Trillions of dollars are on the sidelines right now, and investors are itching to put them to use. Our typical strategy in “normal” markets was to use the 200-day moving average to determine when we were in and when we should be out. However, in 2008, the markets were anything but normal. The unpredictability of it all led us to a short-term strategy we could use until things steadied a bit.
Most funds are still off their 200-day moving averages, some by double digits. If we wait for them to cross the line, we could be missing out on a good portion of gains. 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.
Just because the markets have had more good days than bad recently, though, it doesn’t mean that we’ve reached the bottom. We could still be in for some hard times ahead. What we’re trying to do instead is to watch for those areas that are moving – different areas of the markets move independently of one another. They’re not always on the same track. Emerging markets can be going up while commodities are tanking; technology can be soaring while nuclear energy falters.
To find opportunities in ETFs, visit our ETF Analyzer and make it a habit to use. It’s the easiest place to find sortable 50-day and 200-day moving average information!
For full disclosure, please note that these are not buy and sell recommendations. The ETF Analyzer is a purely analytical tool.