Stock scream room

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Kriegsspiel
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Re: Stock scream room

Post by Kriegsspiel » Tue May 14, 2019 3:31 pm

Just bought chicken at the store. About 20% of my household food allocation.
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Re: Stock scream room

Post by jhogue » Tue May 14, 2019 4:02 pm

Is this the new buddtholomew diet I have been hearing about?
“Groucho Marx wrote:
A stock trader asked him, "Groucho, where do you put all your money?" Groucho was said to have replied, "In Treasury bonds", and the trader said, "You can't make much money on those." Groucho said, "You can if you have enough of them!"
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Re: Stock scream room

Post by Kriegsspiel » Tue May 14, 2019 4:15 pm

budd is a fellow weightroom aficionado, so I am sure we've both eaten more than our fair share of chickens.
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Re: Stock scream room

Post by Cortopassi » Thu May 16, 2019 12:31 pm

Nothing short of all out nuclear war will shake this market for more than a few days/weeks. Amazing. Wonder what can cause an actual sustained downtrend.

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Re: Stock scream room

Post by pmward » Thu May 16, 2019 12:55 pm

Just as it always has, momentum works until it doesn't. Generally down trends don't start off of rumors. Matter of fact, news has much less effect on the markets than people realize. If you go back in time and look at the dates that big important news has been released and look at what happened in the markets you would be surprised at how little it actually made a difference. Even 911, which should have been murder on the stock market, was taken just as "meh" in the grand scheme. The downtrend for the bear market was already in place before 911, and 911 did not speed or slow it down, the market just continued on the trajectory and trend it already was on just as it would have done if 911 didn't happen.

The moment you start to realize that things like fundamentals, news, etc don't really matter on any timeframe measured in less than years, the more you'll be free from wondering why the market is not behaving why you expect on a given day, week, month, quarter, or even year. Technicals (measurement of current sentiment, fear, greed, momentum, trend, etc) are THE ONLY thing that matters in the short to medium term. There’s a popular saying amongst traders “the trend is your friend until the bend at the end.” What that means it is best not to bet short term against the current trend until there is technical proof that it’s over, regardless of how much conviction you have or how much it fundamentally might make sense to do so. As long as we are over the major support line at 2800, there really is not enough technical damage to even begin to consider a change in trend.
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Re: Stock scream room

Post by boglerdude » Thu May 16, 2019 10:43 pm

I cant find that post by Nisi, where he posts a stock chart, everyone reads into it, then he reveals it was randomly generated.

That said, money does slosh between assets classes, and it all cant move overnight.

Related
https://www.bogleheads.org/forum/viewto ... 0&t=245475

Ill watch tonight. https://www.youtube.com/watch?v=cy43vfYaxk0 Paul Tudor Jones - Trader Documentary 1987
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Re: Stock scream room

Post by Kriegsspiel » Fri May 17, 2019 9:23 am

boglerdude wrote:
Thu May 16, 2019 10:43 pm
Ill watch tonight. https://www.youtube.com/watch?v=cy43vfYaxk0 Paul Tudor Jones - Trader Documentary 1987
Really cool! I have always thought being a Wall Street trader would have been a cool way to go in another life.
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Re: Stock scream room

Post by dualstow » Fri May 17, 2019 10:31 am

Yeah, thanks for that, Boglerdude. Pasted it into my Telegram and can't wait to watch.
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Kriegsspiel
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Re: Stock scream room

Post by Kriegsspiel » Fri May 17, 2019 10:38 am

According to wikipedia, Paul Tudor Jones was attempting to buy up all the copies of that doc back in the day to prevent people from watching it. He didn't say why, but speculation is that it revealed too much of his methods.
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Re: Stock scream room

Post by dualstow » Fri May 17, 2019 1:52 pm

Kriegsspiel wrote:
Fri May 17, 2019 10:38 am
According to wikipedia, Paul Tudor Jones was attempting to buy up all the copies of that doc back in the day to prevent people from watching it. He didn't say why, but speculation is that it revealed too much of his methods.
Sounds like a ‘Monk’ episode...except, you know, he would’ve been covering up a murder.
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Re: Stock scream room

