401k strategy Best seasonal period

I have noticed a couple of longer term signals that I believe are indicative of an important longer term buy signal. The 1st is the bullish seasonal I will describe here. And 2nd Is identifying bear market bottoms explained in the post below. The stock traders almanac does a great deal of work on the best 6 months of the year with timing. The idea is to simply buy after October 1st when the MACD difference is positive and sell after April 1st when the MACD difference turns negative. Following this strategy in the DLIA would have turned $10,000 into $1,546,000 , a 9.16% compounded return with only 7 down years since 1950. As a comparison If you bought during the worst 6 month period April to October that same 10,000 would have dwindled down to -$6,291 and 28 out of the 57 year period would have returned a loss. The entry dates and performance are listed here. This timing strategy triggered a buy signal on October 20th with the DJIA @ 9,265. At the time of this writing the DJIA is now @ 8770 , now is the time to game this strategy and get in a bit cheaper than the 9265 entry.

As a longer term strategy you could buy the DIA or better yet take advantage of the VIX @ 61 and sell naked puts in the DIA equal to the amount of shares you would have bought. As an example for a $100,000 investment in DIA @ 88 buy 1136 shares or using the naked puts park the 100,000 in MMKt earning interest and sell 12 out of the money puts on DIA, the NOV 83 strike are trading ~ $3.5 that’s a 4% premium for only 1 month of time and these are 5.7% out of the money. You will have downside protection and a breakeven @ $79.5 If you look at these risk reward stats annualized the numbers are very attractive, ~48% premium income and much better downside protection when you consider the out of the money strikes. Don’t forget your 100k + premiums collected will be sitting in the money market during the 6 month period collecting interest. That’s a Ripe Trade.

One other note, is that I wouldn’t place any trades until you see some form of short term strength. I like to look for what I call a Bullish pivot or a range pivot. A bullish pivot is a day when today’s low is greater than yesterdays low and todays high exceeds yesterday high, entering at prior days high. A range pivot is adding or subtracting 30% of yesterdays range on to today’s open for longs / shorts respectively. This is probably one of the most basic but most important rules I have learned during my years of trading. A declining market or stock can not go higher without having a Bull pivot or Range pivot. And a rising market will never go down until after its formed a Bear pivot or bearish range pivot. This is a fact and I challenge you to prove me wrong.

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