Wednesday, August 31, 2011

Gross admits he was wrong on bonds

All over the news is an admission by Pimco bond king Bill Gross that he was wrong to be bearish on U.S. Treasury bonds (CNN article link).

>>

Gross, who manages the world's biggest bond fund, is now admitting that he struck out. ...

Pimco ... slashed its exposure to U.S. government debt to zero in February ...

The 10-year yield stood at a lofty 3.75% in February. Less than two weeks ago, the yield on the 10-year note touched a record low below 2%, and it now stands at 2.17%.

>>

Even the best of the best make bad calls. It is refreshing to see a straight out admission of that instead of double speak or excuses, or rationalizing about being right just early. No matter how a person parses it, 3.75% to 2.17% is a huge bull move, and anyone that was bearish was wrong, wrong, and more wrong.

Readers know that I write openly about my losers. Most traders tend to learn more from their losses, so journaling about them, trying to dissect what went wrong can often be a useful exercise. For Bill Gross, I point to the massive efforts of the Fed and its allies to keep rates low. $2 trillion in quantitative easing buys a lot of bonds. The Fed still has a sword pointed at bond market bears even though there has not been an official announcement for QE3. I see little chance that the Fed will let interest rates explode to the upside.

As I've written in other posts, the Fed will eventually run out of ammo, because the bond market will stop responding, or take more and more money to manipulate it. That time isn't now, or even close. The lid is still on the pot.

The bond market is so vast and huge, I believe it will take a while to boil over. I may start tilting bearish on bonds on a trading basis in Oct/Nov, but still think the Fed will pull levers to keep rates relatively low, and that the bond market crash is still years out. It will take a lot to kill off a 31 year long bull market, but when it goes it may be something to behold.

Tuesday, August 30, 2011

Buy SPY (sell puts)

Buy SPY via selling Oct 89 puts SPY@120.9
The rally has decreased my overall SPY delta. I sell some way out puts to add some delta back in. VIX is lower than it was, but there is still decent premium on puts that are 31 points out. Even though I think lower lows are likely, I see a 25% decline by October expiration as unlikely. By the time I get the fill, and type this entry up SPY is another .8 lower to 120.1, I hate it when that happens.

Long GLD, PFF, SPY, TLT

Saturday, August 27, 2011

ETFs % from 52-week high

We'll see if this formats okay, a table with some popular ETFs and how far they are off their 52-week highs. List is selective and ignores any dividends.

14% SPY SP500
4% GLD Gold
16% SLV Silver
3% TLT 20-year US Treas
13% IYR US Real Estate ETF
1% BND US Total Bond
8% HYG US high yield bonds

18% VEU Total World Stock market
20% EEM Emerging markets
18% EWJ Japan
23% FXI China top 25
17% EWA Australia
17% EWC Canada
25% EWZ Brazil
30% EWG Germany

Germany is the weakest major country ETF, despite still having one of the stronger economies. I'm not sure what conclusions to draw, I just wanted to do a quick look at what is down the most from the highs.

Friday, August 26, 2011

Gallup: Gold #1

A recent Gallup poll ranks gold number one in terms of long term investments (link).

>>
Thirty-four percent of Americans say gold is the best long-term investment ... Real estate (19%) and stocks (17%) are distant second choices.
>>

This is the first time gold was included in this Gallup survey which says something by itself. Without other surveys to give context it is one data point. However, it does show that the gold bandwagon is filling up. Gold was at record highs during the week of the survey. Gold was ranked #1 by every income group, and every age group, Republicans, Democrats and Independents.

/edit to add a link to a discussion of this poll on the PCGS Precious Metals forum (link). For those not familiar, PCGS is a coin grading company that hosts a coin collecting forum with a subcategory for precious metals.

Thursday, August 25, 2011

Brown: Rules for Surviving a Crash

Barry Ritholtz posts Josh Brown's 10 Rules for Surviving a Crash on his blog (link). Lots of good stuff, these three are a sampling:
>>
5. Make sacrifices by reducing stock exposure by beta and volatility. This is my iron-clad rule.

8. Abandon any hope or intention of catching the bottom. You won’t and it is unnecessary.

10. Stop being a know-it-all and shut up. If you are telling people a price or a support line where the selling will end, you are only kidding yourself.
>>

Certainly timely with the action in gold this week. My latest trade of short put backratios has gotten slaughtered. The "good news" is that it brings GLD closer to my max profit line of 154 at October expiration, but the position is deep in the red if I get out today.

