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In a bull market, when the Ratio is:
2.00 and higher, it tends to be bearish
1.25 or less, it tends to be bullish.
In a bear market, when the Ratio is:
0.99 and higher, it tends to be bearish
0.49 or less, it tends to be bullish.
The theory being that if the 50-day EMA is above the 200-day EMA, we will consider ourselves in a bull market. If the 50 is below the 200, we'll consider it a bear market.
The other change is that instead of always using the S-fund for a buy signal, we will use the C-fund when on a buy signal and the 50-day moving average of the S&P 500 is below the 200-day moving average.
In 2008, the ratio has never reached 2.00 so it has been on a buy signal, and 100% S-fund all year. Obviously this is unacceptable. Through Friday 11/14/08, that was a loss of 42.85%, the same as the S-fund. The new system would have given us a loss of "just" 6.14%.
I will start 2009 with the new adjustment and we'll see how it goes.
Thanks,
TSP Talk
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