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Demise of a Tradable Indicator

I must confess that my efforts to create a tradable market indicator have come to naught and I have shelved the project. Try as I have done over the past few months of market declines - failing at my MF, CEF, ETF, and stock picks - I am also unable to predict how the market will do based on the color of the dress worn by Kelly Evans of CNBC. Not only was I sure I could make this indicator work, I was also planning to figure out a way to infiltrate the  channel's wardrobe department so that I could front run the indicator. This is what market declines do to a sound mind or in the words of one song I like, "Chalk It Up to the Blues."


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  • John Bogle seems like the only guy who calls it like it is because he has nothing to gain or lose. So far he is the only one who has pointed out that these markets aren't investing any more, it is betting against each other and bidding things up.

    Rest just talk their books even if they think what Bogle thinks privately.
  • edited February 2016
    A keep it simple investment strategy that has worked well, for my family, through the years is when stock market valuations become streached and overbrought reduce your allocation to stocks and when stock valuations decline and become oversold raise your allocation to them.

    I am currently finding that stocks are currently a little oversold but not enough for me to go on a buying spree. I bought a little at 1922 and again at 1880. For me to buy again anytime soon I'll need to see a decline to about 1820 on the S&P 500 Index. At the current time I'm about 23% cash, 22% bonds, 50% stocks (35% domestic & 15% foreign) and 5% other according to a recent Xray analysis.

    It's interesting that a fund that I am invested in (CTFAX) has been raising it's allocation to stocks as they decline; and, it will begin to reduce its allocation to stocks, raising it's allocation to bonds, as stock valuations recover and prices move upward. I generally follow P/E Ratios as my guide and the fund follows the price action of the S&P 500 Index.

    For those interest more information on CTFAX is linked below.
  • @Old_Skeet I am curious what you are going to do with your 23% cash if the market does not reach 1820 and will start moving up slowly from the current level?
  • edited February 2016
    Hi @DavidV,

    Thanks for the question.

    Maintain my current allocation to cash, perhaps even increase it, until the TTM P/E Ratio for the S&P 500 Index scores a reading of 20 or less. With a reading above 20 stocks are said to be overbought and a reading below 20 indicates stocks are becoming oversold.

    Currently, the TTM P/E Ratio for the S&P 500 Index as reported by the WSJ is 21.4 as of this past Friday market close with a price reading of 1880. It's interesting, that forward estimates are reported to be 15.9.

    This strategy somewhat follows the Rule of Twenty.
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