Author Topic: New "the sky is about to fall" stock chart  (Read 13717 times)

Cheddar Stacker

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New "the sky is about to fall" stock chart
« on: July 02, 2014, 02:56:21 PM »
Just saw this one on yahoo:

http://finance.yahoo.com/news/perfect-chart-everyone-thinks-1929-022037055.html

Good news guys and gals, we have until the beginning of 2017 this time before the next great depression. Plan accordingly. ; )

hodedofome

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Re: New "the sky is about to fall" stock chart
« Reply #1 on: July 02, 2014, 04:32:45 PM »
Prefer Market Anthropology's analogs to most of the others you see on CNBC or what have you. Incorporating stochastics/RSI/momentum and other indicators besides just price tells you if it's really following the same trajectory. See here http://4.bp.blogspot.com/-GYN4qMWnORA/U7I-BmQCGoI/AAAAAAAACl0/9a4kaGKHXOs/s1600/5.png

You have to realize that analog trading has at least 50% losing trades, meaning you can toss out half of the analogs out there because the turns don't end up happening as the analog predicts. That doesn't mean you can't make analog trading profitable. If you lose 1% per trade on losing trades, but make 10% per trade on winning trades, even if you only have 30% winning trades it will still be a very profitable system in the end. Just ask Paul Tudor Jones.

warfreak2

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Re: New "the sky is about to fall" stock chart
« Reply #2 on: July 02, 2014, 04:49:15 PM »

matchewed

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Re: New "the sky is about to fall" stock chart
« Reply #3 on: July 02, 2014, 04:50:26 PM »
One is too many. :( There's my sad for the day.

Zamboni

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Re: New "the sky is about to fall" stock chart
« Reply #4 on: July 02, 2014, 05:05:44 PM »
I saw a similar one (actually it was a much more convincing match between the traces) in January of this year that said the market would be crashed by a couple of months ago.  Hmmm.

thepokercab

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Re: New "the sky is about to fall" stock chart
« Reply #5 on: July 02, 2014, 05:22:15 PM »
Quote
While just about everyone has dismissed Demark’s chart of doom, you may be surprised to hear that, potentially, an even more startling chart has surfaced.

I love this.  The first chart of doom was wrong, but now, an even bigger and doomy chart has come along.

surfhb

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Re: New "the sky is about to fall" stock chart
« Reply #6 on: July 02, 2014, 07:12:06 PM »
I can only hope and pray for a major depression!   I'll finally  be able to afford a home in Orange County, Ca and accumulate some massive positions on some great discounted market prices.    Whoo Hoo!

If you were a Mustachian investor back in 1929 you did very well in the Depression.   In fact the markets rate of return during that period (1929-1944) was somewhere around 6%....not bad.   
« Last Edit: July 02, 2014, 07:18:38 PM by surfhb »

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Re: New "the sky is about to fall" stock chart
« Reply #7 on: July 02, 2014, 07:59:20 PM »
I can only hope and pray for a major depression!   I'll finally  be able to afford a home in Orange County, Ca and accumulate some massive positions on some great discounted market prices.    Whoo Hoo!

If you were a Mustachian investor back in 1929 you did very well in the Depression.   In fact the markets rate of return during that period (1929-1944) was somewhere around 6%....not bad.   

Right... unless you lost your job and your pre-FDIC savings...  While it's great to buy cheap, you probably shouldn't hope and pray for a major depression.

Eric

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Re: New "the sky is about to fall" stock chart
« Reply #8 on: July 02, 2014, 08:06:32 PM »
Quote
While just about everyone has dismissed Demark’s chart of doom, you may be surprised to hear that, potentially, an even more startling chart has surfaced.

I love this.  The first chart of doom was wrong, but now, an even bigger and doomy chart has come along.

Right?  Wait until doomy gloomy chart version 3 comes along.  Now with even more gloom!

