Tactical Asset Allocation + HBPP an intriguing combo

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Re: Tactical Asset Allocation + HBPP an intriguing combo

Post by pmward » Wed Apr 29, 2020 8:16 pm

decipede wrote:
Wed Apr 29, 2020 8:05 pm
ochotona wrote:
Sun Mar 15, 2020 4:35 pm
I got an email 30 min before market close advising me to sell. Emotionally very easy. Push the button, logoff.

But I knew it was coming based on the moving average Paul uses.
Ochotona, I was looking at Paul Novell's website after reading your posts and couldn't find some info.

The coronavirus decline began on Feb 19th and SPY dropped below 200MA on Feb 27th. So Paul's SPY-COMP would have signaled exiting the position, getting you out with minimal losses.

However, are his signals only at the end of the calendar month? What if the crash started on Feb 28th and bottomed out at the end of March? The portfolio would have taken a full 35% hit (much more than SPY-COMP's max drawdown till date). At least on the face of it, it seems like SPY-COMP has lucked out so far and may not be robust against drawdowns.

Does Paul address this concern and/or provide any way to mitigate that risk? And do you have any opinions on it?
Yeah, I myself have a gripe with the strategies that wait until month end. The markets just move way too fast these days.
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Re: Tactical Asset Allocation + HBPP an intriguing combo

Post by ochotona » Wed Apr 29, 2020 8:40 pm

Novell has end of week signals and also a daily volatility buy-sell signal. You are not limited to monthly trades. I agree markets move too fast these days.
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Re: Tactical Asset Allocation + HBPP an intriguing combo

Post by ochotona » Thu Apr 30, 2020 4:43 pm

The GEM portfolio is in Bonds for May 2020 (AGG, BND, SCHZ)
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Re: Tactical Asset Allocation + HBPP an intriguing combo

Post by pmward » Fri May 08, 2020 4:16 pm

Moving discussion over here from another thread, as it better fits here:
Vil wrote:
Fri May 08, 2020 3:03 pm
pmward wrote:
Fri May 08, 2020 11:24 am
You can see on this page me and Ocho having a discussion about it as I was digging into the system, and I gave the basic algorithm for the strategy.
Thanks for the link, got the overall idea, but the point about the economic indicators I do not really understand. Actually, I share the common(?) belief that markets are somewhat following their own way of interpreting things going on; as Dalio currently stated "there is a real economy and there is a financial economy, which are intertwined but different. The real economy and the financial economy each has its own supply and demand dynamics".
Yeah Novell is basically using the economic data as a crap filter to help reduce unnecessary whipsaws. He likes to pair the economic data with his systems that use slower trend signals, as the tradeoff to slower signals is that they can be prone to some pretty big whipsaws when the market does a quick rip down and back up. In SPY-COMP when all economic data is good, then you ignore any technical sell signals from your trend following system. This means that you hold through the shallow quick corrections (like many that we had from 2010-2018) instead of risking the potential of selling the bottom and buying the top. This would have prevented people from selling and getting whipsawed in a lot of the quick shallow corrections. It really only sells if there is evidence of a real potential recession in the economic data. He does use some forward looking market based data too, like yield curve inversion, so it is pretty robust. If only one of the economic indicators is flagging danger, then you listen to your trend signals. It's only when they are *all* green that you ignore them.

Of course, his favorite economic indicator, the unemployment rate, is going to be destroyed for quite awhile to come from this redonculous jobless data we have right now.
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Re: Tactical Asset Allocation + HBPP an intriguing combo

Post by mathjak107 » Sat May 09, 2020 4:42 am

ochotona wrote:
Thu Apr 30, 2020 4:43 pm
The GEM portfolio is in Bonds for May 2020 (AGG, BND, SCHZ)
That gem missed a pretty good stock run up
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Re: Tactical Asset Allocation + HBPP an intriguing combo

Post by pmward » Sat May 09, 2020 9:16 am

mathjak107 wrote:
Sat May 09, 2020 4:42 am
ochotona wrote:
Thu Apr 30, 2020 4:43 pm
The GEM portfolio is in Bonds for May 2020 (AGG, BND, SCHZ)
That gem missed a pretty good stock run up
I would personally never use a trend system like GEM that waited until end of month for signals. Daily signals are best. Weekly is good too (just don't make Monday the day of the week that you trade, haha). Monthly is just asking to eat your shirt with how fast markets move these days. There is always the tradeoff though of how sensitive you want your signals to be. GEM is meant to be a very slow and insensitive signal specifically catered to those that want to minimize trading and not have to look at their portfolio often. It's always going to sell and buy late. It really only gets it's alpha during big bear markets like 01-03, 08-09, etc. If this turns into a year long or more debacle that goes down below 2000 then it will benefit on the whole. If the bottom is in however and stocks continue higher, it will be lucky to buy back in at the same price it sold and likely will take a drawdown. A quicker signal would get in and out quicker, but require more active monitoring, many more trades, more short term capital gains tax, and if too quick can take a bunch of small drawdowns on the quick run of the mill corrections that slower systems would have just held through. There's a bit of a balancing act to be had, something I have had to think very hard on as I was researching for my 30% quant allocation. But yeah, GEM has no appeal to me personally.
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Re: Tactical Asset Allocation + HBPP an intriguing combo

