rinse. Repeat. This is as simple and as basic as it gets. I haven’t yet done the needed backtesting to prove the system would be profitable, on average and over the long haul across all market conditions and all security types, but that’s my expectation. This investing/trading stuff ain’t rocket science, and a daily 10-15 minutes should be all that’s needed once the system is understood and practiced.

Model B. Same evening review as before. Same amount of time. But this time, also identify support and resistance levels, decide where to place a stop, and then write and submit the appropriate orders. Wash. Rinse. Repeat. There’s no need to backtest this system to prove robustness or profitabliity, because it’s the same system Ed Seykota advocates and uses himself.

Model C: Same evening review as before. Same setting of stops. But this time, positions will be monitored intraday day and pulled if they offer windfal profits.

Thus, Models A, B and C use the exact same chart template and (mostly) the same interpretation rules to make entry/exit decisions. Here’s the chart template (done with a 1-month lookback for clarity).

Feb 7. Dots turn from ‘red’ to ‘green’, but TSI is negative. DO NOTHING.
Feb 8. A seond green dot appeared and TSI turned positve. BUY TOMORROW.
Feb 9. The position is put on at market open at a price close to 17.48.
Feb 10. The evening review confirms that the market confirmed that the entry was correct. (I.e., there’s another green dot. TSI becomes more postive.) DO NOTHING.
Feb 13. The evening review sees another green dot, but notes that TSI is rolling over. DO NOTHING.
Feb 14. The dots have turned to red, and TSI has declined futher. Were it me, I’d say. GET OUT TOMORROW.
Feb 15. The order got filled close to 18.02. The net-gain would be close to 3.09% or 51 basis points per day, which is killer money even when it is discounted by the likely 3/4th of the time one would be standing aside.

I could grind through how Model A would trade SPXS for the rest of the month and how Models B and C would trade SPXS over the same days. But there’s no need to, because it’s pretty obvious, and it’s something that anyone who wants to use the HA Smoothie system is going to have to do for themseves, for a lot of stocks, over a lot of market conditions, so that one understands what to do, no matter what happens.

I will say this, though. What’s likely to make or break one’s account isn’t one’s entry/exit rules but one’s policy for sizing position, just as Van Tharp has demonstrated.

Arindam

[buynholdisdead]

Thanks Arindam, I have been looking at Nat Gas because it has been down so much and I think Boil and Kold could be Tetter/Tottered. It looks like Boil is starting to take off.

Andy

[Arindam]

" Have been doing the Tetter Tottering since 2006 - 2014…"

Quill,

BarChart’s screener says there are 74 triple-leveraged ETFs and 138 double-leveraged. That’s way too many to handchart each night. Not all pair up long and short. Some could be discarded for being too thinly traded or for being redundant to each other. Some focus on just single stocks. Some are outrageously high-priced AND illiquid. I’d be willing to handchart 25 pairs max that cover the key markets. That means I’ve got a lot of culling to do this weekend, besides shoveling the nearly foot of snow that fell on Portland and just isn’t melting away.

As my Dad used to say, “No rest for the weary. And the righteous don’t need any.”

Arindam

[buynholdisdead]

Hi Arindam and Quill,
I have a question if you can indulge me. So Arindam you think this market is going down. So SPXS and SPXL are a way to play that idea. SPXS is the 3x bear and SPXL is the 3x bull on the S and P. Here is SPXS on a 2 month chart.

Now if you look at that I should have been in it on the second green ball which would have been on 2/13/23 but as you can see it had a bunch of Doji’s up until 2/16. On the 14th, 15th and 16th the Doji was actually red. But on the 23rd we had a Candle that looks like the start of a strong uptrend and the last candle on the 24th confirms the strong uptrend. Here is the SPXL.

This is showing a strong downtrend which it should because it is the opposite of SPXS.

So seeing these two charts would you say I have missed the move? Or, since it is strong do you think I should play this as having a strong momentum and can be still moved on?

Andy

[Arindam]

Andy,

I don’t trade SPXL/SPXS. That’s Quill’s balliwick and forte. But I’d say this. If you’ve gotta ask how to trade the pair, you shouldn’t be trading it. You’re just going to get yourself into trouble.

Arindam

[buynholdisdead]

@Arindam

But I’d say this. If you’ve gotta ask how to trade the pair, you shouldn’t be trading it. You’re just going to get yourself into trouble.

Right Arindam that is why I am asking questions. It’s the way that I learn more.

Andy

[buynholdisdead]

Hi Arindam,
I think I need to study and stick to the rules that Quill made up instead of trying to get around them. I believe the answer is in the rules, thanks.

Andy

[Arindam]

Andy,

There’s a trader’s proverb that goes like this,“No one can trade another man’s game.” But if you build it yourself, you can fix it yourself.

Arindam

[buynholdisdead]

@Arindam

There’s a trader’s proverb that goes like this,“No one can trade another man’s game.” But if you build it yourself, you can fix it yourself.

I also didn’t realize it but you also need a frame work. The more video’s I am watching the more this is becoming clearer.

Andy

[Arindam]

Andy,

Trading styles resemble fishing styles. They’re going to vary from one angler to the next, even if both are on the stretch of water and have agreed to use the same fly.