TomTX

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Re: New "the sky is about to fall" stock chart
« Reply #9 on: July 02, 2014, 08:16:56 PM »
Just saw this one on yahoo:

http://finance.yahoo.com/news/perfect-chart-everyone-thinks-1929-022037055.html

Good news guys and gals, we have until the beginning of 2017 this time before the next great depression. Plan accordingly. ; )

So, it looks like I should hold in stocks for the next 3 years until it doubles, then sell? :D

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Re: New "the sky is about to fall" stock chart
« Reply #10 on: July 02, 2014, 08:44:11 PM »
Sounds about right. ~5 years after the last 20% correction and right as the next republican (hey for whatever reason the stock markets perform poorly when they are in office and it seems like we alternate parties a lot over the past 90 years.) takes office.  If an AFC team wins the superbowl, be extra worried:)

Just saw this one on yahoo:

http://finance.yahoo.com/news/perfect-chart-everyone-thinks-1929-022037055.html

Good news guys and gals, we have until the beginning of 2017 this time before the next great depression. Plan accordingly. ; )

surfhb

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Re: New "the sky is about to fall" stock chart
« Reply #11 on: July 02, 2014, 08:49:42 PM »
I can only hope and pray for a major depression!   I'll finally  be able to afford a home in Orange County, Ca and accumulate some massive positions on some great discounted market prices.    Whoo Hoo!

If you were a Mustachian investor back in 1929 you did very well in the Depression.   In fact the markets rate of return during that period (1929-1944) was somewhere around 6%....not bad.   

Right... unless you lost your job and your pre-FDIC savings...  While it's great to buy cheap, you probably shouldn't hope and pray for a major depression.

OK....I was a little heavy on the keyboard with that one.    I'll rephrase:   I look forward to the next significant downturn in the market similar to the last meltdown.    The generation who lived through The Depression was our most prosperous so they aren't that bad....little bumps in the road is all.  ;)
« Last Edit: July 02, 2014, 08:51:41 PM by surfhb »

foobar

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Re: New "the sky is about to fall" stock chart
« Reply #12 on: July 02, 2014, 09:17:03 PM »
It still doesn't help if your one of the 10% who end up unemployed:) The short little hicups we have had in the past 15 years have been easy to stay the course through.  For the guy that invest in the market in 1966 was down inflation wise 16 years later, I bet it was very hard to keep the faith. And I am sure the person who was praying for a major depression in Japan in 1989 isn't so happy when 25 years latter the market is off 50%.:)

When stock prices drop they might be on sale. Or it might just be value evaporating.

And finally the silent generation (i.e. the ones that just missed having to look for work in the depression) did a lot better than their parents. Having your peak earning years in the 80s/90s was a road to wealth
 
I can only hope and pray for a major depression!   I'll finally  be able to afford a home in Orange County, Ca and accumulate some massive positions on some great discounted market prices.    Whoo Hoo!

If you were a Mustachian investor back in 1929 you did very well in the Depression.   In fact the markets rate of return during that period (1929-1944) was somewhere around 6%....not bad.   

Right... unless you lost your job and your pre-FDIC savings...  While it's great to buy cheap, you probably shouldn't hope and pray for a major depression.

OK....I was a little heavy on the keyboard with that one.    I'll rephrase:   I look forward to the next significant downturn in the market similar to the last meltdown.    The generation who lived through The Depression was our most prosperous so they aren't that bad....little bumps in the road is all.  ;)

surfhb

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Re: New "the sky is about to fall" stock chart
« Reply #13 on: July 02, 2014, 09:41:30 PM »
It still doesn't help if your one of the 10% who end up unemployed:) The short little hicups we have had in the past 15 years have been easy to stay the course through.  For the guy that invest in the market in 1966 was down inflation wise 16 years later, I bet it was very hard to keep the faith. And I am sure the person who was praying for a major depression in Japan in 1989 isn't so happy when 25 years latter the market is off 50%.:)

When stock prices drop they might be on sale. Or it might just be value evaporating.

