Can anyone tell me the glaring flaw in my strategy if there is one? In the next 2-3 months, I anticipate the election & Covid not slowing down and perhaps becoming more rampant. I think this will cause some correction in the market that will place it below what it is today. My plan is to slowly start liquidating, on green days , sell more, red days, buy less. If I’m wrong, I miss out on gains, if I’m right, it’ll hopefully save me a few years-a decade of trying to claw back money. Thoughts?

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I think biggest flaw is thinking markets are rational.

July spike in cases did next to nothing on Market sentiment. Even reimposed lockdowns had little impact. It would take a significant second wave of COVID and a massive re-outbreak in NY or something similar to cause investors to be concerned IMO.

Election will cause volatility and big swings certainly.

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I think the days of market drops because Covid cases are long gone. People as well as the market shrug that off. Remember, how everyone calling FL and GA governors all kinds of names because they didn’t shut their states down? Not going to happen anymore.

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Don’t try to time the market. It’s a fools game.

If you think things are overbought and might decline in the next few weeks maybe sell some and raise a little cash, but don’t go more than 10-12% cash. I went too far to cash in Feb and wasn’t aggressive enough getting back in. I avoided a good chunk of the draw down but have under-participated on the rebound.

Keep this on the margin. If you have individual stocks look to pull chunks of your original investment out of your big winners. If you only have an index then trim some there. If this is a taxable account you need to consider how big the drop needs to be to offset the tax bill.

You could also use out options as a hedge but that’s not something I’ll give advice on.

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This!

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That everyone else including the big funds may have the same idea. The recent rebalancing is an indication that they’re preparing for a buying strategy in the coming months. The idea is probably the right track, the most difficult part is the timing

Also the main economic indicators right now aren’t looking that terrible, so it’s not a guarantee that things will dip. Unemployment has decreased, housing still seems to have strong demand for the suburbs, and the Fed is ok allowing inflation to go above target, since it has been below for a while

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Maybe, but I don’t agree with either of your assumptions, “COVID not slowing down” it already has been, the seven day moving avg of both cases and deaths have been declining since Jul 26th and Aug 2nd respectively. The election risk has less to do with who wins and is more because of the lag between Election Day and verifying results ala 2000. I’d expect the market to continue to rise through the end of October with a pullback in Nov/Dec.

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Oh boy!!!

likesmart

Buy an sell options against your equity positions.

Timing the market is just hard. There are people who’s been warning of a bull trap since May. And I think back in May not everyone saw that we’ll have higher daily new cases in September, but market didn’t crash. Sounds like you are seeing some collapse of bubbles coming up, but personally I don’t see much bubble. I see an inflation in asset values due to that royal money printer in Powell’s back pocket. That will not just disappear overnight and cause a crash in the market.

Unless the second wave of covid turns out to be like Black Death and wipes out half of the population, I doubt market will crash like it did in March. Back then everyone was selling off to get liquidity for the untertainties with the shutdown, and many of my clients still have cash that could keep them running for a year without any revenue. Market sell off will likely not repeat itself for the same reason

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A lot of people dont anticipate market to be completely red even if biden gets elected (e.g. pro environmental companies like tesla and nkla might actually do better under biden whereas oil companies will obviously do worse)

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Am going to look more closely later, but it seems we’re headed for double top and drop to me

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I respectfully disagree.

1) Covid cases are decreasing
2) Historically stocks run up prior to the presidential election
3) I think it’s almost certain sometime from now until Nov 3, Trump will announce the US has found a vaccine. It may or may not be true but it will pump up markets

It seems like tech stocks and reopening stocks are inversely correlated where tech will run up for a couple days and reopening will run down, then they’ll reverse. I think I’m going to shift from tech to reopening and vice versa after 2/3 days of solid run up. What do you guys think?

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COVID declining cases and vaccine are already baked in IMO. Good vaccine news and stimulus are good for some short term pumps. Once that load is blown, the focus goes back to the actual economy, which is far from great.

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Let’s say your macro economic thesis is right for a moment ... what’s is your investment strategy ? Index ? Vix ? Etc... That is critical .

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It’s also possible that we continue to melt up with continued fed actions and with Trump promoting and pushing for a vaccine even if unproven. Plus based on the latest covid figures, it seems like it’s stable to slightly declining. I’m planning on staying in the market and buying if we go down.

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Perfect strategy.

Sure why not

Also if you’re young - just DCA. There’s no reason to be pulling out. Spy 4500 in 10 years.

SPX likely 7,000 in 10 years. Doubt SPY will be 4,500 in 10 years.

Look at the distribution of returns historically in the major indices. A massive % of returns happen over less than 20 trading days over multiple years. The same is also true of drawdowns though. Cutting the damage done to your portfolio on the worst 10 days in the SPX by half improves your returns like 120% or something ridiculous (I forget the time period this is over, but you can probably find it online). So maybe the answer is to find better ways to hedge/diversify your holdings. Rather than remove market exposure entirely.

The only thing is hedging insurance is expensive because of the vol premium built into something like index puts. But it might be worth the peace of mind so you can stay invested but have lower risk.

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