Is It 2007 Again for the Stock Market from a Trend Following Perspective
On October 19, 2007 it was recorded the highest number of bulls via various advisor sentiment reporting services. For example the NAAIM reported that the 3-week average equity exposure among its members increased to the highest level on record at that time. Currently exuberance is still flowing from New Years. The vast majority from professionals, hedge fund managers to private investors missed the stock market in 2013 and now expect it to continue. When bullish readings are high, caution needs to be heeded. Combine this with rising interest rates, high margin debt, age of this bull market and lack of fear a potential bear market might not be that far off.
The key is to have a trading plan. Know exactly what to buy…when to exit with a profit or loss as well as know how much to buy. More so study the current market situation on a daily basis…Without fear mongering which is not my intention….simply look at 10 and 30 exponential moving averages of the indexes. Combining this with the 200 day exponential moving average you can have a good feeling where you stand in the stock market.