And finally the silent generation (i.e. the ones that just missed having to look for work in the depression) did a lot better than their parents. Having your peak earning years in the 80s/90s was a road to wealth
 
I can only hope and pray for a major depression!   I'll finally  be able to afford a home in Orange County, Ca and accumulate some massive positions on some great discounted market prices.    Whoo Hoo!

If you were a Mustachian investor back in 1929 you did very well in the Depression.   In fact the markets rate of return during that period (1929-1944) was somewhere around 6%....not bad.   

Right... unless you lost your job and your pre-FDIC savings...  While it's great to buy cheap, you probably shouldn't hope and pray for a major depression.

OK....I was a little heavy on the keyboard with that one.    I'll rephrase:   I look forward to the next significant downturn in the market similar to the last meltdown.    The generation who lived through The Depression was our most prosperous so they aren't that bad....little bumps in the road is all.  ;)

Im a "long term optimist ":)   I'll still cling to the fact that the worst 30 year period for the US market was roughly 6-7%.   The best was around 12%.    If I lose my shirt then at least I tried.     Im happy to be a Gen X'er.....I think the world will be amazing in 40 years.  Hope im still here
« Last Edit: July 02, 2014, 09:46:19 PM by surfhb »

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Re: New "the sky is about to fall" stock chart
« Reply #16 on: July 03, 2014, 10:14:12 AM »
My favorite response (with its own theme song)...

http://www.thereformedbroker.com/2014/06/09/turn-down-for-what/
« Last Edit: July 03, 2014, 10:23:43 AM by sirdoug007 »

whitedragon

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Re: New "the sky is about to fall" stock chart
« Reply #17 on: July 03, 2014, 10:18:14 AM »
Just saw this one on yahoo:

http://finance.yahoo.com/news/perfect-chart-everyone-thinks-1929-022037055.html

Good news guys and gals, we have until the beginning of 2017 this time before the next great depression. Plan accordingly. ; )

I deal with this kind of thing around the water cooler every day.  It's tough to stay out of it, but the rampant negativity is certainly infectious.

EDIT: That is to say, I can see why it's easy for folks to fall into this type of trap and panic.

frugledoc

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Re: New "the sky is about to fall" stock chart
« Reply #18 on: July 03, 2014, 11:55:05 AM »
Who cares if the sky falls?  Mustachians have a lifestyle and money stach to protect themselves and allow themselves to take advantage of such a situation. 



hodedofome

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Re: New "the sky is about to fall" stock chart
« Reply #20 on: July 03, 2014, 01:22:30 PM »
http://4.bp.blogspot.com/-GYN4qMWnORA/U7I-BmQCGoI/AAAAAAAACl0/9a4kaGKHXOs/s1600/5.png
These two charts superimposed just... don't look similar at all. Who falls for this?

I've traded a few times off of analogs, and made some pretty decent money as it. I don't trade that way any longer however, it's just not my style. It ended up being the exact day of the turnaround just as the analog predicted.

Once again, it doesn't matter if the analog is wrong 5 times in a row. If it's right on the 6th time and you make 10, 20 or even 50x your risk, is that a bad trading system? You can make a lot of money like that if you're patient through the losing trades.

arebelspy

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Re: New "the sky is about to fall" stock chart
« Reply #21 on: July 03, 2014, 01:27:49 PM »
http://4.bp.blogspot.com/-GYN4qMWnORA/U7I-BmQCGoI/AAAAAAAACl0/9a4kaGKHXOs/s1600/5.png
These two charts superimposed just... don't look similar at all. Who falls for this?

I've traded a few times off of analogs, and made some pretty decent money as it. I don't trade that way any longer however, it's just not my style. It ended up being the exact day of the turnaround just as the analog predicted.

