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Portfolio123 » List all forums » Forum: General Comments » Thread: Today is PANIC day |
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Koronbock
Advanced Member  GERMANY Joined: Jun 11, 2006 Posts: 166 Status: Offline |
Wow, today looks like we will finally be getting that panic selling day I've been waiting for. Futures are down extremely, Asian and European are down in the neighborhood of 10%, volume is high and we will see headlines claiming the end of the world. While this IS bad, it smacks like an approaching bottom. I must admit that I have said that before (and of course I don't know if this level will hold or not, we may be going much lower) but panic days are usually good buying opportunities. Wern |
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hyper
Advanced Member
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I think there's more pain to go. All the actions from the top may just be symptomatic relief. They can't stop consumers from spending less nor can they stop investors from taking on less risk and less leverage. The growth (bubble) of the recent years has been fueled by a lot of debt. We could see years of much lower growth rates from here. Less consumption results in lower company earnings. Less tolerance to risk results in redemptions from managed funds and selling out of most financial markets. These factors could drive stock prices lower. Here are some relevant articles: The Economic Blue Screen of Death by John Mauldin Nouriel Roubini's Global EconoMonitor Deleveraging the Consumer and the New Realities of a Pay-As-You-Go World by Brett Steenbarger The Great Unwind. Wringing Enormous Debt Out of the Financial System by Satyajit Das Nuclear De-Leveraging by Satyajit Das ---------------------------------------- [Edit 4 times, last edit by hyper at Oct 25, 2008 1:45:37 PM] |
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hyper
Advanced Member
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The Consumer Discretionary Select Sector SPDR (XLY) broke the 2001 & 2002 & 2003 bottoms today (around the 20s) and made an all-time low. I have a small short position in XLY. ---------------------------------------- 
XLY-2008-10-25.gif
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stumo
Advanced Member
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Trying to predict market tops, or bottoms seems like a futile exercise. I’d like to see more comments related to how money is, or may be made in today’s market. New ideas, long, short, timing models, options (is this market volatility creating opportunity using options?)… etc. Even if simulation results are shown without the trading system details it would be good to see that others have created exciting, alternative trading solutions. There have been some great comments in the past related to using the 200day ma on the S&P as a simple but effective timing model for staying long in the market. We should be able to improve on this rule. P123 has been a useful tool for trading long, but it should be equally useful for trading short. Even though the simulation interface is not set up for running shorts (as I have repeatedly requested) P123 in its current form is still very useful for running short sims. I believe that most of us use P123 for short term trading, so it seems that we should be able to find new ways to make money in up, or down markets. |
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dwpeters
Advanced Member
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Hi, There are definitely ways to make money, or at least avoid losing money in todays market. Hedging with short ETF's is one. Here's a strategy backtest based on Mebane Faber's Quantitative Tactical Asset Allocation strategy: http://www.icarra.com/viewPortfolio.php?id=5175 I incorporated some of this into my 401K investments (w/o the shorts) .. though not enough of it to be as fully protected. Here's another that I was trading from earlier in the year until mid August when I stopped updating the trades, but still even without rotating out of commodities, which it surely would have done, it has held up well. It simply holds 3 positions in the top long ETF's that are reasonably uncorrelated and 2 positions (1/2 size of the long positions) in the top performing ultra shorts: http://www.icarra.com/viewPortfolio.php?id=3811 And since mid-August I have been trading a watered down version of this with a market timing rule. I won't discuss the rules except to say this version has NO market timing rules and at least in backtests it actually does much better in a bull market: Don ----------------------------------------
Combo5 6mo.png
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charles123
Advanced Member
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Don, Care to elaborate on your ETF strategy. Not necessarliy rules but where you developed it and general ideas. Also in the copy of the graph of you P123 system here, does this have a market timing element, and how many stocks does it hold. Thanks. |
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dwpeters
Advanced Member
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Hi, The first ETF strategy has a brief explanation on the summary page at the link. The other does not so I'll elaborate on that. The idea is to select 3 ETFs based on 6 mo performance and 2 ultra short ETF's based on the same, only updating the portfolio monthly and only replacing funds held if they were not close to the leading candidates to purchase. I had a bias to select funds that were not overbought (difficult because that is can be a contradiction with 6 mo performance) and tried to ensure the fund had positive returns over the 6 mo. From what I can tell, based on data from some mutual funds, assuming they could have been shorted, shorting the weakest of the funds based on 6 mo performance would have had returns near 0 over the past 10-15 years, as of early this year. So the idea was not to try to time the markets at all but simply to be hedged. Rotation strategies can be very profitable when going with the trend but they can have very sharp reversals ... but holding long and short those reversals should be cancelled out to some extent. The rotation 7525 is actually a 75/25 weighted combination of the two portfolio's below. I traded this strategy from 3/31/2008 through into August of this year: http://www.icarra.com/viewPortfolio.php?id=3781 http://www.icarra.com/viewPortfolio.php?id=3810 I should add that at times I sold my ultra short positions early (probably earlier than shown in the port), since I know these especially can have sharp reversals and they are not well suited for long holding periods, but if I was trading this in Oct I almost certainly would have sold the shorts way too soon. I think there are a number of ways to implement this strategy and I think the shorts do an excellent job of reducing the risk and volatility - look at the statistics on the summary page of the port's. The 75/25 mix was chosen because in the long term I am bullish and I wanted this strategy to reflect that. Don ---------------------------------------- [Edit 1 times, last edit by dwpeters at Oct 27, 2008 11:03:29 AM] |
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charles123
Advanced Member
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Can you elaborate on the system that generated the graph in the P123 screenshot? |
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dwpeters
Advanced Member
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Hi, Sorry, I won't discuss the P123 strategy, even in general. Don |
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charles123
Advanced Member
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No problem. Just didn't know if that had a timing component as well or if was always long. |
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