On rare occasions when the stock market is extremely volatile the Bull & Bear Tracker’s signals can change more than once in a day. Wednesday August 7, 2019, was one of those rare days. The signal went from GREEN to RED on the open and back to GREEN at 3:40PM.
The reason why the signal stated to go to 100% cash and the SPY was not recommended to conservative traders and the SPXL for aggressive traders is because we were concerned about a subscriber’s brokerage account being frozen for 90 days for violating the SEC’s “Regulation T”. It is the rule which governs day trading. We had incorrectly believed that a subscriber’s account liquidating to go to 100% cash would not be a violation. We were wrong. Yesterday all accounts which did not have a sufficient amount of surplus cash (over and above the proceeds from the 3:45PM sale) to cover the proceeds from the sale of the SPXS or the SH ETFs could potentially violate Regulation T. You may have already received a notice from your broker about this.
If we had known that swapping the ETFs at the end of yesterday was the same violation as a liquidation the text would have recommended to utilize the proceeds from the sales of the inverse ETFs to purchase the SPXL or the SPY.
From researching Regulation T, we learned that an account ONLY becomes frozen for 90 days upon the third regulation T violation occurring within a rolling 12-month period. We also discovered that if an account holder deposits the amount to cover the second purchase for a day within five business days of the trade date, a violation will not have occurred.
We alerted you about this because we want you to be:
- Mindful to not enter trades for other stocks, etc., that might use up your Regulation T bullets.
- Prepared to temporarily advance additional funds in your account when there are two signal changes during a trading day. Your brokerage firm will send you a margin call for specific amount that needs to be deposited to remain in compliance with Regulation T.
The good news is that from reviewing the Bull & Bear Tracker’s January 2018 through June 2019, back tested data there were no days which had multiple signals. Thus, the probability is very low for there to be more than two multi signal days over any 12-month rolling period. Click https://bullbeartracker.com/?p=442 for access to the Bull & Bear Tracker’s track record.
Please accept our apology for any stress that we may have caused for you.