Post by mathjak107 » Fri May 17, 2019 3:36 pm

Kriegsspiel wrote:
Fri May 17, 2019 10:38 am
According to wikipedia, Paul Tudor Jones was attempting to buy up all the copies of that doc back in the day to prevent people from watching it. He didn't say why, but speculation is that it revealed too much of his methods.
my daughter inlaw worked for paul for many years up until last year as a matter of fact
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Kriegsspiel
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Re: Stock scream room

Post by Kriegsspiel » Fri May 17, 2019 9:43 pm

Oh yea? Small world. He seemed like a good dude in that doc.
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ochotona
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Re: Stock scream room

Post by ochotona » Fri May 24, 2019 12:14 pm

Sell in May Go Away reference:

https://stocktradersalmanac.com/Strategy.aspx

Seems well-paired to an HBPP philosophy. Rules-based, simple, infrequent actions, low cost. The ETF would be DIA, seems to work better with Dow than S&P 500. Backtested to 1950... I can't verify with PV.com

I just tested Sell in May on DIA and put it into the HBPP... for 2005-2019 data (admittedly a short period of time... GLD) you can run 61% Sell in May DIA and 13% all other assets, and get the same MaxDD but 94 extra basis points, which is pretty nice.

IT BEATS THE GOLDEN BUTTERFLY!

It's the kind of thing I could tell my daughter to implement for my wife and I when we've got drool coming out of our mouths.

Below is DIA vs DIA six best months... no other assets involved.

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Re: Stock scream room

Post by D1984 » Sat May 25, 2019 2:00 am

ochotona wrote:
Fri May 24, 2019 12:14 pm
Sell in May Go Away reference:

https://stocktradersalmanac.com/Strategy.aspx

Seems well-paired to an HBPP philosophy. Rules-based, simple, infrequent actions, low cost. The ETF would be DIA, seems to work better with Dow than S&P 500. Backtested to 1950... I can't verify with PV.com

I just tested Sell in May on DIA and put it into the HBPP... for 2005-2019 data (admittedly a short period of time... GLD) you can run 61% Sell in May DIA and 13% all other assets, and get the same MaxDD but 94 extra basis points, which is pretty nice.

IT BEATS THE GOLDEN BUTTERFLY!

It's the kind of thing I could tell my daughter to implement for my wife and I when we've got drool coming out of our mouths.

Below is DIA vs DIA six best months... no other assets involved.

Image
Is there any reason to trust that "sell in May" will always continue to work, though? It worked great post 1950....but sucked before then; see:


https://www.cxoadvisory.com/calendar-ef ... -long-run/

https://www.forbes.com/sites/rickferri/ ... away-myth/

http://www.equityclock.com/2017/05/11/s ... y-12-2017/

So what exactly changed around 1949-50 to make it work? Will whatever it is continue into the future?
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Re: Stock scream room

Post by pmward » Sat May 25, 2019 8:05 am

Yeah just because something back tests doesn't mean it's not anything more than just random luck. In this case, a couple of the largest bear market drops happened to be between May and October, and a couple of the biggest rally's happened to be in the other months. These couple cases severely skew the data. If you take out those couple random outlier years you would come to a different conclusion. And, as last year showed, this isn't always the case. Sell in May and go away would have really burned someone last year.
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Re: Stock scream room

Post by D1984 » Sun May 26, 2019 3:53 am

pmward wrote:
Sat May 25, 2019 8:05 am
Yeah just because something back tests doesn't mean it's not anything more than just random luck. In this case, a couple of the largest bear market drops happened to be between May and October, and a couple of the biggest rallies happened to be in the other months. These couple cases severely skew the data. If you take out those couple random outlier years you would come to a different conclusion. And, as last year showed, this isn't always the case. Sell in May and go away would have really burned someone last year.
Ocho, pmward,

The "sell in May" effect does seem to be merely a spurious correlation/statistical anomaly in that it wouldn't have worked so well before 1950; also, even when it did work (i.e. in the 1950 and later era up to the present) you would still have had higher returns--albeit with higher volatility and higher maxDD--simply by buying and holding through all months rather than by being in cash/T-bills half the year. Time in the market beat timing the market.

