The stock market and exchange traded funds (ETFs) have looked positively stuck for most of the last several months, with the Dow Jones Industrial Average languishing in a 500-point range and the S&P 500 similarly struggling to break out. Some opine that this stagnation in the markets will continue indefinitely, but others believe that’s too negative an outlook.
Henry Blodget for Yahoo! Finance questions whether we will break out of this range and Art Hogan, Managing Director at Jefferies, believes a breakout will be on the high side. [S&P 500 Moves Above the 200-Day – Now What?]
As the Dow dropped below 10,000, many investors predicted a double-dip recession. But the economic data on jobs and industrial manufacturing has been better than expected. [Why Young ETF Investors Have Turned Cautious.]
Hogan argues that investors will act favorably when more positive data comes out in the next couple of months. But the country will be in a state of “gridlock” after election season is over, opines Hogan, which isn’t necessarily a bad thing since a predictable Congress will help investor confidence.
How can you cope? We suggest having a simple strategy that helps you pick spots that are moving while avoiding those asset classes that just aren’t. The crux of the strategy we follow is the 200-day moving average. It helps minimize the emotional impact you can have on your investments and provides a sell strategy to help protect you on the downside. [How to Follow the Trends.]
For more information on trend following, visit our trend following category.
Max Chen contributed to this article.
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.