Fashionably Late

Below I have posted the chart of the S&P 500 along with the simple 200 day moving average. I use the 200 day moving average to gauge big, trend changing moves. Before I analyze the chart below I should note that tactical asset allocation always looks easier in the rear view mirror, but what I've found in this chart serves simply as a long term "trend monitor." As you can see, the 200 day moving average has only significantly been breached three times over the past decade. Interestingly enough, if you had lightened up on equities and increased your cash position as soon as the 200 day moving average was significantly breached back in 2001, you would have performed quite well. Again, In the middle of 2003 the 200 day moving average was busted signaling a big, trend changing moment (in the bullish direction this time). Sure enough, it didn't disappoint. Now for the grand daddy of them all...In the first part of 2008 the 200 day moving average was shattered, but left savvy investors with plenty of time to move into cash and out of equities (riskier assets). You should never bet the house on one indicator, but the 200 day moving serves as a great technical confirmation. As you can see below, it pays to wait for that significant confirmation because in all three instances the party was just getting started. As for our current predicament...I'll be keeping a close eye on the 200 day moving average. I have a feeling that by the time the moving average is breached, the economy will be in it's healing process, allowing me to show up to this party fashionably late.