Just out of curiosity I went and looked back at S&P 500 monthly returns back to 1927. It appears that most of the worst months were typically in September and October; this applies in the present era as well as pre-1950. If you had simply sold at market close on August 31st and bought back again at market close on October 31st you would have avoided most of the worst of the crashes in 1929, 1930, 1931, 1932 (and would've sidestepped losses in 1933 to turn it from an excellent year into a truly stunning year and would've saved yourself almost a 4% loss in 1934 as well); you would've also avoided the worst two months in the 1937 crash and would've saved yourself a little over 6% in late 1941 and just over 10% in 1946.

It's not all kittens and puppies and rainbows though....this strategy would've hurt you in 1939 (market was up 15.47% and 0.31% respectively in September and October that year) and 1973, 1974, and 1975 (would have made 1973 worse by about 4.4%; 1974 worse by about 3.4%, and 1975 would've had a lower return by about 5.3%...although in compensation you would've gained a extra 3.77% in 1977, 9% in 1978, and almost 6% in 1979).

You would have given up a big gain of 12.90% in 1982 (when in autumn of that year the market was rocketing off the mid-August bottom) but would've missed a loss of 2.15% in September 1987 and the big 20% one-day crash of October 1987 (and missed that month's loss of 21.54% for the whole month). You would've evaded around a 5.2% loss in the 1990 bear market by being out those two months in 1990.

This strategy did very well in the 2000-02 bear market and the 2008 crash; in 2011 it would've cost you a tiny bit; you'd have had a 2.10% positive return by buying and holding but would've had a 0.98% negative return (less than one percent) by staying out those two months. In 2015 it would've cost you about 5.75% and turned a 1.37% gain into a 4.37% loss; but in 2019 it would've yielded around a 0.52% positive return (vs a negative 4.5% return for buy and hold the whole year) for the year by avoiding the sharp decline in October.

Will this strategy continue to outperform in the future? Who knows? YMMV.

EDITED TO ADD: All of the above assumes that for the two months you are out of the market (September and October) you are invested in plain cash earning 0% interest (i.e. earning nothing). If you assume instead that you would've invested in t-bills, a savings account, or 6-month or 1-year Treasuries during those two months then the returns would be even higher (and the losses even less) for the "stay out in September and October" strategy mentioned above.
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Re: Stock scream room

Post by ochotona » Sun May 26, 2019 8:45 am

1984, what was your data source? Sep / Oct seem really to be bad months overall, I agree. Maybe one could use some indicators like MACD to determine whether taking action during Sep / Oct is justified, and for short periods of time like this, I'm thinking maybe buying puts from time to time would work.
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Re: Stock scream room

Post by D1984 » Sun May 26, 2019 9:28 am

ochotona wrote:
Sun May 26, 2019 8:45 am
1984, what was your data source? Sep / Oct seem really to be bad months overall, I agree. Maybe one could use some indicators like MACD to determine whether taking action during Sep / Oct is justified, and for short periods of time like this, I'm thinking maybe buying puts from time to time would work.
Late 1920s to early 1970s -

Image

Early 1970s to mid-2017 -

Image

If you want to go to before 1928 then Stooq and Shiller have returns back to the late 1800s; going back to 1900 you would've missed some times when September and October were good during those years (like 1915) but also would've missed crappy months in 1902, the Panic of 1907, and 1917

Of course after 1976 VFINX is available and PV lets you backtest it to 1985 and see monthly returns
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Re: Stock scream room

Post by ochotona » Sun May 26, 2019 2:28 pm

Aw perfect, thanks! My objective is to find out when the really oversized declines occur... the ones we remember for decades and decades. I'd love to side-step those if there is meaningful seasonality + anticipatory technical indicators.

Yup... September October, bad moon rising for some reason.
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Re: Stock scream room

Post by pmward » Sun May 26, 2019 6:37 pm

ochotona wrote:
Sun May 26, 2019 2:28 pm
Aw perfect, thanks! My objective is to find out when the really oversized declines occur... the ones we remember for decades and decades. I'd love to side-step those if there is meaningful seasonality + anticipatory technical indicators.