My son will attest to that. We had bushwacked down to Hatchet Creek that he had fished the year before with a buddy and had done well on. We were both using 7’, 3wts, with a #10 Madam X tied on, taking turns to make the first cast at each pool as we worked our way up the canyon. Our reading of the water and where we’d cast overlapped, but also differed, something he’d constantly comment on.

The opportunities --or not-- that two traders see in markets will overlap, but they will also differ enough that neither should try to clue off of the other. That’s why I say to not try to trade Quill’s system, but to trade your own.

Arindam

[Quillnpenn]

Andy,

At this point in time, you missed the Train, we never chase a stock, you will have to wait for the train to make its next stop so you can buy SPXL.
I have seen a many of the Dashing Dan’s get heart attacks trying to catch up to the train speeding away.

My spider Lucas perched high on top of my monitors, says we wait for the Prey to come to us and not the inverse.

Now Andy, put your mouse on 2/10/23 and describe what you see one bar to the left for SPXS and then look at SPXL.

Have at least a 6 pack of pairs from the list I provided a little while ago.

Now let’s look at the Simon Sez III charts I use exclusively, let’s look at SPXS and place the mouse on 2/3/23. What do you see the next bar to the left? What did Simon say for you to do. Please review the rules over and over again. I believe I repeated the rules to the Physician a few days ago.
You will succeed by being kewl with patience and discipline. Werks for me.

[Arindam]

Quill,

I love you dearly. But (nearly) every time I try to replicate how you would have done a trade, I finding myself disagreeing on its timing. No surprise there, right? Because we aren’t the same person, we don’t see the same opportunities. Same-same as I said about fishing. Even on the same water, even using the exact same equipment, our casts and catches would be different.

Andy asked about SPXL/SPXS, and you replied, saying that Feb 3 was the turning point based on price labels. But price labels aren’t a part of my version of HAS, because I dislike the fact they constantly repaint. Therefore, for me, Feb 3 was a day when HAS said, DO NOTHING. Yeah, TSI had begun to roll over. But there was no lower wick on the long candle, and the SAR dot was still green. That’s three to four positives compared to one negative, and enough evidence that nothing needed to be done.

The next day, Feb 6, is a whole 'nother matter. TSI goes negative. The candle shortens, and a lower wick appears. Yeah, there’s still a green SAR dot. But the weight of the technical evidence is now negative, creating this signal, GET OUT TOMORROW.

One might think that a signal to sell SPXL would also be a signal to buy SPXS. But that isn’t the case. As looking at a chart shows, the signal that SPXS generated on Feb 6 is DO NOTHING. On Feb 7, the SAR dot turns green, and the candle becomes an unmistakable doji. But TSI doesn’t confirm. Therefore, for me and my version of HAS, the signal is again, DO NOTHING. That changes on Feb 8 with TSI turning positive, creating a signal that says, BUY TOMORROW.

My version of HA Smoothie (HAS) gets me out of SPXL on Feb 7 and into SPXS on Feb 9, and I can replicate the process that underlies those trading decisions, for any stock or ETF, across any market condition. Therefore, I’ve got a good enough ‘timer’, and I’m going to cease tweaking HAS and focus on fleshing out the other two components of a beginner’s trading system, namely, a ‘scanner’ and a ‘position-sizer.’

Summary: An investing plan --aka, a trading system-- needs to tell its user three things: What? When? How Much? AFAIC, HAS is plenty good enough about saying, When?

Arindam

[buynholdisdead]

@Quillnpenn

Now Andy, put your mouse on 2/10/23 and describe what you see one bar to the left for SPXS and then look at SPXL.

I see the smiley face and it is time to go long.

@Quillnpenn

Now let’s look at the Simon Sez III charts I use exclusively, let’s look at SPXS and place the mouse on 2/3/23. What do you see the next bar to the left?

Ok I see the price label and it is telling me to buy. Hmmm that is interesting I would have been in on 2/3 instead of the 10th. Here is my chart.

As you can see Quill it would have kept me out and the earliest would have been on the 9th after the smiley face. Thanks Quill that is exactly what I needed. Great information and helps me think through the process. I will look for you post to physician. I am starting to understand to follow the rules exactly to keep your emotions and actions under control. Thanks again.

Andy

[Quillnpenn]

Andy,

Look at the following topic. Just have to kruz around. At the bottom area will be of interest for gold and silver Tetter Totters.

Here’s a Tweak to HA Smoothie

what are the two moving averages in the middle of you charts and how do you place them. I am hoping they are the TSI’s.

[Arindam]

Quill,

The MAs in the middle of his chart are the TSI plot. They got there, because any indicator can be overlaid on the main panel plot. But unless the chart is built with a second panel, TSI doesn’t plot well in the main panel.

A

[IBHefty]

Quillnpenn,

I think I understand your simple rules for simon sez III. I have not seen a mention of a stop loss…Do you think stop loss with a close below the low of the ‘price label’ bar is a good idea?? I like your simple rules but do not know what to do if trades goes bad… Thanks!

[Arindam]

IB,

From Investopedia (which is always a good place to get answers to investing questions:

• Figuring out where to place your stop-loss depends on your risk threshold—the price should minimize and limit your loss.
• The percentage method limits the stop-loss at a specific percentage.
• In the support method, an investor determines the most recent support level of the stock and places the stop-loss just below that level.
• The moving average method sees the stop-loss placed just below a longer-term moving average price. Determining Where to Set Your Stop-Loss

Also, there are time stops and volatility stops.