Monday, August 22, 2011

Buy GLD (sell put backratios)

Buy GLD via selling Oct put backratios with GLD@184.1. Sell two Oct 154 puts for every one Oct 159 put bought. Selling these put backratios is net delta positive, so are bullish bets. The twist is an explosive max profit if GLD is at 154 at October expiration.

Stock market is all over the place. Some technicians are saying SPY 107 is support, with the potential of a double/triple bottom, but I see that price level as minor support. Lower lows and support at 105/104 seems more likely and where my short SPY put backratios are placed.

Long GLD, PFF, SPY, TLT

Friday, August 19, 2011

4-6 for August, disastrous month

Four small winners, six losers including four monster hits, and two big losers, makes for a terrible month of trading. Selling naked puts was the wrong place to be this month. I survived the flash crash last year, and the carnage in 2008, and survived this, but each time took some hits. GLD went up 20%, and SPY went down 20%, however when selling puts, the winning trade only yields 100% profit, while the loser might be a 2000% loser.

The losses did major damage. I don't like to talk about overall account percentages or specific dollar amounts, because those tend be correlated with risk appetite and how much capital is available. I will categorize the losses as significant and painful, though not crippling--I am still in the game.

The other analogy that comes to mind is putting lipstick on a pig. No matter how a person tries to pretty up the pig, there is only so much improvement to be done with makeup. The losses are closed trades and now done with. I think it would be a mistake to try to get it all back in a few trades. Revenge trades usually result in more losses and make a bad situation worse.

Going forward, I have two short put backratios on SPY, and a long vertical put spread. This adds up to a positive SPY delta, positive theta, and a breakeven point to the downside of 95. Best case would be a SPY close right at 105 for September expiration, and then a close at 104 for October. If SPY rallies, I would profit from here. I am short some puts on GLD and TLT, but because of the rallies, the delta is small. I am reluctant to sell more puts on GLD because the run up has left little support below. A steep correction in gold would surprise no one, but so far those betting on that event have been big losers.

Thursday, August 18, 2011

Short SPY (buy vertical put spread)

I short SPY via buying a vertical put spread, buying Oct 100 puts, selling Oct 95s with SPY@114.8

My Sep and Oct short put backratios give protection down to 100 on SPY. The vertical is a way to cover downside to SPY 95. I am still net long SPY delta, but now less so.

Long GLD, PFF, SPY, TLT

Cover short EWZ puts

I continue to take risk off the table by covering short EWZ Sep 44 puts with EWZ@60.0 (covered some short SPY puts earlier this morning). EWZ is a Brazil ETF. I net a 31% profit on the dollar amount of the options. Market is moving, and while I doubt these options will come into play, I am reducing risk.

Long GLD, PFF, SPY, TLT

Cover short SPY puts, sell BRKB calls

This goes under the category “what was I thinking?” I wrote that I expected lower lows and yet sold puts? I decided to “limit” the loss to about 170% on the price of the option, instead of risking another huge monster percentage loser (which I've had four of this cycle already). I start with a limit order with SPY@116.2 and market continues lower so I get out with a market order with SPY@116.0. Ouch.

I also sell BRKB Aug 77.5 long calls for a 96% loss, before it goes out worthless tomorrow. BRKB@70.4 with slim chance of going up 7 points by Friday's close. The market is a cruel mistress.

Long GLD, EWZ, PFF, SPY, TLT

Wednesday, August 17, 2011

Buy SPY (sell puts)

Buy SPY via selling Sep 94 puts with SPY@121.0

This morning stocks, bonds and gold are all up, possibly due to the Wednesday before option expiration. The more cynical might say it is the PPT (plunge protection team) propping up prices. Despite the relief rally, the way out SPY puts are near 50% volatility. While I expect lower lows, I expect support at SPY 105 to be significant.

My broker ThinkorSwim did a clearing firm transition due to the merger with TDAmeritrade, and it is causing headaches. Mostly I've been very happy with TOS, but these few days have not been pleasant.

Long EWZ, GLD, PFF, SPY, TLT

Tuesday, August 16, 2011

Buy TLT (sell puts)

Buy TLT via selling Oct 92 puts with TLT@106.1

I open an October position on TLT. It is similar to the gold situation, as TLT has rallied my delta declines. TLT is overbought so I am selling way out of the money puts.