Once again, it doesn't matter if the analog is wrong 5 times in a row. If it's right on the 6th time and you make 10, 20 or even 50x your risk, is that a bad trading system? You can make a lot of money like that if you're patient through the losing trades.

Since it's (I can say with almost complete confidence) negative EV in the long run, yes, it does matter.  Your home run will not make up for all the small losses.

Typically you hear it the other way around though - someone who wins 90% of the time, but their big loss cancels out all the small wins.

Either way, if it's -EV, it'll get you in the end, just due to the law of large numbers.
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warfreak2

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Re: New "the sky is about to fall" stock chart
« Reply #22 on: July 03, 2014, 01:36:03 PM »
Since it's (I can say with almost complete confidence) negative EV in the long run, yes, it does matter.  Your home run will not make up for all the small losses.
Assuming that market movements are random and independent, it wouldn't be -EV unless you go short. Holding cash has an EV of 0, so as long as you're sometimes long and never going short then it's +EV; just not as +EV as buy-and-hold.

But the two charts superimposed, they just don't look similar, at all. The only thing in common is that they both went up by about the same amount. None of the smaller movements along the way line up, it's just "look, the market has been going up, just like it did in 1943-1946". Yawn.

hodedofome

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Re: New "the sky is about to fall" stock chart
« Reply #23 on: July 03, 2014, 01:47:30 PM »
http://4.bp.blogspot.com/-GYN4qMWnORA/U7I-BmQCGoI/AAAAAAAACl0/9a4kaGKHXOs/s1600/5.png
These two charts superimposed just... don't look similar at all. Who falls for this?

I've traded a few times off of analogs, and made some pretty decent money as it. I don't trade that way any longer however, it's just not my style. It ended up being the exact day of the turnaround just as the analog predicted.

Once again, it doesn't matter if the analog is wrong 5 times in a row. If it's right on the 6th time and you make 10, 20 or even 50x your risk, is that a bad trading system? You can make a lot of money like that if you're patient through the losing trades.

Since it's (I can say with almost complete confidence) negative EV in the long run, yes, it does matter.  Your home run will not make up for all the small losses.

Typically you hear it the other way around though - someone who wins 90% of the time, but their big loss cancels out all the small wins.

Either way, if it's -EV, it'll get you in the end, just due to the law of large numbers.

Agree with the concept of Expected Value but I think you misread my example. My example has a positive EV. Making 10, 20, 30 or 50 times your risk on a winning trade, and having 50% winners will give you positive EV over time. Even in a random string of 10 losing trades in a row, the 11th winning trade can pay for all the losers and then some.

Expected Value = Prob(winning)*(Size of average win) - Prob(losing)*(size of average loss)

Assuming I have $1k on a losing trade, and make $10k on a winning trade, that's EV = .5*10000 - .5*1000 = $4,500.00

Almost all professional traders risk no more than 1-2% on any trade, so they can have a very large number of losing trades in a row before being wiped out.

Roland of Gilead

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Re: New "the sky is about to fall" stock chart
« Reply #24 on: July 03, 2014, 01:57:17 PM »
I must be missing something.  What is negative about the chart linked in the first post?  It looks like our portfolio will more than double between now and 2017.

Thedudeabides

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Re: New "the sky is about to fall" stock chart
« Reply #25 on: July 03, 2014, 02:04:44 PM »
I just set a reminder to sell all my stocks on 1/31/17, the day before the inevitable crash :D

Roland of Gilead

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Re: New "the sky is about to fall" stock chart
« Reply #26 on: July 03, 2014, 02:10:10 PM »
I just set a reminder to sell all my stocks on 1/31/17, the day before the inevitable crash :D

That is cutting it too close.  I am bailing on 1/30/17 because I am not a risk taker.

warfreak2

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Re: New "the sky is about to fall" stock chart
« Reply #27 on: July 03, 2014, 02:15:49 PM »
I just set a reminder to sell all my stocks on 1/31/17, the day before the inevitable crash :D
If the sky is going to fall, how can we be sure that January 2017 will even have 31 days?

