Let's look at similar periods in the recent past. We are referring to period when BPNYA Index was between 40 to 60 while crossing EMA(30) upwards which is our BUY signal.
1st recent occurrence:
As we can see from above chart, 1st BUY signal was a good signal as NYSE made some gains, but the 2nd BUY signal was fake as NYSE actually lost. At this point we had following questions:
1. Is this system working!!! Is our history teacher guiding us in right direction?
2. How do I know when to believe and act on the BUY signal and when not to believe it?
3. Why does COPPER Futures Index is showing up in the bottom section? What is the correlation here!!!
Mind boggling isn't it!!!!
1. Well based on our analysis of 20yrs of BPNYA charts in comparison with NYSE, this system works. Does it mean we will never have a loss? Of-course not!!! As long as our losses are minimal, we are good. No matter what system you follow, NO SYSTEM is FULL-PROOF and losses are inevitable. This is what we call cost of doing business. So we do believe that our history teacher is guiding us right.
2. Lets say we did believe in every BUY signal and got in the market, as long as we follow our SELL signal or threshold built into our spreadsheet, we will still be able to keep our loss at a minimum. But if our BUY signal is correct than we will ride the market in right direction, Isn't it?
3. In an attempt to understand markets and be cognizant of fake BUY signal, we are doing our research. COPPER Futures are considered to be one of the leading indicators of economy. As you can see from above chart. Every time we get a BUY signal, check our last 1-2 months of COPPER FUTURES right before our BUY signal is generated and the direction that is evolving. Makes sense!!!
2nd recent occurrence:
Current BPNYA chart:
If market continue this move then this coming week, we should see BPNYA crossing EMA(30) which is our BUY signal. Also COPPER FUTURES seem to be in the rising trend based on the last 2 months chart in the bottom section which indicates this may not be a fake BUY signal.
What does it mean for our Long Term Funds!!!
401K/HSA/College Fund: Once we get the BUY signal, we enter the highest ranked Mutual Fund available to us. You can find the highest ranked Mutual Fund by using the spreadsheet available here.
Traditional IRA/Roth IRA: Based on our "Advanced Strategies" section we should be using our BULL market ETF list when we get the BUY signal and invest in the highest ranked ETF.