Technical Analysis

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I am a long-term investor and have been using technical analysis since 2014

  • 1.  I am a long-term investor and have been using technical analysis since 2014

    Posted 12-30-2022 20:10
    It has worked as advertised. There is bull market friction, because you get whipsawed out of the market occasionally, and end up buying back in higher than your exit point. However, you make it back during bear markets, case in point is 2022, I am down 10% for the entire year, which is better than the 60/40. The buy and hold part of my portfolio contributed significantly to the drawdown.

    The trade discipline is trade once a month only, at the end of month.

    The Tactical Asset Allocation (TAA) part of my portfolio (65%) consists of:

    Bold Asset Allocation (Aggressive)
    Generalized Protective Momentum
    Paul Novell's SPY-COMP
    Gary Antonacci's Global Equities Momentum (GEM)

    I also have buy and hold (35%) precious metals, gold miners (painful drawdown) I-Bonds, Treasury Bills, Notes, and Bonds, and an Oil & Gas Limited Partnership. I sold Bitcoin for a handsome profit, but not before it drew down from $49k to $22.5k in 2022.

    If we look at the backtest of just the TAA portion, with weights 40% 40% 10% 10% to each strategy, we get the following results (1/1/73 - 12/30/22):

    CAGR 15.3%, Sharpe ratio 1.21, Max Drawdown -8.5%, Longest Drawdown 16 months, Ulcer Performance Index (UPI) 5.11

    The Benchmark 60/40:

    CAGR 9.1%, Sharpe ratio 0.46, Max Drawdown -29.5%, Longest Drawdown 40 months, Ulcer Performance Index (UPI) 0.75

    My TAA strategies are tax-inefficient, high turnover. I only use them in my IRAs.

    I source my signals and do my backtests at Allocate Smartly. The cost is minimal compared to my portfolio size. The Allocate Smartly results above are net of estimated expenses and trading friction.





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    PETER WANG
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  • 2.  RE: I am a long-term investor and have been using technical analysis since 2014

    Posted 01-17-2023 11:24
    Thank you, Peter, for sharing your perspective on using technical analysis as a long-term investor. Also, thanks for sharing some good resources about allocation. I am curious if other members tend to combine buy/hold strategies with technical analysis or strictly use one or the other?

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    Jenna Brashear
    AAII Community Manager
    Chicago, IL
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  • 3.  RE: I am a long-term investor and have been using technical analysis since 2014

    Posted 01-19-2023 08:56
    I'm a buy and hold long term investor. I don't use technical analysis to select a holding for the long term, I use fundamental analysis. However, I do use technical analysis to establish option positions on my long-term holdings. I use a combination of two indicators to determine the optimum time to sell puts or calls to generate income in addition to the dividends. I use a third indicator for an option buying strategy. I have been doing this successfully for over 10 years. Last year, net option income added 60% to my 2022 dividend income.

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    JEFFREY IPSER
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    Original Message


  • 4.  RE: I am a long-term investor and have been using technical analysis since 2014

    Posted 01-19-2023 10:17
    Jeffrey, that's extremely smart. I have thought about buying puts to protect a B&H position in addition to Tactical Asset Allocation. Is this what you are doing, or are you buying spreads consisting of put and calls where you make money no matter which direction the market goes?

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    PETER WANG
    AAII Houston TX Member
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    Original Message


  • 5.  RE: I am a long-term investor and have been using technical analysis since 2014

    Posted 01-19-2023 15:04
    The indicator I'm using to buy options oscillates between bullish and bearish.  When bearish, I buy a synthetic short stock (buy ATM put and sell ATM call) and buy an upside call that costs little money, typically less than $0.10. The structure as describes makes it a call spread and I don't lose my stock if I'm wrong. I also set an alert to notify me if the indicator turns direction while I'm the trade. I then exit immediately if the indicator changes direction. 
     When the indicator is bullish, I place a synthetic long stock option trade (buy ATM call and sell ATM put). I then buy a low cost put as downside protection and to limit my buying power. I use this strategy to profit and lower my position cost basis. I then set the alert for the change in the indicator.

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    JEFFREY IPSER
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    Original Message


  • 6.  RE: I am a long-term investor and have been using technical analysis since 2014

    Posted 01-19-2023 19:43
    That's great, how many times per year or per month you do trade? Is this a very active strategy?

