The Bulls vs. Bears Scoring System In 2008 Market Meltdown Period

This is perfect time to go back and re-visit the meltdown of 2008 and see how our bulls vs. bears system did during that time.


Here is our bulls vs. bears scoring system for the period from 5/12/2008 to 5/8/2009 in which the “market meltdown of 2008” occurred.

There are 3 major phases in that one year period:


(1) A small meltdown market (from 5/21/2008 to 7/8/2008). Our bull bear system nicely predicted that period. It was then followed by a small upward stabilization period.

(2) A big market meltdown (started 9/3/2008 to 11/20/2008). Our bull bear system told us the beginning of the “crash” with a few “one day wonders” later.

(3) Market bottom and start a major upswing (from 3/6/2009 to 4/23/2010). Our system told us to buy only a few days after the market bottomed. A few “one day wonders” after that.

The major “problem” with our system is the existing of many “one day wonders”. The bulls or bears take over for just “one day”. These kinds of whipsaws made it hard to follow the system. There a few ways to “solve” the problem:

(1) The first one is that you can act on when there are at least 2 days of bulls or bears control. i.e., you can wait for a day, see if the signal is still valid or not

(2) The 2nd way is based on SPY chart reading. You can based on your chart reading ability to “filter out” these “one day wonders”

(3) Another way to “solve” the whipsaw is to adjust the ratio of longs and shorts. For example, bulls are in control for long time, and your portfolio is 100%, and then one day the bears score >25 and bears>bulls. You don’t have to sell all the longs and go 100% shorts. What you should do is sell some longs and add some shorts, say after one day, your portfolio become 90% longs and 10% shorts. If the signal is a false one, all you have to do cut the 10% shorts. If the bears indeed take over, you continue add shorts and cut longs, after a few days, your portfolio become 50% long and 50%shorts, and so on. This is my own weakness. I have to adjust my mind to hold both longs and shorts at the same time. It is very hard for me to root for both teams in a sports game. I will have to get better on this.

(4) Use with other people’s systems to confirm or filter the signals. I will encourage discussion among my blog visitors, so we can build a strong community to share ideas. Especially when a new signal is generated, please make comments; the new signal could be a “one day wonder”.


What do you think of my thoughts on “filtering out” the “one day wonders” and whipsaws?, which way do you like the most?, do you have any other suggestions?, I’d appreciate it if you would give me feedbacks. Thanks.

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The corresponding SPY diamondWise chart for the same period is shown below