Disclaimer: I am not an investment advisor. When I describe my own trading activities, it is not intended as advice or solicitation of any kind.

31 March 2011

Not The Spreadsheet's Fault

Two weeks ago, CS|MACO gave me a Buy signal when AAII.com released a bearish investor sentiment report -- bearish investors correspond well to short-term market bottoms, that's why we call it Contrary Sentiment.  The moving-average crossover component had no strong feelings either way, so the CS-based Buy signal was allowed to generate a system-wide Buy.  I dutifully bought SPY near the open price in my paperMoney account.

A week later, as the market rose, investors relaxed their concerns somewhat and found their bullish mojo again.  37.7% of them gave the thumbs-up to the world, which was outside of the Buy range, but not above the 41.5% required to close the trade.

Finally last night, a new report came out at 41.8%...just high enough to get a close signal.  But now SPY was above its 25-day moving average, which in turn was above the 200-day moving average.  So while CS went from Buy to Flat, MACO went from Flat to Buy.  Flat+Buy=Stay-Long.

If I had managed to put the numbers into the newly-fixed spreadsheet correctly, that's what I would have done.  Instead, I fat-fingered the 200-day moving average, entering 4119.49 instead of 119.49.  The spreadsheet was a little taken aback by this sudden 4000% spike in the long-term moving average, but kept a stiff upper lip about it.  "Guess you better sell, boss," it said.  I sold.

Hey, I got a great price, getting out about 35c above the close for the day.  But first thing tomorrow I'll have to get back in.  And I'm betting that the Employment Situation Report tomorrow an hour before market-open is going to send the S&P up sharply, causing a gap-up in SPY that will cost me for my stupidity.

Can't blame the spreadsheet this time... garbage in, garbage out.

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