I'm selling now, and shorting companies that print calendars.

arebelspy

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Re: New "the sky is about to fall" stock chart
« Reply #28 on: July 03, 2014, 02:17:08 PM »
http://4.bp.blogspot.com/-GYN4qMWnORA/U7I-BmQCGoI/AAAAAAAACl0/9a4kaGKHXOs/s1600/5.png
These two charts superimposed just... don't look similar at all. Who falls for this?

I've traded a few times off of analogs, and made some pretty decent money as it. I don't trade that way any longer however, it's just not my style. It ended up being the exact day of the turnaround just as the analog predicted.

Once again, it doesn't matter if the analog is wrong 5 times in a row. If it's right on the 6th time and you make 10, 20 or even 50x your risk, is that a bad trading system? You can make a lot of money like that if you're patient through the losing trades.

Since it's (I can say with almost complete confidence) negative EV in the long run, yes, it does matter.  Your home run will not make up for all the small losses.

Typically you hear it the other way around though - someone who wins 90% of the time, but their big loss cancels out all the small wins.

Either way, if it's -EV, it'll get you in the end, just due to the law of large numbers.

Agree with the concept of Expected Value but I think you misread my example. My example has a positive EV. Making 10, 20, 30 or 50 times your risk on a winning trade, and having 50% winners will give you positive EV over time. Even in a random string of 10 losing trades in a row, the 11th winning trade can pay for all the losers and then some.

Expected Value = Prob(winning)*(Size of average win) - Prob(losing)*(size of average loss)

Assuming I have $1k on a losing trade, and make $10k on a winning trade, that's EV = .5*10000 - .5*1000 = $4,500.00

Almost all professional traders risk no more than 1-2% on any trade, so they can have a very large number of losing trades in a row before being wiped out.

Right, I don't think your example is realistic.

I think pretty much any "trading" scheme is going to be -EV.  I'm open to data proving otherwise, but until then, I'll remain skeptical.
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hodedofome

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Re: New "the sky is about to fall" stock chart
« Reply #29 on: July 03, 2014, 03:11:13 PM »

I think pretty much any "trading" scheme is going to be -EV.  I'm open to data proving otherwise, but until then, I'll remain skeptical.

Lol, excuse my own 'skepticism.' You're open to data proving otherwise? Come on, you've brushed off any data I've shown here before. :)

I've often wondered if Eugene Fama is secretly your father!

KingCoin

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Re: New "the sky is about to fall" stock chart
« Reply #30 on: July 03, 2014, 04:23:49 PM »

I think pretty much any "trading" scheme is going to be -EV.  I'm open to data proving otherwise, but until then, I'll remain skeptical.

Lol, excuse my own 'skepticism.' You're open to data proving otherwise? Come on, you've brushed off any data I've shown here before. :)

I've often wondered if Eugene Fama is secretly your father!

I'd love some concrete examples of these asymmetric, +EV trades currently available in the market. Unfortunately, most out-of-the-money options are decidedly -EV (you pay an insurance premium over and above even an assumed fat tail distribution). I'd especially love some uncorrelated trades of that nature. I don't have to tell you that guys who have been generically long vol have gotten destroyed over the past few years.

warfreak2

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Re: New "the sky is about to fall" stock chart
« Reply #31 on: July 03, 2014, 04:30:46 PM »
Unfortunately, most out-of-the-money options are decidedly -EV (you pay an insurance premium over and above even an assumed fat tail distribution).
Unless you're the one writing and selling the options, in which case that premium is paid to you.

terrier56

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Re: New "the sky is about to fall" stock chart
« Reply #32 on: July 03, 2014, 06:23:03 PM »
Unfortunately, most out-of-the-money options are decidedly -EV (you pay an insurance premium over and above even an assumed fat tail distribution).
Unless you're the one writing and selling the options, in which case that premium is paid to you.

don't let everyone know. I don't want the market to be flooded with insurance sellers like me ;)

arebelspy

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Re: New "the sky is about to fall" stock chart
« Reply #33 on: July 03, 2014, 07:30:43 PM »
Come on, you've brushed off any data I've shown here before.

