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I began this blog in 2006 after watching the media pundits and financial advisors lead the trusting public into the 2000 abyss after the internet bubble burst, while I was safely in cash. The same thing happened in 2008 and then again now. I do not advise people but merely report my actions. This site is free and I tell all that my musings are worth exactly what they paid for them. Nevertheless, I hope some of my readers have benefitted from my writings about exiting the market in February.

If it is impossible to time the market, then why have I been out of the market in bad times and back in during the good times?  Just luck? As someone once replied, the harder I work, the luckier I get. The key for me is to ignore all of the talk about the market and to just watch what it is doing. I have simple criteria that have been summarized in the GMI table below, that keep me on the right side of the market’s trend. This  is the strategy I teach my undergraduate students. With the GMI=0 (see Table below) why would I be invested long?

All persons with tax deferred IRAs and 401 (K) accounts can exit the market anytime, transfer into money market funds,  and go back into mutual funds or equities later, without tax consequences. I know some employer plans limit market timing, but they usually let one exit and enter as long as it does not occur too often I(check your plan’s rules). So when things begin to look bad, I begin taking money off the table. I have been in 100% cash for weeks. After the GMI flashed a  Red signal on February 26, why would I ever be invested long?

The other nonsense the pundits promote is, no one rings the bell at the bottom. Don’t get out because you will mss the bottom. I do not care if I miss the bottom or the top. There is plenty of room to make money in between. I do not care if the market rises 5-10% now without me. I am trying to avoid much larger losses. I will get back in after my indicators suggest that a new up-trend has begun and I will do so gradually, in stages, at ever higher prices. I will post here when I begin to re-enter.

This decline and the resulting low interest rates on savings vehicles will decimate my fellow boomers’ wealth. I hope those who did not escape this storm have the years necessary to recoup their money and a comfortable retirement. When will this decline end? No one knows.

Jesse Liver more once said:

“There came the awful day of reckoning for the bulls and the optimists and the wishful thinkers and those vast hordes that, dreading the pain of a small loss at the beginning, were now about to suffer total amputation – without anaesthetics. A day I shall never forget, October 24 1907.”

The technology changes but trading is human behavior and human psychology never changes–greed and fear, euphoria and panic. People must learn a set of rules that help them to take small losses so as to avoid the large ones.

While I do not predict bottoms, this weekly chart of the SPY suggests to me the beginning, not the end of a Weinstein Stage IV decline. Note the huge weekly selling volume in two of the last three weeks. The SPY has only closed below its critical 30 week average (solid red line) for three weeks. Bear markets often last 10 months or more and we should not be misled by the speed of this decline.  We could see much  more… (then again, T2108=3%)

The GMI=0 and on a Red signal.

During the internet bull market of the 90s I sold Yahoo around $400 per share  (pre -split) because my internal voice said making money was too easy. I had seen the stock go up $50 in one week when I was holding a large position. I tell my students that whenever my voice cautions me that way, I sell. (It rarely happens!) It happened a few days ago, however,  when I had a small position in INMD. I watched it rising fast and then on Monday morning, 11/18, INMD was trading up almost $9 from Friday’s close.   It was also trading outside of its upper daily 15.2 Bollinger Band on very heavy volume and had gone vertical. My voice went off and I sold around $57. I had a 40%+ gain in just 9 days. I was lucky. INMD closed Friday at $41.55. When I make money too fast, I sell. As they say,: Bulls make money, Bears make money and Pigs get slaughtered. (Wy did I buy this stock? The consummate trader, Mark Minervini, @Marmminervini, had tweeted about INMD.The stock was a strong recent IPO and at all-time highs. I merely bought some on November 6, with the intention to sell it if it traded lower than the prior day’s low. I get great trade-able ideas by following the tweets of a couple of very smart traders: @markminervini and @TMLTrader, whom I met at Mark’s annual invaluable trader workshop.

The GMI is at 4 (of 6) and many of the very short term indicators in the GMI2 are negative. This is a reduced trading week and probably not the time for me to add or increase positions.

AAPL hit an all-time high of $233.47 on October 3, 2018. After that high was not exceeded for 3 months, I drew in a green line, designating a green line top. I could then set an alert on TC2000 to alert me when AAPL traded above the green line. It had a green line break-out (GLB) one year later on October 11, 2019. Note the above average trading volume that day confirming the break-out.  AAPL has now advanced +12.5% since the GLB. Note that after the GLB, AAPL re-tested the green line for a few days, a common occurrence. If it had CLOSED back below the green line, I would have sold my position.  I would then have repurchased it if it retook the green line. I have found that the GLB strategy works really well for me in a strong market. The idea is to buy a stock that has advanced to an all-time high, then rested for 3 months or more and subsequently closes above the green line on above average trading volume. The fabulously successful trader,  Nicolas Darvas, concentrated on buying stocks breaking to all-time highs during a rising market. Every person should read his book, How I made…listed below. (It is the first book I require my students to read.)

Note that during the time of the GLB and for weeks before, AAPL had been in a nice daily RWB up-trend.

GMI remains at 6 (of 6).