Dec 23 2008
Time to Reenter Market?
Whether or not it is time to reenter the market is a personal call. Long-term investors never sold their holdings despite the bear market. Others took tax losses and therefore have available cash to reinvest. For those who have available cash, when and where to put it to use is a burning question. The best advice I can give is to tell you what I am doing.
One place to begin is with some technical indicators as exhibited in this link. The VV Exchange Traded Fund (ETF) is Vanguard’s large-cap blend fund that closely tracks the S&P 500. If you examine the lower three graphs, RSI, MACD, and CMF are all positive at the time of this writing. The one remaining negative signal is the 26 and 52-Day EMA combination. Investors who acted upon the RSI, MACD, and CMF going positive are back in the market. Those a tad more cautious, and I am among that group, are waiting for the 26-Day Exponential Moving Average (EMA) to move from below to above the 52-Day EMA. Some investors may even want to wait for the 26-Day EMA to move from below to above the 190-Day EMA or 200-Day EMA. The longer one waits the less chance there is for a whipsaw to occur. The trade-off is that one will lose a higher percentage of the potential gain.
Actually, I am a combination investor as I did pick up a few different stocks and ETFs when the RSI and MACD turned positive. Then I added more when the CMF went positive, and I have a number of limit orders in place as I wait for the fourth signal to turn positive.
Make no mistake, the risks are still high when it comes to investing in equities. In no way are we clear of the mess left by this administration. Unemployment will likely continue to rise for at least another six months and we are in for another wave of mortgage foreclosures. This market still lacks commitment and bad news of any significance will drive it down another 10% to 20%.
Be prepared with your portfolio plan and have it in place. I’ve been working on laying out plans for several portfolios over on the Premium side. Planning requires one to select asset classes and what percentage to invest in each asset class. Selecting what ETFs and stocks to use to populate the portfolio is the last step.
Lowell Herr
Premium subscription available for $6.99 per month.
Sphere: Related Content