Christian Money Manager: The Best Offense Is a Good Defense by DEXTER P. LYONS for Charisma News
The NASDAQ 100, S&P 500 and Junk Bond Indexes are trading below their 50-day moving averages (DMA), which tells me risk is rising. My line in the sand was crossed last week, so I went to an all-cash position in LIONX as I did in February when the indexes fell below their respective 50-DMAs. I would rather be out of the market wishing I were in, instead of being in the market wishing I were out. In other words, I would rather miss an opportunity than potentially lose money. Said another way, nothing good happens after midnight or below the 50-DMA.
Historically, I believe the 50-DMA is where many institutions commonly support their favorite stocks. If big money tries to support their favorite stocks at the 50-DMA and the sellers overwhelm the buyers, then the stock could fall below its 50-DMA, indicating to me that risk has been elevated. Historically, the junk bond market has been a good indicator of investors’ appetite for risk, and it is currently telling me that risk is rising. Therefore, I believe caution is warranted.
However, I think the market is digesting recent gains, and it may take a while to shake out the weaker hands before the big money buying can dominate the indexes once again. Nevertheless, I try to follow price and volume and not what I believe, and I see elevated risk in the market. Therefore, I will get back invested when I am convinced that risk has subsided, and the market has the potential of rewarding me for taking risk. On a positive note, the indexes and FAANG stocks have held support and are rallying into their respective 50-DMAs. If they break above their 50-DMAs on above-average volume, then I plan to dip my toe in the water. I believe LIONX has plenty of capacity to grow, so please help me spread the good news! (There is no guarantee that any investment will achieve its objectives, generate positive returns or avoid losses.)
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