Portfolio Boss

Bull or Bear?

Corona Del Mar, CA


Howdy Friend!

I was told once that because "everyone" uses subjective TA (like trend lines, patterns, Gann angles, Elliott Wave), it's a self-fulfilling prophecy. That's ironic, because by it's subjective nature, traders who use that sort of technical analysis rarely see eye to eye. Lock 100 E-wavers in a room for 4 hours, and they'll come out with 100 different wave counts.


I see no difference between those individuals and the so-called "fundamental" forecasters who decide on a market trend—be it a bull or bear market—first, and then scrounge up 500 pieces of evidence to support their predetermined conclusion. It's like declaring you've found Waldo before opening the book, and then pointing out every red-striped object as definitive proof of his whereabouts.


I became so annoyed with these types of traders that I wagered a straightforward strategy, encapsulated in just seven lines of code, would outperform them significantly—and it would do so effortlessly.


Check it out:

You might remember this strategy from my book Outfoxing Wall Street. It sold out of SPY recently, and got into bonds. Amusingly, bonds then started to outperform right on cue.

Even though the strategy is simple, it manages to combine trend following with mean reversion.


When the S&P 500 does end up falling, it'll trigger a sell on bonds, and a buy on S&P 500. We'll have to rise a few more percent for the trend following element to kick in. For now, it's going to ping pong back and forth between stocks and bonds.


What about our other strategies?


At this point, I'm looking at hundreds of strategies. Dozens of those trade stock indices. That's why I invented a new form of machine learning that predicts which strategies will perform best over the next month.


Let the tools do the work.

Trade smart,

Dan "Prince of Proof" Murphy


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