Reader Monday

I had a lot of questions and comments left this weekend that I'd like to address. After this I won't be able to post for a while, I have two accounts to implement today. That hasn't happened before so I'll be very busy.

I had a response to my CNBC World idea from Bruce Lawrence. Turns out its not my idea. Bruce had the same idea two years ago. Even though I can no longer lay claim I still hope it happens. Bruce reiterated some of my thoughts about more time given to interviews and more insight being gleaned.

Harry Jaloti left a good comment about always having an exit strategy on my stop order piece. Hopefully no one took the article as an endorsement for no exit strategy. I believe wholeheartedly in exit strategies, even stop orders. The point was that plan has flaws. All strategies have flaws. I want to try to know what flaws I may face with any trading I do. Hopefully you are reading Harry's site.

I had one question come in asking my thoughts on dollar cost averaging. That depends on the context. Putting money away every month systematically and investing it is a great way to build assets. If you have a lump sum to invest I would say I don't think DCA is a great idea. You will either be better off or not by doing it, there is no way to know.

Since the market has an up year 72% of the time I think it makes sense to just invest a lump sum. The question specifically mentions DCA of an energy fund. Energy is going great guns. That is not an invitation to make reckless bets. Energy is about 8.6% of the SPX. Anything above a 13% or 14% weight in the sector is making a huge bet. So while I'm not sure exactly what the question is asking about an energy fund, if it would be the only exposure to the market he has I would say buying the fund at all is a huge bet. If this fund would be a small piece of an existing portfolio I would say invest in the fund to the extent you want to own it, as a matter of philosophy.

There was a last comment about Jubak, O'Neil and staying invested through different market cycles. The question quotes O'Neil as saying anytime is a good time to buy. Long time readers will know I don't try to get too clever with this. Almost any time is a good time to buy. My primary barometer about now being a good time to buy is whether the SPX is above its 200 DMA or below it. Above means be fully invested. Below means, at a minimum, be very defensive. What defensive looks like depends on the circumstance. I've written about a couple of other indicators that might warn me the market has a high probability of going below the 200 DMA.

The market can only do four things (this is a rerun for a lot of you); up a lot, up a little, down a little and down a lot. The market will go through the 200 DMA on its way to down a lot, usually. If I can miss big chunks of down a lot I will add a lot of value for my clients.