Reacting to the Current Market Trend
recently was speaking with a large Hedge Fund and we were having a discussion regarding the concept of being fully invested when the stock market is healthy and going to cash when market conditions are in the bearish mode. We joked about the phrase regarding “Sell in May”.
This is not about predicting or trying to market time. Using concepts such as moving averages one can stay on the correct side of the market. This is no different than what Jesse Livermore, Paul Tudor Jones, and Gould have done over the decades. It is not about predicting. More so there is no way to avoid whip saws or small losses. The key point is being available with full capital when there are favorable periods during bull markets. It is so much more psychologically easy to sit on the sideline during a stock market down turn.
I use several simple tools to stay in tuned with the market. Moving averages and % moves from the last X number days are the key elements. Learning to count and recognize distribution days and volume are invaluable tools. Putting it all together keeps you in tuned with the stock market.