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Author: joelxwil Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 75383  
Subject: Re: Asset allocation Date: 2/26/2012 3:52 PM
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I am not sure why people think that timing the market is so hard. It is certainly the case that nobody can (and so far as I know nobody claims to) get in at the absolute bottom and out at the absolute top. Nevertheless, the market does tend to trend. Once a trend has been established, one should go with it until it reverses itself. Nobody is right all of the time, just as nobody can buy and sell every stock at the right time for it.

If you look at charts of the major averages, both domestic and foreign, you can see broad trends. Technical analysis, particularly moving average crossovers and individual exponential moving averages, will aid in making decisions. Not all decisions are going to be right, but if you are careful you will do better than buy and hold. Just trading IWM off the (8,55) exponential moving average crossover keeps you out of the market in most of the bad times, and does better than buy and hold, even though there are some losing trades.

Since I trade mechanical systems, I look at the chart of the results of the systems, and buy into the systems only when the trend is up. I also look at the major averages to see how they are doing - that is if they confirm what I am seeing in the mechanical systems.

The people on the Mechanical Investing Board have done a lot of work on market timing, and it is definitely worth looking at what they have done, and are doing.

So far as "the Pros" being "caught with their pants down in 2008-2009", that simple trade on IWM by the (8,55) EMA crossover gained about 15% during those 2 years, whereas IWM was down about the same amount during that period. Those results do not include trading costs, but there are only 11 trades, so on a $20,000 account the total cost is about .5%, depending on what discount broker you use.

I don't know what (or if) "the Pros" were thinking.
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