Long EWZ, GLD, PFF, SPY, TLT

Monday, August 15, 2011

Buy GLD (sell puts)

Buy GLD via selling Oct 143 puts with GLD@171.0. As gold has rallied, my delta on the short puts gets smaller and smaller. I open a small October position. GLD is a bit overbought in here, so I am going way out of the money on the puts.

As for the stock market, these few days feel like the eye of the hurricane, with more volatility on the other side.

Long EWZ, GLD, PFF, SPY, TLT

Sunday, August 14, 2011

Betting on the end of the financial world

Some option buyers are placing bets on the end of the financial world. I cite the way out of the money September calls on TLT and VXX. The Sep calls on TLT (20 year Treasury fund) and VXX (Volatility fund) have value even 20 points out of the money. It would take something like a 10% down day in the Dow to bring those way out calls into play. With that, I am reluctant to sell those calls. Most times I have thought to myself, "that's free money," when looking at selling certain options, there was something I wasn't seeing that the option buyer did know or see.

The other factor might be that those buying these way out calls are using them as part of a more complex strategy. Only rarely are way out calls bought in quantity as a pure speculative play. Mostly they are offset with other options, or futures, or equities.

As for the stock market, I expect lower lows, testing 105 on SPY (118.1 today), though hopefully not immediately. As for bonds, tougher to call because of all the Fed games and manipulations. Gold might see some more short covering, and a retest of the recent highs might be a place to take a shot at the short side.

Friday, August 12, 2011

Buy EWZ (sell puts)

Buy EWZ Brazil fund via selling Sep 44 puts with EWZ@61.2.

I add to equity longs. My thinking is that many are looking to buy safe stocks, and EWZ is near the opposite end of the spectrum.

Long EWZ, GLD, PFF, SPY, TLT

Constant Proportion CPPI investment strategy

I saw a mention of Constant Proportion as an investment strategy on the Vanguard forum (link1). To be honest, I had never heard of it, and never met anyone that said they used it. It still isn't all that clear in my mind, but this lengthy PDF paper written by Perold and Sharpe at link2 has more on it, starting on page 6, along with profit/loss graphs. Some other references that I haven't linked refer to using derivatives to implement CPPI.

To cut to the short and sweet: CPPI buys on strength, sells on weakness. It tends to do well in strong bull markets, not so good in flat range bound markets, and offers downside protection in severe bear markets. The much more popular constant mix strategy of rebalancing will do better in a flat market, not as well in a strong bull or strong bear market. Rebalancing also fails if assets approach near zero value in a melt down scenario (think Germany or Japan in 1944/1945 or CSA bonds and currency in 1864/1865). Even in a milder downturn like Japan 1990 until 2011, CPPI would have done better than the constant mix.

Some other very popular strategies are buy-and-hold, which is self explanatory, and dollar-cost-averaging, which is buying a set dollar amount every week or every month. I am a fan of DCA, even though there are studies that show it isn't the best way to invest. The main reason is that it smooths out the emotions. It is difficult for most folks to go from 0% invested to 100% invested. The daily swings are too much for most to take, and they will bail on their plan. DCA is easier on the emotions, so most folks are more likely to stick to the plan.

Well I learned something new, though I don't have an in depth understanding of it.

Thursday, August 11, 2011

Buy PFF (sell puts)

Buy PFF via selling Oct 30 puts with PFF@36.7

I view this as putting in a bid for the preferred stock ETF at 30. If I get assigned fine, if not I get a small premium. The spreads are wide on the PFF options, so the options aren't suitable for short term trading.

Long GLD, PFF, SPY, TLT

Buy SPY (sell puts)

Buy SPY via selling SPY Aug 102 puts with
SPY@116.6

I add some more SPY delta as my short backratios move down in delta. I have misplayed these last couple of weeks badly, we will see if that continues. So far, yes, as SPY is now 116.2 and falling as I type this up.

GLD and TLT tumbling today, but I have considerable room on my short puts after the recent run ups.

Long GLD, SPY, TLT

Wednesday, August 10, 2011

Dylan: Shelter from the Storm

Song of the day is Bob Dylan's iconic "Shelter from the Storm" (youtube link). Trade ideas continue to buzz in my head, but it is probably best to hide out in the bunker for a bit while my head clears from four huge losses.

What went wrong? Being long and wrong in the face of a mini-crash is a good way to lose money. Being short naked puts while volatility explodes is a way to lose tons of money. The other meme in my head, is that I never much enjoyed rollercoasters.

