Gyroscopic Investing

One of the long term indicators I use to see general trends in the markets is the 17/43 Weekly Exponential Moving Averages crossover. This indicator has a higher than 70% accuracy and is a long term indicator.  The crossovers would have kept you fully invested during the great bulk of all bull markets, and out of the market during all major declines.  For example it signaled getting out of stocks in January 2008.  Right now TLT is looking terrible. 

Mdraf wrote: One of the long term indicators I use to see general trends in the markets is the 17/43 Weekly Exponential Moving Averages crossover. This indicator has a higher than 70% accuracy and is a long term indicator.  The crossovers would have kept you fully invested during the great bulk of all bull markets, and out of the market during all major declines.  For example it signaled getting out of stocks in January 2008.  Right now TLT is looking terrible. 

http://stockcharts.com/h-sc/ui?s=TLT&p= ... 1953626724

You lost me at 17/43 Weekly Exponential Moving Averages crossover. 

Mdraf wrote: One of the long term indicators I use to see general trends in the markets is the 17/43 Weekly Exponential 

What did that indicator say about 30 year treasuries in March of 2010, or February of 2011?

This indicator has a higher than 70% accuracy and is a long term indicator.

70% of the time, it works every time.

And how likely is it that the active investor will stay in this investing style when the 30% appears?  This may work for some, but for most investors a passive style will have a higher percentage probability of achieving desired results.

Good, that means we'll be rebalancing soon when interest rates are probably 4% or more and everybody else is desperate to sell.

I just pointed out some data for people on this forum. Nobody has to act on it.
After all this is the PP forum where no dissent is allowed.

But I'll point out that this indicator said to sell gold in February 2013.

And I'll quote my friend TennPaGa's tag line:

"When a man tells you that he knows the exact truth about anything, you are safe in inferring that he is an inexact man."
-- Bertrand Russell

Would like to see those indicators on a total return chart of TLT. Most charts exclude the paid distributions.

iwealth wrote: Would like to see those indicators on a total return chart of TLT. Most charts exclude the paid distributions.

While the total return is higher of course the chart's pattern is the same and so is the signal.

Mdraf wrote: I just pointed out some data for people on this forum. Nobody has to act on it.
After all this is the PP forum where no dissent is allowed.

I don't see anyone squelching dissent here…

Mdraf wrote: After all this is the PP forum where no dissent is allowed.

I hope you don't really feel that way.

If you do, that hurts my feelings and I think I might ban you for being so insensitive.

(Just kidding.)

***

It's interesting, though, that your indicators suggest that TLT is in trouble, because from my perspective LT treasuries look like a great buy right now.  I guess that's what makes a market.

The wild card right now is whether that moron Larry Summers is going to be the next Fed chief.  Judging by Obama's track record of selecting other morons like Joe Biden and John Kerry for key posts, I'm afraid that Summers might be it.  If he is, look out.  It's going to be a tough 4 years for all of us as reality will be constantly slapping Summers and his ego around.

MediumTex wrote:

Mdraf wrote: After all this is the PP forum where no dissent is allowed.

I hope you don't really feel that way.

If you do, that hurts my feelings and I think I might ban you for being so insensitive.

(Just kidding.)

***

It's interesting, though, that your indicators suggest that TLT is in trouble, because from my perspective LT treasuries look like a great buy right now.  I guess that's what makes a market.

The wild card right now is whether that moron Larry Summers is going to be the next Fed chief.  Judging by Obama's track record of selecting other morons like Joe Biden and John Kerry for key posts, I'm afraid that Summers might be it.  If he is, look out.  It's going to be a tough 4 years for all of us as reality will be constantly slapping Summers and his ego around.

Do you think Summers is a "hawk" and wants to increase rates? I think he is slightly less dovish than Yellen. Not much of a difference in my opinion. In any case this indicator has been reliable for long term trends and the "steepness" of this crossover is worse than what we had earlier in the year with gold.

I am still holding my PP but am worried.  The indicator for stocks is still good and gold is improving but still negative.

Mdraf wrote: If you do, that hurts my feelings and I think I might ban you for being so insensitive.

If you do I'll report your post to the moderator! 

Mdraf wrote:

Mdraf wrote: If you do, that hurts my feelings and I think I might ban you for being so insensitive.

If you do I'll report your post to the moderator! 

I prefer to think that there is some person out there I don't know very well who actually runs this whole thing and I'm just one more voice among the rest of us.

Mdraf wrote: Do you think Summers is a "hawk" and wants to increase rates? I think he is slightly less dovish than Yellen. Not much of a difference in my opinion. In any case this indicator has been reliable for long term trends and the "steepness" of this crossover is worse than what we had earlier in the year with gold.

I am still holding my PP but am worried.  The indicator for stocks is still good and gold is improving but still negative.

I just think that Summers is a bull in a china shop and people like that bother me when they are around delicate operations.

Are you suggesting that the 30 year treasury bull market is over?  If long term rates rise much more they are going to start pushing outside the channel, which is what one would expect to see at the end of a very long bull market.

To me, the underlying fundamentals strongly favor low yields, so I expect yields to start drifting back down, though I don't know when that will happen.

It should be fun to watch it all play out.

TennPaGa wrote: You might be careful about doing too much of that in public.

LOL

Mdraf wrote: I just pointed out some data for people on this forum. Nobody has to act on it.
After all this is the PP forum where no dissent is allowed.

But I'll point out that this indicator said to sell gold in February 2013.

And I'll quote my friend TennPaGa's tag line:

"When a man tells you that he knows the exact truth about anything, you are safe in inferring that he is an inexact man."
-- Bertrand Russell

My point is just that, as someone who has tried to use some of the moving average strategies in the past, I'm a little skeptical. 

