i noticed you guys talking about the use of indicators and thought i'd offer something i was once taught. the best indicator is the one that gives you a leading jump on what is about to happen in other markets. in order to find that indicator, it's best to search for the thing that most expresses the insiders actions. sure enough, fear/optimism indicators are nifty, but they don't quite give you the jump you need because they aren't as close as possible to an expression of the action being taken. old schoolers used to use the cash/futures spread in the S&P to guide them, but as with most things, people learn and it isn't as special an indicator. it's important to understand that the investor has become more sophisticated in the past decade and so the circle of who knows what (insiders, a degree or two removed from real money) has grown more than is realized. the market reacts faster and thus you have to also.
i attached the sox index because high tech has led the moves in the market over the past 10 years and will continue to do so until the fundamentals of our economy change. it's currently an ugly chart (as demonstrated by longterm MA failures)
AND if you had paid attention to it at the end of december, it would have given the best heads up about getting out of the rally that ended the year ... ultimately what counts in this game. keep in mind that when you look at this connection, you'll also see it led the oversold rally you see now ... the key heads up to that rally was an earlier MA convergence and crossover than the broader market.
where to now ? the broader market has healthier MA trends by the very virtue of still trading above the major MA benchmarks. what happenning? money is shifting to large caps and out of the smaller cap tech stocks. Barrons talked about this phenom in one of its issues late last year.
an added indicator of where the money is going is in the F fund (agg). it has recently turned down in its MA convergence and indicates to me that equities will still rise. how far ? i'll look to unloadwhen the the squeeze on the shorts drives equity prices close to the end of the year highs or if you use the SOX, it will be once it is driven to the 200 MA and is forced to fail again. big boys like Gates and others can handle a squeeze and will likely increase their position as the market rises, while others can't cover the margin, are required to coverand provide the rally.
as for investors like me, i need nimbleness when i see it coming but have thereality of TSP in and out rules. i currently make up for the TSP by getting out when i can and pouncing on OEX puts. remember that the SOX is still the leader here and needs to die efficientlybefore thebigger caps start to seebull market accumulations of buyers.
hope this helps you preserve capital and still participate in ways that accumulate wealth.
