Damn, Three Two Times

On Monday the S&P 500 closed above it's 200 DMA so I was prepared to sell our current inverse ETF position which is the ProShares Ultra Short Dow 30 (DXD) on Tuesday near the close. Typically I wait for a second straight day, which would have been Tuesday, as a sort confirmation in the hopes of reducing the chance of getting whipsawed.

As a reminder the goal with defensive action is avoiding the full brunt of down a lot should it happen, not every breach will result in down a lot so there will be times where a position is entered and then sold without the market having dropped a lot.

My plan yesterday was to sell the DXD, if necessary which would have been of the SPX was above the 200 DMA, five minutes before the close. Any closer to 4:00 and I can't be certain of getting the trade complete which would be a huge headache.

For most of the last hour yesterday the SPX was a few tenths of a point above or a few tenths of a point below the 200 DMA which stockcharts.com had at 1113.93; it will be a little different today. Given how the market was trading, within a few tenths of a point either way, I decided about ten minutes to the close to not place any trade even if it ticked back over the 200 DMA. The thinking was if the market continues higher on Wednesday I can always sell it then as missing by one day would not be a crisis and if it goes lower then the chance for whipsaw has been reduced.

As a practical matter if an individual waits until one minute before the close to place a trade they may not get it in on time to be executed due to the vagaries of the internet and online brokerages. I am quite confident I could get a trade completed for a liquid vehicle like DXD if entered no later than 3:55 but I am not sure where that line in the sand is and don't want to find out first hand.

In the time I have been relying on the 200 DMA in this manner I cannot recall another instance where the market hopped around the 200 DMA on either side of it so closely as it did yesterday. As the SPX closed below the 200 DMA yesterday (1113.84 for the cash index versus 1113.93 for the 200 DMA) I will wait to sell DXD until there is another two day series of closes above the 200 DMA.