Yup... September October, bad moon rising for some reason.
Coming from someone with experience in technical analysis, good luck on that one. That's the holy grail that everyone wishes they had. I don't think what you're looking for is realistic, it's along the lines of finding the fountain of youth. If it were possible to quantify these things, people already would have figured it out long ago, and the minute the cat got out the bag it would no longer be valid. The only thing that is clear is the past. It's easy to ride a confirmed trend. It's almost impossible to call a top, or any change of trend for that matter, in advance, or even in the early stages. There is no way to predict the future. All you can do if you want to trade is look at probabilities, hedge your bets, manage your risk, and pray. If you want to trade it's not about finding times to get all in or all out, it's about finding areas you can place small bets, and limiting your downside risk if you're wrong. You're much better off not trying to place all in bets on picking tops and bottoms. It takes a super human strong stomach to be able to even attempt this.
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Re: Stock scream room

Post by ochotona » Sun May 26, 2019 10:50 pm

I'm going to paper trade this one
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Re: Stock scream room

Post by D1984 » Mon May 27, 2019 4:15 am

ochotona wrote:
Sun May 26, 2019 10:50 pm
I'm going to paper trade this one
What are you going to use to determine if you should be out or in during the two "bad months" of September and October? MACD? NH/NL? Relative Strength vs cash?
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Re: Stock scream room

Post by ochotona » Mon May 27, 2019 7:15 am

D1984 wrote:
Mon May 27, 2019 4:15 am
ochotona wrote:
Sun May 26, 2019 10:50 pm
I'm going to paper trade this one
What are you going to use to determine if you should be out or in during the two "bad months" of September and October? MACD? NH/NL? Relative Strength vs cash?
MACD, also the Recognia AI pattern recognition service offered to Schwab clients looks tailor made for this kind of thing. I admit there are many ways to interpret MACD.
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Re: Stock scream room

Post by pmward » Mon May 27, 2019 8:17 am

ochotona wrote:
Mon May 27, 2019 7:15 am
D1984 wrote:
Mon May 27, 2019 4:15 am
ochotona wrote:
Sun May 26, 2019 10:50 pm
I'm going to paper trade this one
What are you going to use to determine if you should be out or in during the two "bad months" of September and October? MACD? NH/NL? Relative Strength vs cash?
MACD, also the Recognia AI pattern recognition service offered to Schwab clients looks tailor made for this kind of thing. I admit there are many ways to interpret MACD.
MACD gives you a general feel for the strength and momentum of the trend. But it is absolutely useless as a market timing tool, no matter how you interpret it. It can always change on a dime. MACD is ok as a way to get extra confirmation on a narrative, but it's one of the worst tools to try to make buy/sell signals from. Also, I used to trade patterns, patterns fail all the time. False breakouts/breakdowns are a part of the game. This is why traders use risk management strategies like stop losses, scaling into positions, setting percentage limits on each individual position, hedging with options strategies like straddles, etc to be able to get out fast and limit damage if they are wrong.

The risk management strategies are MORE important than the technical strategy itself. Trading patterns and seasonality with MACD you would still be hard pressed to even get 50% accuracy in your calls and using a 100% all in or out bet (i.e. no risk management at all) means you're going to lose big time on the whole. If you want to trade you need to spend your time learning how to manage risk first, before you ever put on a single position. So how are you going to manage your risk with the random assortment of indicators that all are open to subjective interpretation? The reason most traders fail is because they don't pay attention to risk management. Everything for a trader starts and ends with risk management. I'm really trying to hammer this home for a reason. Those traders that can manage risk succeed, those that can't go bust. This is 100% true in all cases.

I'm not sure what's wrong with your current blend of buy and hold, PP hedging, and trend following? It's a much better strategy for someone without the knowledge in how to properly manage risk or the stomach for trading (which I know you don't from how you reacted to the trend following failure in December; you were not able to stick with the system after one false positive). Trading is more akin to gambling than investing, and that's why a lot of traders implement similar risk management strategies to professional gamblers. I'm trying to protect you from yourself here, haha. You're free to do what you want, but I think this is a mistake. If you want to trade, you need to learn from someone who knows what they are doing (and these days it can be hard to find legit teachers that really know what they are doing instead of just saying they do on the internet).
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Re: Stock scream room

Post by ochotona » Mon May 27, 2019 2:43 pm

I digitized SEP and OCT from 1928 - 2018. If you step away from these two months and go to cash, you gain 14 basis points on average each time you do it, over the entire 91 years. But you avoid some of the worst large drawdowns ever. SEP and OCT have 11 monthly drawdowns greater than 10% for this period. Seems pretty easy to just buy some puts, sell some, whatever makes you feel better. Or do nothing. It's like living in tornado country.
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