Monday, August 08, 2011

Cover short puts SPY

More financial carnage, as I cover more short SPY puts, Aug 112 puts, and Sep 113 puts with SPY@113.7. The percentage losses are -1800% and -2500% on the dollar value of the options. I have too much risk on the table, and with short puts, my delta increases as the market declines. Yes, 113 is a support level for SPY, but tape action is bearish. I hate to cover, but it is the rational choice. I still am long SPY delta with two short backratios, one for Sep, and one for Oct.

I don't feel very smart today, and my recent monster losses reflect that feeling.

Long GLD, SPY, TLT

Saturday, August 06, 2011

SP debt downgrade = Sat morning rant

Looks like the news is an ugly potion across the Internet, so I'll take my turn with the ugly stick. I rarely go political on this blog, so I'll temper my comments, but geez Louise, reading some of it, is enough to boil blood.

I see the downgrade as bringing a true U.S. austerity budget closer. The Greeks had time to make rational conscious choices, now the markets are forcing changes upon them. (Link1 is to grim article in the UK Guardian about Greece). Keep in mind that these massive cuts in spending were passed by far left Socialists in Greece, so coming soon to a budget near you:
>>
salaries of civil servants are slashed by up to 30% within a few months, as happened last year, and over 20% of public-sector workers face unemployment within the next four years – plus whole swathes of national assets are to be privatised before Christmas, with more job losses doubtless to follow ...
>>

Meanwhile in the U.S. there is nary a mention of cutting massive Federal salaries. Link2 is a USA Today article about the growing pay gap.
>>
Federal civil servants earned average pay and benefits of $123,049 in 2009 while private workers made $61,051 in total compensation ...

>>
There was no mention of across-the-board salary cuts during recent budget negotiations. Why can't even a modest 3% rollback in Federal salaries and benefits be proposed even? Why? Because Congressional staffers are all Federal employees? Probably. So sad.

Link3 is a news bit about Socialist Italy pledging to balance its budget.
>>
Italy pledged on Friday [8/5/2011] to work swiftly for a constitutional amendment requiring the government to balance its budget ... with the possibility of reaching a balanced budget by 2013 ...
>>
If Socialist Italy can get there, with massive cuts in government spending, why is there no political will in the U.S. to move that way? Not enough pain? Too many pigs feeding at the Federal trough. Too many droids in the media spinning their narratives? All the above.

Link4 is a scary report from TaxProf citing IRS sources about U.S. incomes. These are compiled using stats from tax returns, and show a 15% decline in reported income.
>>
U.S. incomes plummeted again in 2009, with total income down 15.2% in real terms since 2007, new tax data showed on Wednesday. The data showed an alarming drop in the number of taxpayers reporting any earnings from a job -- down by nearly 4.2 million from 2007 -- meaning every 33rd household that had work in 2007 had no work in 2009.
>>
The pay gap cited in the USA Today article in link2 is worse than reported. Private sector workers have seen a 15% drop in average real wage income. Most of the drop is because of fewer private sector workers, and many more that were forced into lower paying jobs. Yet, there is not even a proposal for modest cuts in Federal compensation, which now averages over $123k per employee. Average. Are you kidding me?

There was one more article that I wanted to link, but I can't find it. The gist of the article was about the PE ratio for U.S. stocks, and how it is in line with historical averages. However, the ratio of average U.S. wages vs. stock prices, is near historic lows. The theory is is that something has to give. Consumers get their money from wages. If private sector wages are careening lower as the TaxProf article indicates, earnings will eventually follow because consumers have no money to spend.

As for market reactions, I always come back to the bond market. It is the biggest market and often drives the bus. Unfortunately all the QE (quantitative easing) programs have distorted the bond market the most. Even though QE2 is over, the threat of QE3 still keeps yields artificially low, with the U.S. ten year bond well below 3%. I see it going back to a historic average of 7% at some point, but when the Fed is burning trillions to keep yields low, the time table is uncertain.

Enough of my rants. I'll pass the ugly stick back over to the many political threads and forums all over the Internet. It is ugly out there. Keep your cool. Again, rule #1 is that no one wins an argument on the Internet. Arguing about politics [or religion] with someone with different assumptions and a different world view is a big waste of time. It can ruin friendships, and creates ill-will. People can't agree on basic assumptions, so their arguments spiral out in circles from there. No one ever agrees after a heated political thread, not that I have seen. Mostly they serve to bring out the ugly in people.

