Stock Trend Investing

Last week, the German DAX stock market index showed a Death Cross. This is the event where the 50-day moving average dives under the 200-day moving average. The death cross is one of the oldest sell-signals in technical stock market analysis. Other trend following signals, however, did not generate a sell-signal. Why is that?

The answer to this question lays in the fact that different trend following signals seek a different balance between timeliness and accuracy. Good trend signals are designed for a specific investing purpose.

Some investors like to take a cautious, traditional, approach. They prefer to be rather safe than sorry. When they perceive that it becomes more risky to be invested in the stock market, they prefer to sell and stay in cash.

Last week I asked our readers and members what they thought of our new Long-short Strength Indicator (LSSI). Here is a reaction from one of our members. I believe that his thoughts on how to use the indicator in combination with our other trend signal the MATI for his tax-deferred and taxable accounts are worth sharing here.

What do you do with your index funds when the long-term trend still points up but recent market declines could also be the start of a new massive downturn? The answer depends probably on your attitude towards risk. Here is a tool that we have developed to help you in making these decisions.

More risk-prone investors would like to hold on to their funds. In case the market re-bounces, they avoid any loss and are well positioned to capitalize on the coming bull market. They accept some additional losses in the case the market trend really turns down.