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    PETER WANG
    AAII Houston TX Member
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    Original Message


  • 7.  RE: I am a long-term investor and have been using technical analysis since 2014

    Posted 01-20-2023 14:14
    The number of trades over a period of time is dependent on how often the indicator alerts and after I evaluate the alert. I use different indicators to place different option strategies. It's important to note that every indicator doesn't work all the time. If you can understand what nuances makes it useful for a successful trade, you can avoid losing trades and increase your probability of success. After an indicator alerts, the trade is verified by other metrics and or another indicator. Trust but verify as a U.S. president once said. That is where experience and learning from failed trades is so important.
    Some of the strategies I use are active, others are not. On average 30 -50% of my holdings have an option position tied to the underlying at any given time.

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    JEFFREY IPSER
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    Original Message


  • 8.  RE: I am a long-term investor and have been using technical analysis since 2014

    Posted 02-18-2023 23:13

    Whatever folks are doing they should stay out of bear markets. Some good technical indicators for this would take the emotion out of reasoning about when is a good time to get out. Also people should consider some kind of momentum aspect in their holdings. I uploaded an article titled

     "Fact, Fiction and Momentum Investing". Fama/French the efficient frontier guru's maintain a web site. In it they look at different factors and how this effects portfolio performance. In a nutshell momentum comes out looking good. It's worth a read.



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    [Jim] [McClean]
    [Houston][Texas]
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    Original Message


  • 9.  RE: I am a long-term investor and have been using technical analysis since 2014

    Posted 02-18-2023 19:32

    Peter I implemented a variation of Gary Antonacci's strategy. In Allocate Smartly is there a way you can change the calculation of relative momentum for each asset. I used 4/10 of the monthly relative momentum, 3/10 of the quarterly, 2/10 of the semi annual and 1/10 of the annual relative momentum. By relative momentum I mean (CurrentPrice - PastPrice)/PastPrice. Also if multiple assets where investable in this strategy invest in them proportional to there relative performance. So if vti had 5% outperformance,  schf had 7%, vnq 3%, and gld 10% outperformance relative to something yielding 2% then the investment proportions would be 5/25, 7/25, 3/25, 10/25. Twenty-five is just 5+7+3+10 in the denominator.

    Something like this will get you a GAGR in the mid twenties assuming 1% trading friction and 20% tax rate.



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    [Jim] [McClean]
    [Houston][Texas]
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  • 10.  RE: I am a long-term investor and have been using technical analysis since 2014

    Posted 02-18-2023 20:56
    Edited by PETER WANG 02-18-2023 20:56

    There's nothing user configurable in Allocate Smartly except for how you blend the strategies, also you can choose to trade on different days of the month. But it does give you a backtest of your constructed portfolios (you can have three) and you get email alerts when you need to trade.

    The strategies by Wouter Keller and JW Keuning do use 1, 3, 6, and 12 month momentum as you do. They also use a "canary universe", all of the canary (in the coalmine) assets have to be risk-on for the strategies to go risk, and when they do (60% of the time) they tend to swing for the fences. My favorites from them are Bold Asset Allocation (Aggressive) and Generalized Protective Momentum. Google them.

    The backtests are very impressive. But they are really very tax inefficient, the turnover is very high. I only use them in IRAs / HSA.



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    PETER WANG
    AAII Houston TX Member
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    Original Message


  • 11.  RE: I am a long-term investor and have been using technical analysis since 2014

    Posted 02-18-2023 23:02

    Hi Peter,

        I have attached some results from a run of my variation of the dual momentum strategy.

        StratVsS&P.png is dual momentum versus s&p buy and hold

         drawdown.png is the draw down for strategy and s&p . s&p is much worse

         BackTestDual.txt  is trades made during backtesting. GAGR are at bottom

         Perhaps i should try a strategy that varies from holding s&p during bull periods and safe things like cash, gld, uup during bear periods.

    Would probably be a lot better than either a s&p buy and hold or a 60/40 strategy. How much I don't know?



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    [Jim] [McClean]
    [Houston][Texas]
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    Attachment(s)

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    BackTestDual.txt   65 KB 1 version
    Original Message