Post by mathjak107 » Sat May 09, 2020 10:17 am

it is like driving and looking in the rearview mirror
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Re: Tactical Asset Allocation + HBPP an intriguing combo

Post by pmward » Sat May 09, 2020 10:27 am

mathjak107 wrote:
Sat May 09, 2020 10:17 am
it is like driving and looking in the rearview mirror
Isn't any form of analysis? All the data is always in the past. You cannot have future data. Once you have data to analyze, it necessarily has to have already happened and is by very definition in the rearview mirror. We all use the past to help formulate the probabilities for the future. There's nothing wrong with that at all. Even people that don't do formal analysis and trade just off of gut feeling use the past as the basis for their gut feelings.
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Re: Tactical Asset Allocation + HBPP an intriguing combo

Post by mathjak107 » Sat May 09, 2020 11:02 am

Which is why I don’t count on the past for much ....I place my bets and let it ride..history never repeats itself , only historians repeat themselves ....each time is just different enough that what you thought plays out differently

Even the same events play out differently..first Iraq invasion stocks tanked...second invasion they soared
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Re: Tactical Asset Allocation + HBPP an intriguing combo

Post by pmward » Sat May 09, 2020 2:30 pm

mathjak107 wrote:
Sat May 09, 2020 11:02 am
Which is why I don’t count on the past for much ....I place my bets and let it ride..history never repeats itself , only historians repeat themselves ....each time is just different enough that what you thought plays out differently

Even the same events play out differently..first Iraq invasion stocks tanked...second invasion they soared
But you still use the conditioning and patterns you've learned from the past. For instance, in your day trading thread you put on a lot of mean reversion trades. Something is extremely down today you buy to sell in the high probability bounce during the coming day or two. Why do you do this? Because of the patterns you've noticed in the past, combined with the fact that you've put enough winning trades on using this tactic to give you the reward to encourage doing it again in the future. Fundamentally, yes history changes and things don't always follow the same patterns. But technically speaking, patterns repeat all the time. There's nothing wrong with using those recurring patterns to profit, whether that be playing quick mean reversion trades on a big dip or using trend following signals. Neither of these are going to be 100% right all the time, but if done properly they both can net substantial alpha in the long term over just buy and pray. And even buy and pray is counting on the same past patterns. Buy and pray is a quant strategy, it looks back at history and says stocks always have to go up and uses that pattern as the basis for holding through a large drawdown.
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Re: Tactical Asset Allocation + HBPP an intriguing combo

Post by mathjak107 » Sat May 09, 2020 2:50 pm

I trade strictly by a feel in my butt ...no lines , no charts , no squiggles ....things go up , things go down and we hope when they go down they go up ...it don’t get any simpler ha ha

Other than that I have no faith or belief in that stuff , never did

By step brother was a professional trader ...he worked on Wall Street and was responsible for trading only two stocks , Amgen and trident energy ...the company had their special proprietary software with all the parameters built in to successfully trade ....it worked well , until it didn’t ...needless to say he didn’t do that very long
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Re: Tactical Asset Allocation + HBPP an intriguing combo

Post by pmward » Sat May 09, 2020 2:56 pm

mathjak107 wrote:
Sat May 09, 2020 2:50 pm
I trade strictly by a feel in my butt ...no lines , no charts , no squiggles ....things go up , things go down and we hope when they go down they go up ...it don’t get any simpler ha ha

Other than that I have no faith or belief in that stuff , never did
My point is it doesn't matter what you use, even if it's just your feelings, your feelings are still influenced by the patterns you've seen in the past. If you looked at a chart's squiggles you would probably find that you buy similar "setups" in the same way a technical trader does. But instead of quantifying those setups on a chart, you're quantifying them based on the percent down vs the norm and that is triggering a gut feeling. It's really no different. You're still doing mean reversion trades, which is a very common strategy for technical traders. Why is it a common strategy? Because past patterns have shown it to work, and in practice it has worked, so you keep doing it.
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