Cycle Trading

[Duma]

I have been doing a lot of work of late with my exits from swing trading SPY and QQQ. Exit too early and get whipped as the market continues to soar. Exit too late and lose a lot of unbooked gain. My exits used to be in the 2% range. They caused some whips, but more important it caused a lot of trading. I want to slow my trading down, but protect myself from major pull backs.

In general I see pullbacks in the 1.5-2% range normally correct pretty quick, buy once a pull back hits about 4%, it is usually serious and most of the time keeps going. At least that is my take and how I am proceeding with my trading plans.

The numbers below are the major pullbacks by year. The pullback is calculated from the highest high close to the lowest low close of the cycle.

SPY has now hit a -5.4% pb and QQQ -7.1%. 2022 was a big down year, so I would expect the pullbacks to be big and they were. 2023 was actually a very good year, so as one might expect, the pullbacks were muted in the 5%-10% area.

So what will 2024 be, a good year or a bad year? If it is going to be a good year, I would not be surprised if this pullback was about over. However, if it is going to be another bad year, but maybe not as bad as 2022, I would think we could see another 5% or more added on to the pullback.

At this point, the market is well below where I exited, so I am protected from any whip and expect my buy points coming up to be less that my exits, giving me the edge on the market that comes from swing trading.

 
 	SPY							QQQ						 
 														 
 2022	5	-12.9%	-15.6%	-12.2%	-16.7%	-7.2%		5	-21.1%	-22.6%	-13.7%	-21.6%	-8.3%	-11.2% 
 														 
 2023	3	-7.5%	-4.7%	-9.0%				4	-7.4%	-7.2%	-6.2%	-7.4%		 
 														 
 2024	1	-5.4%						1	-7.1%