Earlier this week, I put out a note about what I’ve been telling friends and family when they come asking. It comes with the territory right? I’m sure many of you are being sought after in similar ways. It makes sense for this environment.

But the truth is, I underestimated just how much this post would resonate with people. So much so, that I figured I’d write a follow up about another popular, yet simple strategy that I learned a long time ago.

To recap, what the Family & Friends post was about, was the percentage of stocks on the NYSE above their 200 day moving average. Historically, it’s when we’re above 15% and rising that it makes the most sense to own stocks. When we’re below that, it’s further evidence that stocks are a mess.

The reason I like it is because it’s a very infrequent signal, only helpful after severe corrections, and it’s free for anyone to follow. What more can you ask for to give your loved ones an inside look as to how the market works. They’re fascinated by the fact that mathematically, the indexes cannot go up without more stocks going up. But that’s just the way the market works. It’s basic arithmetic.

The reason I prefer the NYSE over the S&P500, let’s say, is because of the International exposure in the NYSE Composite. Remember, over half of the largest 100 stocks on the NYSE are foreign companies. The Nasdaq100 will give you much different data.

Great JC, but this only helps us buy dips. How do we know when to get out? 

Well, it is true. This indicator does not help us get more defensive ahead of the tsunami. We have other tools for that. Similar to how we don’t want to brush our teeth with a hammer. We have different tools for different environments.

So today I wanted to show you another very simple tool that you can keep handy for future cycles. [Read more…]