Sunday, September 12, 2021 5:03:13 PM
Per my previous post, I expect my short term accounts to all be in cash by Monday. If the market turns back up, that will be great. But if it continues to fall, then I will turn my attention to what to do with my long term (IRA) accounts.
As it turns out there was a great article in the weekly Stock Charts weekly newsletter. It was titled “Four Signs the Bull Market is Over.” I recommend reading it for more detail. Here are the four signs.
https://stockcharts.com/articles/mindfulinvestor/2021/09/four-signs-the-bull-market-is-926.html
Sign 1. S&P fails to make a new high – current 453.19 close
Sign 2. S&P makes a lower low – current 436.12
Sign 3. SPY price breaks 50 day ma – current 441.43
Sign 4. RSI(14) breaks below 40 – current 48.2
Friday close 445.44
Sign 1 and 2 go hand in hand in that they could/would form the top and bottom of a sideways channel.
If you look at the chart, SPY has had 8 dips ytd, counting the current one. Five out of 8 times, the 50 ma has been tagged. But on no occasion has RSI 40 been broken. I think that is why he included Sign 4. I have never really used RSI, because MACD is my go to TA. During the largest dip in Mar, M12 just touched zero. So I also like ZXO (MD) as a sign.
As of Fri’s close, SPY is down -1.7% from the highest close. The first support point is at -3.8%. Neither of these numbers should be a big concern for a long term investor, but somehow things seem different now. So much is going wrong in the world.
So my game plan is to do what I have already done once this year. I bought a protective put for less than .5% and when the market turned around, I sold it giving me a net loss of -.25%. I think that was really cheap insurance.
So I just checked and a 33 day SPY Oct 15 400p would cost right at $2. That would be a cost of .45%. 400 is -10% from Friday's close. That to me is really cheap insurance and I can easily live with a -13% drop, if the market were to dip 20%-50%.
I could wait a few days to see if 50ma is hit, but the problem I have learned is that PUT premiums will start to rise quickly once it becomes obvious that the market maybe going to tank. If the market does go back up, again I would expect to sell the put back for $1, cutting the cost to .25%. That is rounding error for sure to me.
I might also consider buying a 408 put for $2.5, .56% which would protect me from only a -10% loss from the top.
Or I may do something more aggressive, will just have to wait until I see what the market does next week.
As it turns out there was a great article in the weekly Stock Charts weekly newsletter. It was titled “Four Signs the Bull Market is Over.” I recommend reading it for more detail. Here are the four signs.
https://stockcharts.com/articles/mindfulinvestor/2021/09/four-signs-the-bull-market-is-926.html
Sign 1. S&P fails to make a new high – current 453.19 close
Sign 2. S&P makes a lower low – current 436.12
Sign 3. SPY price breaks 50 day ma – current 441.43
Sign 4. RSI(14) breaks below 40 – current 48.2
Friday close 445.44
Sign 1 and 2 go hand in hand in that they could/would form the top and bottom of a sideways channel.
If you look at the chart, SPY has had 8 dips ytd, counting the current one. Five out of 8 times, the 50 ma has been tagged. But on no occasion has RSI 40 been broken. I think that is why he included Sign 4. I have never really used RSI, because MACD is my go to TA. During the largest dip in Mar, M12 just touched zero. So I also like ZXO (MD) as a sign.
As of Fri’s close, SPY is down -1.7% from the highest close. The first support point is at -3.8%. Neither of these numbers should be a big concern for a long term investor, but somehow things seem different now. So much is going wrong in the world.
So my game plan is to do what I have already done once this year. I bought a protective put for less than .5% and when the market turned around, I sold it giving me a net loss of -.25%. I think that was really cheap insurance.
So I just checked and a 33 day SPY Oct 15 400p would cost right at $2. That would be a cost of .45%. 400 is -10% from Friday's close. That to me is really cheap insurance and I can easily live with a -13% drop, if the market were to dip 20%-50%.
I could wait a few days to see if 50ma is hit, but the problem I have learned is that PUT premiums will start to rise quickly once it becomes obvious that the market maybe going to tank. If the market does go back up, again I would expect to sell the put back for $1, cutting the cost to .25%. That is rounding error for sure to me.
I might also consider buying a 408 put for $2.5, .56% which would protect me from only a -10% loss from the top.
Or I may do something more aggressive, will just have to wait until I see what the market does next week.
Trade the Charts and not the Heart - Expect the trend to
continue until it doesn't - Realtime is the real deal
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