What Bogleheads may be missing

There is a lengthy thread on one of the Vanguard forums asking what may be missing from Jack Bogle's investment approach. For those that are not familiar, the philosophy in a nutshell, is to pick an age appropriate asset allocation, and then to use passive index funds, and rebalance as assets move up and down in value. Age as a percentage in bonds, the rest in U.S. and world stocks is a common asset allocation. For example a 30 year old might choose to have 30% in bonds (split between BND and TIP), maybe 45% in U.S. stocks (VTI), and 25% in world stocks (VEU). Add in a healthy cash reserve for emergencies.

Let me say, that I am a fan of the Vanguard approach of passive indexing. Experience shows that over the long haul, indexers will beat 80% of active investors. Future results are likely to be similar because of human nature. Indexing and disciplined rebalancing forces a person to buy assets when they are cheap, when they go on sale, when no one wants them. Human nature is to chase performance, so tends to buy what is hot.

The Bogleheads aren't "missing" anything. However, they do use certain postulates that may be faulty. The first and foremost is the long term stability of the U.S. government. While many may cry that this is doom and gloom talk, let's look back 100 years. Go back to 1911, and buy the bonds of all sovereign nations issuing government bonds. How many paid interest continually and could be rolled over until today? Maybe 5 countries out of 50 issuers? How many at some point in the cycle went to zero, or near zero? Almost all of them. Certainly Germany, Japan, Russia, China among major powers all had bonds and domestic stocks go near zero during that century when major historic events such as losing a major war, or revolution occurred. The UK, Canada, Australia, Switzerland and the U.S. were among the very small long term stable group. Off hand, I can't name any more than that five.

The open question is will the U.S. be in that small and lucky group in the next century. Most Americans and most all Bogleheads of course assume yes, mostly because they have never seen their government fall, but the odds are far from 100%. That is the biggest thing the Bogleheads may be missing. Events such as major wars, major famine or plague, revolution or coup, do happen. Those kinds of catalysts can mean a repudiation of the U.S. debt, and a currency that goes to zero. When that happens, U.S. equities, and even U.S. traded ETFs that hold world stocks may not have any value because there is no exchange to trade at for U.S. citizens or trade at bizarre discounts. In war time, or times of revolution, assets get frozen, assets get seized.

I don't want to bring this up in their forum, because they won't get it and will mostly just get mad. Arguing is one of the least productive activities, and rule #1 is that no one wins an argument on the Internet.

Overall, I find the majority of Americans to be a myopic bunch and most will assume that because their government has never fallen, that it can't--that is faulty thinking. The odds will depend on how far out the timeline is extended. The U.S. experience of stable governments, peaceful transitions of power, is more the exception than the rule. Governments fall, countries erase their debts, equities and currencies go to zero. Whether they will happen in the U.S. is an open question, not a postulate that can be depended on to be 100% true.

This is one reason I would tend to favor an asset allocation like the Permanent Portfolio (25% each in cash, bonds, stocks, gold), which includes 25% in physical gold. In an all out war, or revolution scenario, sometimes leaving the country is the best option. Physical gold might be one of the few assets that can be gotten out, or get a person or family out to start life over.

I feel no need to debate the point, or convince anyone. Folks can read up on their own world history and figure out their own odds of the U.S. government making it another 100 years or how ever far they want to extend the timeline. Every decade a few governments fall. Every century, the vast majority do, or at least restructure their debt and currency so that bondholders and paper money holders get the shaft.

Friday, August 05, 2011

Cover short puts (IWM, SPY)

Buy back IWM Aug 75 puts with IWM@72.0
Buy back SPY Aug 117 puts SPY@120.1

Stock market turns lower after a pop up at the open. I am reducing risk, and taking some huge losses on those positions. As I type, markets careen lower for a minute or two and now are stabilizing at lower levels. On the edit for typos, stocks are moving up off the lows. Seems like too many brave heroes are stepping into the breach, and that usually means lower.

As for yesterday's plan, it reminds me of boxer Mike Tyson saying “everyone has a plan, until they get hit in the face.” Ouch. -1600% on the IWM and -900% on the SPY puts, on the dollar value of the options. Writing naked puts can be a risky strategy, and when markets go straight down fast and volatility explodes higher, losses like that happen. Hopefully, I don't have many more of those as open positions, but I do still have some exposure. Taking those two losses doesn't mean the losing is done.

