I wanted to stop things that we were doing here for this entry in order to put out a trade alert - not saying to buy yet, but to keep an eye out for something.
The market has basically 3 ways it can go: up, down, and sideways. It also doesn't continue in just one direction forever. What goes up, must come down, and vice versa - that's just what the market does.
Ever since around the beginning of 2008 we've been in this current bear market. This has been my first bear market since being a trader and it INFURIATES me that these "professionals" who are managing the general public's mutual funds, retirement accounts, and in general managing the future of many many people's lives aren't keeping those folks best interest at heart. These fund managers get paid when they TRADE. The more they trade, the more money they make.
So, instead of advising people to cash out all their holdings and put them into cash until it's safe to get back in, the fund managers instead just keep trading and hoping to make money for their clients (while DEFINITELY making money for themselves).
There's been many people drastically hurt financially by this market. I've got a way that this won't happen to you again. I've also got a way that you can manage your own account and get in and out of the market relatively safely and will most likely BEAT most of the fund managers out there compared to what they can do for you.
What you want to do is only trade the S&P 500 ETF, which is called "SPY". You buy and sell shares of the SPY just like any other stock, but instead you are essentially buying and selling the stock market.
You'll need to put the SPY onto a stock chart. There are many free sites out there, one of them is www.stockcharts.com. Pull up either a 6 month or 1 year chart of the SPY and put on 2 moving averages (you'll have to find these on the charts, they are there, it just takes time to find them). You want 1 moving average to be a "100" day, and the other moving average to be a "200" day.
When the 100 day crosses above the 200 day, then buy SPY shares and hold them. You keep holding these SPY shares until the 100 day crosses back down below the 200 day - this is when you sell all your SPY shares. At this point you are all in cash and simply are waiting for the 100 day to cross back above the 200 day again. Just keep repeating this process.
Now, look at the chart at the beginning of this entry. This is the S&P 500 since 1999 and it shows you the daily price action. The purple line is the 100 day moving average, the blue line is 200 day moving average, and the green circles show the crosses.
Let's look at the first green circle:
You would already own shares of the SPY at this point. See the 100 day crossing the 200 day just before 2001? That would be your time to sell all the SPY shares you owned and then just sit in cash. So, now you are in all cash and waiting.
Now onto the second green circle:
We've been holding in cash since the end of 2000, but now about 1/2 way through 2003 we got the signal to buy shares of the SPY again since the 100 day crossed above the 200 day. So, you buy all you care to and just keep holding them.
Finally onto the third green circle:
We've been holding onto our shares of the SPY since the middle of 2003, but now at the very beginning of 2008 we got the 100 day crossing below the 200 day and it's now time to sell our shares of the SPY again and just keep everything in cash.
From the very beginning of 2008 until now:
We've been just sitting in cash and waiting for the next signal (i.e. the 100 day moving average to cross above the 200 day moving average).
I'm going to post the latest chart in the next entry for you to see where we are with these. But, the important thing to know is that if you use this to manage any retirement or stock account you have, then you will get in during the low prices and get out during the high prices.
Will this type of trading get you in at the bottom and out at the top?? No. But, it will get you close enough and besides who can really pick the bottom or top anyway? Also, compare this to what has happened with your account. I know it was a TON better than what happened to me!!
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