Tuesday, June 2, 2009

Trendsetter Oscillator Says "Time To Sell"

Nothing goes up forever. We all know that. Yet watching the stock market channel, it seems as if there will be no end to this market run. Nervous bears are still not in, many fund managers are underweighted still in stocks and their underperformance does not go without notice. Certainly the market has more power ahead, especially since it cleared the all-important 200-day moving average. But when is enough enough? When is too high too high? When are you the bigger fool in the bigger fool theory?

I use a number of derivative readings to track where the market is. One of my tools has served me well as an oscillator. Even though the market continues to creep ever higher, this tool is falling. The tool has some good validity. The last cycle High occurred at the beginning of the year when the Dow was at 9,000. The last low came in March when the Dow was at 6,600, the low. The recent high occurred three weeks ago when the Dow approached 8,600. Just when the market appeared that it would fall apart, it made a last minute surge at the end of the day on Friday and followed through in dramatic style yesterday.

I Like Cyclical Markets

I do. I like cyclical markets. The whole Trendsetter premise is that markets go up and down. Studies have shown that the majority of the time markets act in this fashion and don't trend. Investors love trending markets. As such they should invest in commodities. Commodities trend. Stock and bond markets need to be cyclical. I hate it when a trend goes on for far too long. I am frustrated now. Not that I have been wrong. I haven't been. Our stock market portfolio is up 11.16% as of now. Much better than the Dow or S&P. I sold lots yesterday and just have long term buy/write positions and I sold an S&P call. Every 5% more, I'll sell more calls. And also, I want to look for some good opportunities to buy some puts. Long term puts.

I can't tell you what to do. You are not my client so you need to speak with your accountant and financial adviser before you do anything that I do. The way I see it now, boom could turn to bust in a heartbeat. It happens all the time, when you least expect it. If I can come out of the year with 15-20% gains, I am going to be very happy. I don't care if you get 40% or 50%. It doesn't matter. I don't need to make all of my money today. Give me 10-15% each year for the next 20 years and I would surely be proclaimed as one of the best money managers in the world. Don't you think? Even if you don't, just don't be greedy. If you still want to hang in there, use some risk management strategies.

Other Ways to Sell

If you want to hang in there and swing for the fences with the market, take a look at my Ezine article, listed in my Other Writings Section, "Five Ways to Take a Profit."

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