Thankfully, I had less than average exposure at the time of this tumble and didn't buy heavily into the debt ceiling rally, and didn't keep selling puts when SPY touched the 125 support level. So while the losses are terrible, traders that came in long two weeks ago and kept doubling down took a lot bigger hit, with aggressive put sellers likely getting margin calls. Of course, a few were short and made a ton, so overall the glass is three-quarters empty, but it could have been a cup of poison too.

Long GLD, SPY, TLT

Thursday, August 04, 2011

Worst day ever

I believe that today was my worst day ever since I starting blogging in February 2006 as the stock market melts down and the Dow is down over 500 points. I am tempted to say "the pain, the pain," as a parody on the old Fantasy Island TV series where Tattoo opens the show with "the plane, the plane," when the guests are arriving.

It is kind of bizarro Fantasy Island, more like nightmare island. What I kept telling myself today was "stop digging." Most of my recent moves have just made the hole I am now in, deeper. I had some "brilliant" ideas for trades today, but resisted.

My current plan is to wait it out. Roll out to further months any short puts that are going to be expiring in the money. My short IWM Aug 75 puts are already deep in the money, and another day like today, and the SPY Aug 117 puts and even the Aug 112 puts are threatened.

SPY broke support at 125 and now projects to 113. This target is by taking the width of the range and subtracting that from the breakdown point (137-125 = 12 points wide, 125-12 = 113 SPY target).

With all that, and despite today's losses, I still have a good bit of dry powder, but am reluctant to take on any more risk. Fast markets are not my friend.

Wednesday, August 03, 2011

Buy BRKB (buy calls)

Buy BRKB via buying Aug 77.5 calls with
BRKB@74.0

A departure for me, buying calls. Berkshire Hathaway earnings come out after the close on Friday, and stock is near support. I am buying the 13% chance 77.5 calls because if earnings are bad, the higher priced, higher probability 75 strike calls are likely to go out worthless.

Long BRKB, GLD, IWM, SPY, TLT

Buy SPY (sell backratio)

Buy SPY via selling a backratio with
SPY@124.7 -0.80 for the day

Sell twice as many lower strike puts, for every put bought
Sell 2x SPY Oct 104 puts
Buy 1x SPY Oct 109 puts

This adds a bit of SPY delta, while also getting some downside buffering. The short backratio is an odd duck in that it is delta positive (a bullish bet) but has a max profit if SPY closes at 104 at October expiration. I like this trade when volatility is high.

Long IWM, GLD, TLT, SPY

Tuesday, August 02, 2011

Buy GLD, TLT (sell puts)

Buy GLD via selling Sep 143 puts with GLD@160.7
Buy TLT via selling Sep 92 puts with TLT@100.9

These moves can be characterized as a rebalancing, to add more delta in bonds and gold. My delta for stocks is increasing as the market declines. The closest short puts in danger are IWM Aug 75 puts, with IWM now at 77.7. My current thinking is to roll those puts down and out if they come into the money.

Long GLD, IWM, SPY, TLT

Hulbert: VIX as a timing tool

Mark Hulbert has a Marketwatch article (link) about using VIX to time the stock market.

>>
Consider a hypothetical portfolio that switched in and out of the Wilshire 5000 index according to whether the VIX was above or below 20 — investing in the market on a given day if the VIX closed the previous session below that level, and otherwise staying in cash. This portfolio would have produced an 8.9% annualized return since 1990, when the CBOE’s data for the VIX commence, in contrast to 8.5% for buying and holding. (I chose 20 as the threshold level for illustration purposes only; it is not far from VIX’s median level over the last two decades.)
>>

As always, backtesting and curve fitting is easier when a person knows what has already happened. Sidestepping much of the 2008 decline is where this timing tool likely makes the bulk of its advantage. Still, it is another possible tool to use, like the 200 day simple moving average, one that has proven to be useful.

An interesting strategy going forward would be to do the opposite, buy on the sell signals given by VIX 20 or the 200 DMA crossovers. Why would anyone do that? Because when an indicator becomes too popular, gets a lot of press, it often starts to fail. I'm not saying I'm going to do that, but it is worth a thought. From the late night bull session a few nights ago, my young relative mentioned he watched the financial news much of the day. I told him that its best use might to use it as a contrary indicator when certain commentators "guaranteed" certain outcomes, to go opposite.