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I agree, it could very well prompt a recession. Also looking at the technicals, the 1 year percent change of the S&P 500 is negative, which is a strong recessio

by xyzzy4 11y ago

I agree, it could very well prompt a recession. Also looking at the technicals, the 1 year percent change of the S&P 500 is negative, which is a strong recession indicator historically. The 150-300-39 day MACD also looks bad. These indicators have both only been negative one other time since 2009, which was in September 2015. Lastly the US CAPE ratio is pretty bad too.

deleted 11y ago
[deleted]
UK-AL 11y ago
For the past few years, someone has predicting a recession in the next 6 months via technicals. Technicals = Star Signs in most cases.
- xyzzy4 11y ago
  Well have you actually run a historical trading simulation (like I did)? You would know these indicators are far superior to a buy and hold strategy.
  - UK-AL 11y ago
    I've heard many people say the same, which then never comes true. Just because stuff happens in the past, doesn't mean it will come true. The fact that people know this information, changes the outcome which is why markets are so hard to predict.
    - xyzzy4 11y ago
      There's countless different indicators and investors don't follow the same ones, if any at all. Most people aren't computer programmers who have run historical simulations. Just because you know something doesn't mean that other investors do. For example I bought lots of Bitcoin when it was at $16, because I thought I knew something other people didn't, and I was right. The fact is if you followed the indicators that I mentioned since 1950, your net worth growth rate would've increased at least 50% without even using leverage. Trends in the general stock market change slowly (the price doesn't look like random noise) and that's why it's predictable enough to beat a buy and hold strategy.
      - jrockway 11y ago
        So are you mostly short on the S&P 500? If I was guaranteed a recession, I would be. I'm long on the US stock market because if US companies are good at one thing, it's their 5% YoY growth.
        xyzzy4 11y ago
        I was long until today. And now I'm short because of thresholds that were hit by my technical indicators.
      - jonknee 11y ago
        > The fact is if you followed the indicators that I mentioned since 1950, your net worth growth rate would've increased at least 50% without even using leverage. Well that's easy, the hard part is finding the indicators that will do that for the next 60 years, not the previous!
      - solotronics 11y ago
        Do you believe that technical indicators take into account factors like political and social pressures on an asset?
        xyzzy4 11y ago
        Ultimately, what matters the most is the price and what other investors do. The price is affected by investors' perceptions of political and social pressures. If there are new political or social pressures, then they would affect the price (over seconds to months) which would then change the indicators. The indicators wouldn't pinpoint what those pressures are, and they would only change after the fact, but they would still change. I wouldn't want to predict the influence of those kinds of pressures unless I could get quantitative data and back-test it, which I don't think is possible. It's not a perfect strategy by any means. But I think using indicators is superior to a buy and hold strategy. When you invest you are necessarily choosing between different strategies. There is nothing magical about buy and hold other than that it's simple, and a lot of people do it. Historical data shows that if you trade based on indicators then your returns are much higher. I think it's important to find what works the best through calibration and back-testing. There are also risks such as survivorship bias that even applies to indicators, in addition to companies and economies. The best indicators survive in whatever system you use, and that doesn't guarantee they will actually work well in the future. Still I think it's better than the buy and hold strategy.
- deleted 11y ago
  [deleted]
tunesmith 11y ago
Meanwhile I've been trying to sell holdings when they go below the 12-month moving average, since that strategy would have made me a ton of money had I used them during 2001 and 2008, but instead I've just been whipsawed to all hell. Not sure any of these indicators really make sense in the long run.
- xyzzy4 11y ago
  What I found through lots of calibration is that it's best to sell when the weekly average of the S&P 500 is -2% compared to that same week a year ago, and then re-purchase when it goes back up to 0%. In fact it's best to short the S&P 500 when it's less than -2%. Perhaps if the interest rate is high then it's best to hold bonds, but that's not the current case. I can't guarantee the indicators will work in the future, but they worked in the past, and they make sense to me because the S&P 500 historically followed a momentum-like path. And I don't see why a 65 year trend based on mathematically simple technical indicators will suddenly change overnight just because it's the future versus the past. If you don't use indicators, then you're taking the strong position that they don't matter, which is more contrary to the evidence than using them. Unfortunately you either have to use indicators or not use them. So an "I don't know" opinion is still a definitive decision that they are worse, which is probably an incorrect decision.
Jeema101 11y ago
Bad historically, yes. Bad compared to everything else in the current investment climate, not so much. CAPE of 25 corresponds to a yield of 4% before growth in earnings is taken into account. That's still pretty good compared to the yield on treasuries and just about anything else right now.
- xyzzy4 11y ago
  I haven't tried to use CAPE in any simulation because I don't think it is too predictive in the near term. But it's good to keep in mind.

