Whether you’re an exchange traded fund (ETF) investor who’s bearish on the market or bullish on it, no doubt you’re finding your own way to interpret the recent market activity and what it all means.

But Gary Gordon for ETF Expert says that bulls and bears alike might find something to like about iShares MSCI Japan Index Fund (EWJ), as it is currently trading at book value. However, the SPDR Trust, Series 1 (SPY) makes this bear market one of the worst of the last 110 years. However, no U.S. bear has lost more than 50% since 1937.

So, are we at the bottom? Bulls and bears have their own take on the matter, but the truth is, it’s just guessing.

Gordon has three steps to deal:

  1. Put together a list of stocks and ETFs that you want to buy or that you would own if the markets were not so traumatic right now. Did you miss a boom the last time around and want to get in soon?
  2. Wait for the  daily range to come back to a reasonable level. Low to high, with ranges from 2%-3% are more sane.
  3. Set a plan for incremental purchasing and forget about calling a bottom. There is never a perfect day. Buy the ETFs on your list over the next 8-10 months and don’t forget to check out EWJ. Gordon says there will be a mini-baby boom putting Japanese spenders in their peak spending in 2009-2018.

Our own take is that investors will need to be ready for a rebound at some point.

Whether yesterday’s move was the beginning of a trend or just a dead cat bounce, the market rebound will happen and we need to be ready for it. A number of funds are up 15% and 20% since the market low, while some others are less than 10% below their 50-day moving averages.

There are trillions of dollars sitting on the sidelines right now as investors ride out the storm, but when the bottom hits and a rebound begins, investors need to be mentally prepared and ready to go.

Most funds are far below the 200-day moving average, meaning it would be a long wait before a signal to buy is reached. We haven’t been so far below the long-term trend lines in decades. As a result, we have a short-term plan for getting back into the markets if the rebound is real:

  • When a fund crosses above its 50-day moving average, put 25% of the value of your portfolio
  • When the fund goes up 5%, put another 25% in

By the time this happens, the 200-day moving average should be well within sight, and things should begin operating in line with our normal buy parameters once again.

The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.

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