Saturday, January 26, 2013

S&P500 Cyclical Buying Opportunities

Sitting on the sidelines with a hoard of cash? Thinking about piling in because the market is making new highs everyday? Let's look at the past 3 years on an SPY Weekly chart to see what the pattern has been.

Piling cash in at market peaks has historically been a bad time to invest longer term. You may get some short term gain but there will be an inevitable reversion to the mean. In other words the 50 week period moving average has been a better place to put your hoards of cash rather than accumulation cycles.

The last time we had this opportunity was in November and the market has screamed since then. We need to wait until the next sell cycle happens (which it will). When that cycle is at or under the 50ma it has been a great opportunity to buy. In 3 years the 50ma has risen and continues to trend higher.

I'm not piling in cash on this current uptrend. My trades are small and nimble, taking advantage of the incremental moves higher in the market. When the market cycles again and we revert to the mean (as stocks always do) thats when I'll put large amounts of cash back to work.

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