There are so many different moving average strategies that one of them is statistically bound to come out looking better than the others when you backtest. 

It's kind of like the story about all of the financial advisors in the football stadium who all try to predict the result of multiple coin tosses.  Just by random chance, some do better than others, but it doesn't mean that they're really any better at picking. 

That's sort of how I feel about moving averages, so I wonder if the 17/43 indicator just happens to the moving average crossover strategy that has picked the most correct coin tosses in the past and not really a true indicator. 


***

By the way...I think most people on this board seem to actually really like dissenting posts. They seem to generate a lot of discussion.  I admit that I am skeptical about moving averages, but not to the point where I won't listen to what you have to say about it.  I've been humbled too many times by the world of investing to have that much confidence. 

AdamA wrote: By the way...I think most people on this board seem to actually really like dissenting posts. They seem to generate a lot of discussion.  I admit that I am skeptical about moving averages, but not to the point where I won't listen to what you have to say about it.  I've been humbled too many times by the world of investing to have that much confidence.

I've never thought of using moving averages to be much different than using rebalance bands. Rebalancing secures gains resulting from momentum and resets your risk profile. 35/15, 40/10, 30/20, etc., it's all arbitrary isn't it? 10 month simple MA, 12 month exponential MA, 17/43 weekly exponential MA...all arbitrary. Backtesting shows some worked better than others up to now.

It is commonly assumed that the moving average technique has you sell out of assets completely after a breach. Would be interesting to see backtest results of using an MA breach to trigger a rebalance instead of an exit/entry. My guess is that as usual we end up in about the same place.

Moving averages don't affect price they are the effect of price. They lag moves, they don't predict them. Using a crossover as an easy signal to determine which way whatever trend you're interested in is fine but there is no logical reason why a crossover would lead to a price movement. The only way it would is if it is a popular crossover like the 50 day and 200 day and then it would only be for a very small amount of momentum players who probably lose more than they gain.

Support and resistance......this is the only logical technical analysis tool in my opinion because it makes sense that large blocks of trading decisions at a certain point in the past would lead to a lot of decisions at that same point in the future. There might be something of value when studying volume but I haven't spent any time examining the theories.

Fundamentally I think TLT is very bad in the long-term, but it might not be in nominal terms. The treasury market is so heavily manipulated by entities that are immune to losses (Central Banks and governments) that shorting it is playing with fire.  They can push yields down so you lose that way and get the double whammy of the inflation used to buy the bonds.

I've just chosen to avoid it altogether until yields are much much higher and the US government can find buyers that aren't printing it out of thin air. Or I'll just avoid it for forever.

Kshartle wrote: Support and resistance......this is the only logical technical analysis tool in my opinion because it makes sense that large blocks of trading decisions at a certain point in the past would lead to a lot of decisions at that same point in the future.

How would you interpret the chart below in terms of support and resistance?

[img]http://chart.finance.yahoo.com/z?s=^TYX ... &region=US[/img]

Well that’s not a tradable security and those aren’t prices so I don’t think there’s support and resistance like we’d normally recognize.  Since bonds mature the individual bond that’s purchased changes in nature over time as you know and becomes a different security.

I imagine there are some major points that the yield can reach (round numbers) that will act as resistance but I don’t think yields work the same as prices. Someone can hold a 30 year treasury fund for decades in the face of rising rates and still show a profit due to interest paid. Support and resistance are about relieving pain, either the pain of missing out on a move or relieving the pain of a losing position that has now broken even.

Let’s not forget this is probably the most manipulated financial instrument in the world. The major buyer for years has been an entity that Harry Browne described as an “accommodating loser”?. They are buying for political or reasons other than profit and they can theoretically buy as much as they can print out of thin air.

Of course they’re not all-powerful. The amount of inflation needed to push rates back to what looks like a double bottom (resistance!) would wipe out any nominal gain. Honestly I think they can’t get back there no matter what they want.

I do think the FED will try to defend 4% if it gets there. We’ll see. I don’t think any tapering is coming but it might. I think if they do taper they’ll be reversing course within a year and the monthly purchases will exceed the 85 billion currently.

Kshartle wrote: Well that’s not a tradable security and those aren’t prices so I don’t think there’s support and resistance like we’d normally recognize. 

If you flipped it over, wouldn't it be the price chart for TLT?

AdamA wrote:

Kshartle wrote: Well that’s not a tradable security and those aren’t prices so I don’t think there’s support and resistance like we’d normally recognize. 

If you flipped it over, wouldn't it be the price chart for TLT?

More or less:



Higher highs and higher lows over the long term.  Pretty typical secular bull market.

Kshartle wrote: Let’s not forget this is probably the most manipulated financial instrument in the world. The major buyer for years has been an entity that Harry Browne described as an “accommodating loser”?. They are buying for political or reasons other than profit and they can theoretically buy as much as they can print out of thin air.

I assume you are aware that in recent years every time the Fed has stopped buying bonds yields have fallen.

MediumTex wrote: I assume you are aware that in recent years every time the Fed has stopped buying bonds yields have fallen.

Well aware. It's repeated constantly here as evidence that yields can go lower absent FED purchases. No one has ever disputed that. You'd be a fool to do that.

It would be equally foolish to think that removing the overwhelmingly largest buyer of a particular item from a market would cause the price to rise long term. I've never gotten whatever deeper insight the FED-absent lower yield point some try to make on here.

Are you saying the FED is not artificially supporting the price of treasuries? What are you really saying when repeat the above quote? Is it more than the obvious that yields are capable of moving lower without the FED? Do you think if the FED wants higher bond prices it should stop buying?!?!?