Green = up trend

Red = risk

Going through a long bear market is perhaps the most stressful aspect of being a money manager. To have a discipline for selling can help to reduce the negative effects of a major decline. You can see that this chart was green throughout 1999 and most of 2000 catching most of the gains before turning red in the Fall of 2000. This marked the beginning of the longest bear markets in recent history. This was a clear sign of higher risk had caused extreme over valuation in many stocks. Even though there were strong four to six week rallies in January 2001 and April 2001 as the US Federal Reserve lowered interest rates, this chart stayed red, indicating that these were just rallies within a long term decline. The indicator finally turned green again seven weeks after Sept. 11, 2001 before turning red again in the Spring of 2002 as the last major decline of the bear market unfolded. It turned green briefly before 2003 before turning red for the last time as the US prepared to attack Iraq. As the markets rose after the invasion, it turned green and stayed positive for a year. No indicator is perfect. However, using this indicator as a selling discipline along with the other indicators I use, have enabled me to avoid a serious decline and have a strong conviction about the trend of the markets. This is the best indicator for selling that I have discovered in my 26 years of research.