I decided to illustrate the importance of using charting as one tool to assist in one's investment strategy .
Below is the LT chart of the S & P. In Jan 2008 the avg broke the 20 month avg. (green dotted line) 4 months later it rallied back to that avg., then failed . Clear "danger" & sell signals. Look back to Oct 2000, trendline broken ,Jan -Feb 01 it rallies back to trend line fails & falls. In both cases a break of the longer term 50 month (blue line) ensued. For those that think charts are voodoo - think again . Nothing is the absolute tool , but charts should not be dismissed as some woul have us believe.
Where we are now --uptrend still intact , so far no sign of a break or "rollover"
Adding some meaningful numbers to chart. Aug 2000 S& P had a closing high of 1517. First break was at 1392 (8% lower), then in Dec 2000 it rallied back had a close of 1320 (13% lower) Caution flag at 8% , failed rally and more caution flags @ 13%. So one could have "acted" defensively during that 4 month period.
Lets look at Oct '07, where S & P had a close of 1549. First break occurs in Jan '08 with a close that month of 1378 (11% drop) .Then a retest and fail in May '08 with a close of 1400 (10% drop) . Caution flags raised but one would have had 4 months to take action.
This refutes the theories that defensive action cant be deployed. Caution flags were raised. Defensive action would have saved a lot of pain.