QQQ is getting close to it’s 13 week simple moving average for the first time since the end of April. The last time it crossed from above was in late February, also after about 5 months above. The short term bull case that SPY is bottoming here remains rational but shaky.
SMH and SOXL are interesting.
More or less the same chart, except the high to low loss on SOXL is 100 and SMH is 20. The losses all came in a 3 day period which was not trivial to avoid.
The algorithm looks at signals and doesn’t do subjective judgments. That’s an issue, but there is no clear way to tell it not to do that and increase returns at the same time. Personally, I don’t see this as something that requires immediate mitigation.
Anyway, assume you are long SOXL the morning after 311. The trader has a decision to sell at the negative open, that is not easy to do. If you hold it all day, that is a tough sell at the close because it has pulled back to support and has excellent chances of rebounding. Day 2 is even more difficult. The algorithm sells after day 1, it has one disastrous day but that is twice as good as buy and hold in this case which has two.
The other side is that the buy signal at 211 should be taken, and that is tough to follow, especially if the trader has just taken a substantial loss.
There is no simple answer to those decisions.