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Market Timing

Apr. 18, 2011 5:59 PM ET
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Tony Pow's Blog
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Buy and hold is dead since 2000. All those text books praise about buy-and-hold most likely used data before 2000. To me, there are 2 market timings: 1. about 3-4 corrections a year, and 2. about a 4-year market bottom.

There are many ways to predict them. You can also subscribe a newsletter just for market timing or an investment service. I've both. They and your own home-brewed systems will not always work and not precisely even it works. However, it is better than without s strategy/market timing.

I would like to update this topic for a while. Here are some ideas from SA commenters.
Search for Chowder for more description.

There are many useful market timing techniques. Many of us, including myself, use simple moving averages. I happen to sell when the 50 crosses below the 200 on the downside (the death cross)...and start buying when it crosses again on the upside (the golden cross). I also use the 20-day SMA as a kind of early warning. Just chart the SMAs to look at exit and entry points.


Let's face it, by and large, the past decade has been somewhat disastrous for buy and hold investors sitting on traditional "safe" stocks. Traders and somewhat active large-cap investors, willing to trade around positions and actively manage asset allocation are the ones who've made real money. Getting in and out of a GE at the correct times could have actually been a profitable endeavor rather than the major losing proposition it was by simply holding it the past 12 years. Large-cap indexing, which was generally considered a no brainer from 1995-2000 has certainly fallen from one-time grace.

The advent of the Internet, busting of the Internet bubble, disastrous corporate scandals, and the mortgage meltdown have, in my opinion, created a new paradigm in the domestic equity market. Buy and simply hold is not as "safe", nor as profitable as it once was. Conversely, given the somewhat wild swings we have experienced over the past 10-15 years, timing, stock selection, and more active investing skills have become much more important than they once were


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