By all means, enlighten me.  I'm on the edge of my seat.  :)



Please describe a single trading strategy that is +EV.  (Emphasis on trading.)

Unfortunately, most out-of-the-money options are decidedly -EV (you pay an insurance premium over and above even an assumed fat tail distribution).
Unless you're the one writing and selling the options, in which case that premium is paid to you.

Sure, there's always someone on the other side of the trade.  ;)
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hodedofome

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Re: New "the sky is about to fall" stock chart
« Reply #34 on: July 03, 2014, 07:36:16 PM »
I'd love some concrete examples of these asymmetric, +EV trades currently available in the market. Unfortunately, most out-of-the-money options are decidedly -EV (you pay an insurance premium over and above even an assumed fat tail distribution). I'd especially love some uncorrelated trades of that nature. I don't have to tell you that guys who have been generically long vol have gotten destroyed over the past few years.

Here's a simple system showing some examples of trades like this. https://drive.google.com/file/d/0BzyyTlvGE-T2MHlLbS1tbzNVVDA/edit?usp=sharing

Recent examples of stocks that have taken off after hitting all time highs are TSLA, YELP, QIHU, FB, PCLN, NFLX, ILMN, MU, ICPT etc etc. Tech and Biotech has been doing well the past few years.

Here's another system http://usa.collective2.com/cgi-perl/system75800796 by Danny Merkel at http://www.chartingtrends.com/ that buys stocks and ETFs making new highs. 48% winning trades, Profit factor is 1.7

Another one, less than 40% winners but avg winning trade is 4x the avg losing trade http://www.thetrendfollower.com/p/performance-history.html

« Last Edit: July 03, 2014, 07:47:50 PM by hodedofome »

Primm

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Re: New "the sky is about to fall" stock chart
« Reply #35 on: July 03, 2014, 07:58:28 PM »
My favourite comment from the Yahoo article:

"The current market graphs also show a similar correlation to the Assyrian grain futures of 3200BC and we all know how that turned out."

Is that one of you lot? :)

Thedudeabides

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Re: New "the sky is about to fall" stock chart
« Reply #36 on: July 03, 2014, 10:52:27 PM »
^^^ hahaha

Dodge

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Re: New "the sky is about to fall" stock chart
« Reply #37 on: July 04, 2014, 08:33:21 AM »
I'd love some concrete examples of these asymmetric, +EV trades currently available in the market. Unfortunately, most out-of-the-money options are decidedly -EV (you pay an insurance premium over and above even an assumed fat tail distribution). I'd especially love some uncorrelated trades of that nature. I don't have to tell you that guys who have been generically long vol have gotten destroyed over the past few years.

Here's a simple system showing some examples of trades like this. https://drive.google.com/file/d/0BzyyTlvGE-T2MHlLbS1tbzNVVDA/edit?usp=sharing

Recent examples of stocks that have taken off after hitting all time highs are TSLA, YELP, QIHU, FB, PCLN, NFLX, ILMN, MU, ICPT etc etc. Tech and Biotech has been doing well the past few years.

Here's another system http://usa.collective2.com/cgi-perl/system75800796 by Danny Merkel at http://www.chartingtrends.com/ that buys stocks and ETFs making new highs. 48% winning trades, Profit factor is 1.7

Another one, less than 40% winners but avg winning trade is 4x the avg losing trade http://www.thetrendfollower.com/p/performance-history.html

These are all self-entitled "trend" strategies, showing trades starting in 2012. Of course trend strategies are doing well between 2012 and now, the market has been trending and is now at an all-time high.  There will always be a strategy who beats the market over the short term, but it's impossible to tell in advance which one it will be.

