In an earlier post, I wrote about a three red flag system. I consider the breach of the 13-day moving average when the market is rising to be a red flag. The red flag is comparable to the battery light coming on in your car. The red flag is a sign that something is amiss. Caution should be exercised. Three red flags and I'm just out of the C Fund until the storm passes.
This morning, we had a second red flag.
The market clipped the 13-day moving average on the clearstation.com chart. It is now time to get out if you're cautious. At least, it is time to be very cautious. Now, the second red flag doesn't mean the market will drop tomorrow. In fact, the market could rise. But the probabilities are strong that the next rise will be the final rise. Resistance lies @ the 1194ish level on the Standard & Poor's 500 Index.
When I was younger, I wouldn't care. I was a Bull for the long haul. I just invested 100% in the C Fund and forgot about the daily ups and downs. But I've learned that you can increase your performance by just taking the small step of stepping aside when storm clouds are approaching. And there's no point in being greedy and trying to squeeze the last point out of the market. There will always be opportunities to get back in at lower prices. Professional money managers operate this way.
Why shouldn't retail, average investors?
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