When Will the Bubble Burst?

The bubble is going to burst -that is what many headlines are saying. The question then becomes twofold: when and are you prepared?

At almost any time you can find some ‘expert’ who says the indicators say the market is getting ready for a correction or even a crash. The indicators used vary but the result is always the same: doomsday is coming.

Actually it is safe to safe that the market will go down, that there will be a so-called correction. But is it going to be next week, next month or three years from now? My crystal ball is good enough to say when.

If one were to listen to these ‘experts’ and take their advice on would never-ever invest in the markets, not even with mutual funds or ETFs because there would never be a good time for investing. Yet we know that more money is made by investing than just about any ‘job’ can ever produce.

So the real question is: are you prepared for when the market goes down, temporarily or big time?

There are ways to stay prepared:

  • Use investment software with timing signals
  • Use investment software with a market exit signal component
  • Place stops on all your positions
  • Watch the charts of your holdings for sustained declines
  • Watch the equity curve of the market
  • Watch the equity curve of your trading strategies or models

By following a prudent plan to protect your portfolio, your money you can avoid losing a chunk of it when the next decline comes.

Instead of being fearful that the market is going to crash and pulling out early or not investing at all you can stay in the markets, make profits and not fret because you know that you have a plan to protect yourself when a decline does occur.

I have always used a combination of stops and a market exit signal based on the equity curve of the S&P 500. Unlike many private individuals who lost a large portion of their retirement account or regular account during our recent 2007-08 recession my portfolio rode it out very well and because of the reverse signal from my Market Exit, I was able to move back into the markets when the stock market began its recovery; netting me some nice growth in my portfolio.

In other words, use solid signals, technical analysis to gauge your strategies and let these signals tell you when it is safe to invest and when to move into a protect mode.

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