Don't you see? If the market had not been trending since 2012, you would instead have linked to a bunch of sites that advocate strategies that work well when the market isn't trending.

hodedofome

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Re: New "the sky is about to fall" stock chart
« Reply #38 on: July 04, 2014, 09:12:04 AM »
The question regarded recent performance which is why I linked to strategies that have recent data.

arebelspy

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Re: New "the sky is about to fall" stock chart
« Reply #39 on: July 04, 2014, 04:59:50 PM »
These are all self-entitled "trend" strategies, showing trades starting in 2012. Of course trend strategies are doing well between 2012 and now, the market has been trending and is now at an all-time high.  There will always be a strategy who beats the market over the short term, but it's impossible to tell in advance which one it will be.

Don't you see? If the market had not been trending since 2012, you would instead have linked to a bunch of sites that advocate strategies that work well when the market isn't trending.

(Emphasis added.)

Boom.  Great final statement.

What I'd like to see is a strategy described that beats the market due to the strategy itself - not just data that shows it's worked recently.  A coin could work recently also, that doesn't make it viable.  No one would share such a strategy, obviously, but I just don't see traders out there making money.  Buffett, a buy and hold guy, has, over long time periods.  Someone doing short term trade beating the market over a long period?  It doesn't seem to happen.  And given that millions of people try it, why don't we see some being successful over a long period?  Cause their strategies are -EV after costs.
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warfreak2

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Re: New "the sky is about to fall" stock chart
« Reply #40 on: July 04, 2014, 06:11:38 PM »
Someone doing short term trade beating the market over a long period?  It doesn't seem to happen.
If trading includes writing/selling options, then yes, it does seem to happen; plenty of businesses make their money writing options. Whether the options are long-term or short-term, the writer takes a premium above the expected value of the option; otherwise what's their incentive to sell?

This isn't a violation of the EMH or a suggestion that the past predicts the future. (The trending strategy, OTOH, is). Writing options actually adds new (financial) products into the market, rather than trying to make money buying and selling stocks that already exist. If you create new products to sell, I don't see a finance-theoretic reason you can't beat the average person buying and selling stocks that already exist.

That said, economic theory still applies; you aren't the only one writing options, so your premiums have to be low enough to be competitive. Chances are, you'd be making more flipping burgers, because the algorithmic trading software you're competing with has more capital and more time, and doesn't ask for minimum wage.

Nords

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Re: New "the sky is about to fall" stock chart
« Reply #41 on: July 04, 2014, 10:20:34 PM »
Almost all professional traders risk no more than 1-2% on any trade, so they can have a very large number of losing trades in a row before being wiped out.
"We lose a little on almost every trade, but we make up for it on volume!"

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Re: New "the sky is about to fall" stock chart
« Reply #42 on: July 05, 2014, 07:11:43 AM »
Almost all professional traders risk no more than 1-2% on any trade, so they can have a very large number of losing trades in a row before being wiped out.
"We lose a little on almost every trade, but we make up for it on volume!"

Ha! Sounds like a great motto for a bad investment advisor.

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dbenamy

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Re: New "the sky is about to fall" stock chart
« Reply #44 on: July 05, 2014, 08:41:36 PM »
MMM talks about using the P/E ratio as a more sensible measure of when stocks are over- or under-valued- http://www.mrmoneymustache.com/2011/06/09/how-to-tell-when-the-stock-market-is-on-sale/

The historical average is 16.23 and right now it's at 19.69 (http://www.multpl.com/). Maybe this means we should ease up on buying as save cash for when they're priced better? What do you think and why?

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Re: New "the sky is about to fall" stock chart
« Reply #45 on: July 06, 2014, 09:17:49 AM »
MMM talks about using the P/E ratio as a more sensible measure of when stocks are over- or under-valued- http://www.mrmoneymustache.com/2011/06/09/how-to-tell-when-the-stock-market-is-on-sale/

The historical average is 16.23 and right now it's at 19.69 (http://www.multpl.com/). Maybe this means we should ease up on buying as save cash for when they're priced better? What do you think and why?

