jsd501 7:32 am on Saturday, February 12, 2022

TQQQ,

We made an all time high on November 22 at 91.68 and the low on January 24 was 48.17 which is a decline of 47% and the FED has not raised interest rates yet. The Covid low on March 20, 2020 was 8.18 so I ask, how low can we go?

bikeeagle1 8:35 am on Saturday, February 12, 2022

Great question! The short answer is, from a high of 91.68, we could see TQQQ at around 8 or 9 cents per share.

I wondered the same thing, so I ran a simulation from 2000 through 2013 using triple the QQQ (100% QQQ plus 200% leverage). I used that time period because I wanted to see what might have happened to TQQQ had it had existed back then, kind of as a worst-case scenario. It took QQQ that entire period to recover to where it was at the beginning, so it seemed natural to wonder what TQQQ would have gotten down to, and what would it have recovered to by the end of the period.

Here’s what that simulation looks like (the red line is the normal unleveraged QQQ and the blue line is the triple version):

Basically, if you had held 300% QQQ during the dot-com crash, a $10,000 investment would have fallen to a grand total of $9 at the bottom. By the end of 2013, QQQ had recovered, but the triple leveraged version had only recovered to $231. Still a long way below the initial investment of $10,000!

Here’s the link (click on the logarithmic scale at the bottom of the chart, otherwise the leveraged version is just a blue line at the bottom):

https://bit.ly/3JkxSBK
- bikeeagle1 8:53 am on Saturday, February 12, 2022
  
  Note that you can do way better by applying a simple market timing strategy. For example, here’s what happens if you had used QQQ and its 200-Day MA as a timing signal over the same time period (the blue line is the triple QQQ with timing, the red is without timing, and the yellow is the normal unleveraged QQQ):
  
  That’s based on waiting until the end of every month and checking whether QQQ is above its 200-Day MA or not. If it is, hold TQQQ and check again a month later. If QQQ is below its 200-Day MA, sell TQQQ, go to cash, and wait a month to check again.
  
  Here’s that link:
  
  https://bit.ly/3oLIPEK
  - bikeeagle1 9:17 am on Saturday, February 12, 2022
    
    Results are even better using SPY and its 200-Day MA as the timing mechanism (again, blue is the simulated TQQQ with timing, red is without timing or buy-and-hold, and gold is the unleveraged QQQ):
    
    Not sure why using SPY and its 200-Day MA works better than directly using QQQ, but I’ve noticed that before when working on other timing strategies. My guess is that it’s because more people watch the SPY one, so it becomes more of a self-fulfilling prophecy.
    
    Here’s that link:
    
    https://bit.ly/3rJICn8
    - jsd501 9:53 am on Saturday, February 12, 2022
      
      So, if you are long the 3 times ETF’s in a bear market, you have a big problem. That is what I was thinking one my 3 mile walk this morning. If it can go down 40% plus with the FED just saying they are going to raise rates, what will happen when they really raise rates several percent? At this point I am in cash and do have any positions but watching.
      - bikeeagle1 10:19 am on Saturday, February 12, 2022
        
        That’s absolutely a reasonable strategy, especially based on your timing models. For someone willing to use the timing strategy I showed using SPY as the IN/OUT signal, it’s in an interesting position right now.
        
        SPY was above its 200-Day MA at the end of January, so that strategy would be all-in on TQQQ until the end of February, even though SPY closed below its 200-Day MA yesterday. As an experiment, I ran the same timing simulation using “Day-Of-Signal” as the trade date, and the results weren’t as good as only checking at the end of the month.
        
        I think that that’s because “Day-Of” timing results in more whipsaws, leading to poorer results long-term. Of course, one has to have the stomach to live with intra-month craziness in order to get “End-Of-Month” results, but that’s where position sizing comes in.
        
        We all have to pick our poison I guess. Lol.
        
        jsd501 10:25 am on Saturday, February 12, 2022
        
        I think that using the QQQ and SPY as signals with proper stops is the way to go but if the FED is on a mission, it may be better to just sit on my hands. Jesse Livermore said he made the most money when he was just sitting.
fuzzballl 6:56 am on Monday, February 14, 2022

Just some random thoughts. Covid pullback was 72 percent so that would be down to about 25.50 now. How much is the Fed already priced in? I’m sure we’re not the only ones that know about rate hikes. 🙂 🙂 Is sell the rumor buy the news a possibility?
- jsd501 7:07 am on Monday, February 14, 2022
  
  I think the FED is way behind on raising rates and it will not be just one rate hike so, until I think they have stopped rate hikes, I will be mostly in cash.

Leave a Reply Cancel reply

The Wait is Over

We have finally made it. Our top 6 albums of all time. The final episode of The Pick 100 is available now. https://thepickcast.com/

The end is nigh

The top is intractable. The end is ineluctable. The finish is forthcoming. We resume the revealing of our revered records of rock with picks 13 through 7; an all-new episode of The Pick. Watch the promo above, then go to our Pick 100 page to link to the episode. It’s also your LAST CHANCE to […]

Only 21 left before #1

As we push our way to #1, we tick off picks from Zeppelin, Liz Phair, Rage Against The Machine, The Police, and Marvin Gaye. We have our first guest on a Pick 100 episode, Leif Sandaas, college friend and man responsible for our love for R.E.M. And a “radio play” to tell the story of […]

#30-22 are here… and you can dance to them

Our Favorite 100 Albums countdown continues, as we have reached numbers 30 through 22. Beastie or Blondie; Mac or Boy; Uh-Huh or Hum; Steely or Straits; Prince or PJ; Ten or 1999; Earth, Wind, Fire, Hell, or Purple Rain… which will rank higher? Led Zeppelin IV is Jeff’s pick at #23, and it features “Stairway […]

The Best Music of 2021

Anticipated by no one and ignored by most, here are my picks for best albums and songs of 2021. You can click on each album to link to Spotify, or the underlined album title for Apple Music. My favorite songs are compiled on playlists on both Spotify and Apple. Click here for song playlist on […]