Investors must embrace the bear. A savvy investor or advisor can generate significantly more profits from a secular bear than a secular bull. It’s also much easier to predict the behavior of a wild and vicious bear than a domesticated bull.
The new 2020 secular bear is the first for which an investor can utilize an inverse ETF (Exchange Traded Fund) to invest in a bear market from start to finish. The share price of an inverse ETF increases when a market goes down. The first inverse ETFs were invented in 2007. The new ETFs enabled investors to make significant profits at the end of the 2000 to 2009 secular bear market. The chart below depicts the gains for the Dow’s inverse ETF before and after Lehman went bankrupt in 2008.
The increased volatility caused by the secular bear can be leveraged by algorithms which had not been utilized in prior bear markets. Two of my algorithms have the potential to produce substantial gains:
- Bull & Bear Tracker (BBT)
From April 9, 2018, and through February 29, 2020, the Bull & Bear Tracker (BBT) trend trading algorithm which trades both long and inverse ETFs produced a gain of 77.3% vs. the S&P 500’s 14.9%. March of 2020 will be the BBT’s 9th consecutive profitable month. See “February 2020, Bull & Bear Tracker’s 8th consecutive profitable month”.
The Bull & Bear Tracker thrives on market volatility. The algorithm’s best performance days since the inception of the signals have been when the markets are most volatile.
- SCPA (Statistical Crash Probability Analysis)
The SCPA is a crash event forecasting algorithm. The algorithm has been very accurate at forecasting the crash of 2020’s events. The SCPA’s forecast that the market had reached a bottom on March 23rd was precisely accurate. From 03/23/20 to 0/3/26/20, the Dow had its biggest one-day gain (11.4%) and three-day percentage gain (21.3%) since 1929 and 1931, respectively. Those investors who purchased the Dow’s long ETF (symbol: DIA) by close of the market on March 23, 2020, after reading “Probability is 87% that market is at interim bottom” which was published during market hours, had a one day gain of 11% at the close of the market on March 24, 2020.
The SCPA’s future event forecasts throughout the life of the crash of 2020 are being utilized to trade long and inverse ETFs until the US markets reach their final bottoms in the fourth quarter of 2022. Had the SCPA and inverse ETFs been available to trade the SCPA’s forecasts in 1929, savvy investors would have made more than 572% from December of 1929 through July of 1932. There were 14 Bear market rallies with average gains of 17%. The rallies were followed by 14 declines which averaged 23%. could have produced average gains of 23% for inverse ETF investors.
Both the Bull & Bear Tracker (BBT) and SCPA complement each other. The BBT predicts market volatility before it increases. The SCPA forecasts the percentage increases for the bear market rallies and the percentage declines from the bear rally highs. My prediction is that the utilization of both of the algorithms will reduce the failed signals ratio for the Bull & Bear Tracker.
For the returns from both of these algorithms to be maximized and the risk minimized requires active management by an approved registered investment advisor. Based on the findings from my recently completed empirical research of the Dow’s best rallies from 1901 to 2020, the markets will remain extremely volatile for the foreseeable future. See “The TRUTH about Dow’s ‘Biggest One-Day Jump Since 1933”, March 31, 2020. To be referred to a registered investment advisor click below.
There are only three reasons why anyone who is reading my articles would not to sell:
- Waiting to get back to break even. It’s against human nature to take losses.
- Not wanting to pay capital gains. Securities with gains can be “sold short against the box” to delay a taxable capital gain,
- Financial advisor advising otherwise. Beware of the following:
a) An advisor’s largest percentage fee that can be charged is for the amount that an investor has in stocks. If the investor is in cash the advisor can-not charge the fee.
b) The majority of financial advisors are affiliated with big brand name firms including Merrill Lynch, Morgan Stanley, Goldman Sachs and UBS, etc. These advisors have to follow the party line. They do not have the independence to get their clients out of the market even if they wanted to.
Forward this article to everyone you know who has stocks, mutual funds and a retirement account. Everyone needs to understand that the probability is high for the market to decline by 79% from the high of this year to 2022. Subscribe to be alerted when my crash of 2020 articles are published.