by xyzzy4 11y ago

deleted 11y ago

[deleted]

UK-AL 11y ago

For the past few years, someone has predicting a recession in the next 6 months via technicals. Technicals = Star Signs in most cases.

xyzzy4 11y ago
Well have you actually run a historical trading simulation (like I did)? You would know these indicators are far superior to a buy and hold strategy.
- UK-AL 11y ago
  I've heard many people say the same, which then never comes true. Just because stuff happens in the past, doesn't mean it will come true. The fact that people know this information, changes the outcome which is why markets are so hard to predict.
  - xyzzy4 11y ago
    There's countless different indicators and investors don't follow the same ones, if any at all. Most people aren't computer programmers who have run historical simulations. Just because you know something doesn't mean that other investors do. For example I bought lots of Bitcoin when it was at $16, because I thought I knew something other people didn't, and I was right. The fact is if you followed the indicators that I mentioned since 1950, your net worth growth rate would've increased at least 50% without even using leverage. Trends in the general stock market change slowly (the price doesn't look like random noise) and that's why it's predictable enough to beat a buy and hold strategy.
    - jrockway 11y ago
      So are you mostly short on the S&P 500? If I was guaranteed a recession, I would be. I'm long on the US stock market because if US companies are good at one thing, it's their 5% YoY growth.
      - xyzzy4 11y ago
        I was long until today. And now I'm short because of thresholds that were hit by my technical indicators.
    - jonknee 11y ago
      > The fact is if you followed the indicators that I mentioned since 1950, your net worth growth rate would've increased at least 50% without even using leverage. Well that's easy, the hard part is finding the indicators that will do that for the next 60 years, not the previous!
    - solotronics 11y ago
      Do you believe that technical indicators take into account factors like political and social pressures on an asset?
      - xyzzy4 11y ago
        Ultimately, what matters the most is the price and what other investors do. The price is affected by investors' perceptions of political and social pressures. If there are new political or social pressures, then they would affect the price (over seconds to months) which would then change the indicators. The indicators wouldn't pinpoint what those pressures are, and they would only change after the fact, but they would still change. I wouldn't want to predict the influence of those kinds of pressures unless I could get quantitative data and back-test it, which I don't think is possible. It's not a perfect strategy by any means. But I think using indicators is superior to a buy and hold strategy. When you invest you are necessarily choosing between different strategies. There is nothing magical about buy and hold other than that it's simple, and a lot of people do it. Historical data shows that if you trade based on indicators then your returns are much higher. I think it's important to find what works the best through calibration and back-testing. There are also risks such as survivorship bias that even applies to indicators, in addition to companies and economies. The best indicators survive in whatever system you use, and that doesn't guarantee they will actually work well in the future. Still I think it's better than the buy and hold strategy.
deleted 11y ago
[deleted]

tunesmith 11y ago

Meanwhile I've been trying to sell holdings when they go below the 12-month moving average, since that strategy would have made me a ton of money had I used them during 2001 and 2008, but instead I've just been whipsawed to all hell. Not sure any of these indicators really make sense in the long run.

xyzzy4 11y ago
What I found through lots of calibration is that it's best to sell when the weekly average of the S&P 500 is -2% compared to that same week a year ago, and then re-purchase when it goes back up to 0%. In fact it's best to short the S&P 500 when it's less than -2%. Perhaps if the interest rate is high then it's best to hold bonds, but that's not the current case. I can't guarantee the indicators will work in the future, but they worked in the past, and they make sense to me because the S&P 500 historically followed a momentum-like path. And I don't see why a 65 year trend based on mathematically simple technical indicators will suddenly change overnight just because it's the future versus the past. If you don't use indicators, then you're taking the strong position that they don't matter, which is more contrary to the evidence than using them. Unfortunately you either have to use indicators or not use them. So an "I don't know" opinion is still a definitive decision that they are worse, which is probably an incorrect decision.

Jeema101 11y ago

Bad historically, yes. Bad compared to everything else in the current investment climate, not so much. CAPE of 25 corresponds to a yield of 4% before growth in earnings is taken into account. That's still pretty good compared to the yield on treasuries and just about anything else right now.

xyzzy4 11y ago
I haven't tried to use CAPE in any simulation because I don't think it is too predictive in the near term. But it's good to keep in mind.