When I plan to get out of equities

E

Enscheff

Well-known member
I posted this in a non-related thread, but figured I'd dump it here too.

I am tracking the total margin debt as reported monthly by the NYSE. I am keeping an updated 12 month rate of change calculation going. That rate has gone over 0.04 only twice during the time I have data. Both times accurately predicted the 2001 and 2008 market meltdowns. Getting out of equities in 2008 due to that metric saved me a boatload of money.

The rate is currently bumping safely along the 0.015 mark.

SP500vsMarginROC.jpg
 
funny...using a completely different criterion (ratio of S&P 500 to potential GDP) I got out yesterday...i'm sure i didn't get out at the top...but i want to be able to buy at a lower level....i probably will focus more on non-U.S. equities when I get back in
 
If trump lets the tech companies bring back thier money from Ireland that might blow up in your face.
 
Quick update on this...

The 12 month ROC on total margin debt peaked at 4.386% back in March 2021. This allowed me to start tracking it's decline and make the following trades:

12/30/21 sold 50% at SP500 close of 4778
3/17/2022 sold 25% at SP500 close of 4411
4/14/2022 sold 25% at SP500 close of 4392

I missed the absolute market peak by 2-3 days, and have missed the bulk of the bloodbath in equities...only down 3.07% YTD, mostly due to buying all the way down with 401k contributions.

I expect the 12 month margin debt ROC to bottom out ~20 months after it peaked, which will be sometime around October (but obviously forecasting it matters not...I will track it and react accordingly). I expect the bottom of 12 month margin debt ROC to be roughly -4.5%. If this impending recovery plays out similarly to the one in 2009, the ROC bottom should coincide almost precisely with the SP500 bottom at a bit under 3000. At that point I will push 50% back in, then push in 25% more as the 12 month margin debt ROC raises towards 0.
 
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Not bad. Through a somewhat different approach I concluded 2900 on the S&P500 is a good target for getting back in.
 
That's in the right ballpark. It's impossible (without a great deal of luck) to hit the low or the high. So better to scale in a little too soon than too late.
 
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