For some months now, I have brought a feature after the end of each month. I had learned this from an old grizzled market veteran who knew a number of big traders. He explained to me why it was that they could trade so coolly and dispassionately. One of their rules was to calculate a simple 17-month moving average of the S&P 500 and ask themselves the simple question, “Did the 500 close the month above, or below, its own 17-month moving average?” If above, they’d stay in for the next month, and if not, they’d sell out of their S&P Futures, and they would wait until the end of the next month, and calculate and decide again. One calculation, and one decision each month. That’s was for their money generally allocated to stocks.
So, as of the end of June, that 17-month simple moving average stood at 1998.45, and yesterday, we closed at 2077.42; which puts the line 3.8% below the 500. It is conceivable, even possible, we could see a further market decline down to, or even thru that 17-month line, and a signal to large traders, that should that condition still exist at the end of this month, that they would want to take all their marbles out of the market, and go home. That money would be parked until the 500 should close back up above its 17-month line again, at the end of some other month.
The beauty of its simplicity, especially for employed 401k plan mutual fund holders, is beyond imaginable. To think, that it’s possible to time the market with one simple calculation, and step aside, so as to avoid the worst of any bear market, for 401k plan mutual fund holders is a true God-send!
Here’s to your successful investing!
Harold F Crowell