Already covered (to death in the link below and every other post in the investor alley).

http://forum.mrmoneymustache.com/investor-alley/%27but-right-now-the-market-is-at-an-all-time-high-%27/

In summary who cares. Why are you going to save cash? You're just advocating market timing which generally doesn't work. When the response should be just keep buying (DCA through ups and downs), if you do see a big drop feel free to take advantage if you've got a way to but don't sit around in cash waiting for the drop.

And what does your question have to do with the post at hand?

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Re: New "the sky is about to fall" stock chart
« Reply #46 on: July 06, 2014, 12:02:11 PM »
I read this thread and the one you linked to before posting and they make good points about how being near the market high isn't a reason not to buy, but I didn't see mention of p/e. Maybe I missed it.

You say "if you do see a big drop feel free to take advantage if you've got a way to but don't sit around in cash waiting for the drop." That sounds to me like you agree that sometimes you might want to tweak your buying pattern slightly, even if the overall strategy is close to periodic buying for DCA. No?

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Re: New "the sky is about to fall" stock chart
« Reply #47 on: July 06, 2014, 07:37:41 PM »
MMM talks about using the P/E ratio as a more sensible measure of when stocks are over- or under-valued- http://www.mrmoneymustache.com/2011/06/09/how-to-tell-when-the-stock-market-is-on-sale/

The historical average is 16.23 and right now it's at 19.69 (http://www.multpl.com/). Maybe this means we should ease up on buying as save cash for when they're priced better? What do you think and why?

What is the historical average of the last 25 years (you know when they changed the accounting rules which resulted inflating PE ratios by about 20%)? PE ratio is a lousy market timing (PE5/PE10 work better). What was the best year to buy stocks recently? Jan 2009 when the PE ratio was 70. Or Jan 2003 when it was 30. Was it a good idea not to buy stocks on Jan 1 1992 when it was sitting at 25?

PE5/10 are a bit better but even there it gets hard.  PEs (both trailing and 5/10) are influenced a lot by outside factors. If you are getting 14% on your bonds, and stocks are returning 10%, you end up with a different PE ratio than when stocks are returning 8% and bonds are doing 2%.  You can still find overvalued markets (2000 was high by any measure) but some of the stutff doesn't show up. 2008 for example wasn't a crazy high valuation in the market. It was a crazy high real estate bubble though but few people realized how that was going to take out the stock market. I for one just thought some flippers and buyers were going to get slaughtered. I didn't expect the banks to crash and burn.

Mr Mark

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Re: New "the sky is about to fall" stock chart
« Reply #48 on: July 06, 2014, 07:51:07 PM »
The problem with many of these analyses are they ignore inflation, reinvested dividend yield, and real interest rates. 

And the future is hard to predict.

also, note that
1/QE is not printing money
2/ this idea that money has to be somewhere, ie that money is flooding into the market. Everyone who buys a stock exchanges cash for it. You can't destroy dollars. The dollars still circulate.( Except through inflation. Which we havent seen. )
3/ the us economy remains the biggest and best bet for growth there is. Together with Canada, Mexico, and China, there will be growth a plenty. Betting against the usa and the fed is the stupidest bet there is.

just my 2 cents

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Re: New "the sky is about to fall" stock chart
« Reply #49 on: July 06, 2014, 11:07:02 PM »
Thanks for sharing your thoughts!

I'll just (timidly) note that we don't need a system to work all the time. It just has to have positive expected value (more or less). It seems to me that DCA is kind of like that: there have been times where it could screw you, at least short term, but we like it because over the long run we expect it to do well.

I'm not arguing that PE-based timing is a net win. I'm just wondering if we should look at long term rather than a few specific dates to decide if it's worth it.