I don't know about you, but I am a long-time, true-believer in letting the "Trend be your Friend". As a quant-based, algorithmic analysis investment firm, we have developed some of the best and most reliable trend-based investment strategies in the world.
These algorithms have proven to be extremely capable of generating great client gains that far outpace the market. Personally, I find these algorithmic trading decisions quite comforting. When so many other investment strategies are gasping for air, particularly in down-trending markets, knowing how reliable and dependable our algorithms are, makes the investment process quite calming and, in fact, comforting.
But... and this is a BIG but... When the market does not provide us with a well-defined trend, the antithesis of "Let the trend be your friend", becomes "No trend becomes your enemy!" When this happens, history has proven that the best course of action is to move more to cash.
When it comes to making money in the stock market, you want to let the trend of the market (bull or bear) be your guiding light and invest accordingly.
When the market does not have a good trend, is in an overbought condition, is frenetic and indecisive, with no clear direction one way or the other... the best course of action is to not take a bullish or bearish investment bias. The best course of action is to stay more in cash until the market gives us a trend.
Of course, this means we will be a bit late to the party when the trend does, once again, surface. But, that is better than 'guessing' wrong. And, if you are a reader of my writings, you know how much I abhor guessing.
With the market telling us today that it doesn't know what the heck it is doing and bouncing up and down in a world of whipsawing actions, the right decision is to move 'mostly' to cash.
For those tickers that are holding onto an up-trend, we will keep a tight rein on them (tight stops), but any of the others that are struggling to stay in a positive trend, we are selling until the market becomes more friendly... meaning, until a definite trend reestablishes itself.
This time will pass. The market will, eventually, develop a trend that lasts for more than a few days, or a few weeks. Granted, we want to pick up on the next major trend as quickly as we can and I am confident our trend-based algorithms will do exactly that.
The data clearly support taking a wait-and-see attitude. That is what we are doing as we get rid of down-trending holdings.