The 30 Down Rule

What is the 30 Down rule?

Why did we change from four sell skips to one for 6Sig and 9Sig? Why is 3Sig not in it? When do we rebalance?

— Jason Kelly is the author of The Neatest Little Guide to Stock Market Investing and The 3% Signal, and writes an investing newsletter called The Kelly Letter. He lives near Tokyo.


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2 Comments

  1. Rqb90
    Posted May 3, 2020 at 3:36 am | Permalink

    I have a question about the 30 down stick around rule. I thought I understood the 30 down rule and wanted to see if I got it right.

    The rule is quite simple and is as follows:

    If the SPY price at “any point- say 2020Q1” drops below the “max. of the closing prices of SPY that falls within a 2 year span preceding that point (2020Q1), i.e. max. of SPY closing prices in the preceding 8 quarters 2019Q4,Q3,Q2,Q1, 2018Q4,Q3,Q2,Q1”

    the next “4 sell signals” that “may” occur in the next 2 year period following that point (2020Q1) shall be ignored (i.e. sell signal that “may” occur in these following 8 quarters 2020Q2,Q3,Q4,2021Q1,Q2,Q3,Q4,2022Q1).

    – Note: We will either ignore Only 4 sell signals that may happen in the next 8 quarters after that we will resume the plan as usual or we will resume after 8 quarters if all 4 sell signal did not occur.

    If what I understood is correct please read below.

    When I was studying Mark’s plan to see if the 30 down rule works the way it is supposed to I found the following:

    1- in Q301- the SPY price was $104.44, the max closing of the SPY price in the preceding 8 quarters was $150.375 which happened on Q100. So if I understood the 30 down right, the Q301 should have triggered the “30 down rule” and Mark should have ignored the next 4 signals in the following 8 quarters. But, I see that did not happen. The next quarter Q401 there was a sell signal to sell 10.28 shares which was not ignored. Why? where am I wrong?

    2- Now, if Mark had followed the “30 down rule” (may be he did and I am misunderstanding), the “Ignore Sell” signal would have ended on Q303, and the plan should have resumed as usual starting on Q403 and he should have sold 1.98 shares on Q403.

    Well, may be not and here is where I do have another confusion and a sub-question as stated below:

    3- Each time the SPY current price drops down 30%, should it trigger a 2 year span of ignoring 4 sell signals? Just like in Mark’s plan, the 30 down trigger happened 1st time in Q301 and again in Q202,Q302,Q402,Q103 (Note all next 4 triggers are within the 2Year span of the 1st trigger), should they all act as an independent trigger point of “Ignore next 4 sell signals”? In other words, should each trigger point set a new span of 2 years along the way, when they occur back to back?

    – Q301 trigger would last from Q401-Q303: Ignoring 4 sell signal in this period and resume normal plan or wait till Q303 ends and then resume normally, whichever occurs first.
    -Q202 trigger should last from Q302- Q204?
    -Q302 trigger should last from Q402- Q304?
    -Q402 trigger should last from Q103- Q404?
    -Q103 trigger should last from Q203-Q105?

    Which one is the right trigger? which one did Marks plan consider, he did not consider Q301 ? Which one of the next 4 did Mark considered each as a new trigger point, the 4 sell signals that was ignored in the plan from Chapter 7 was correct and aligns with the plan.

    Hope I was able to ask my questions clearly.

    Thanks.

  2. cheyann browning
    Posted April 11, 2020 at 1:09 am | Permalink

    I finally clearly see what the 30 Down Rule means, Thanks you!

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