<<Please let us know when your indicators say this run is over <g>. >>
I don't have personal indicators.<g>
They say that overall market direction is the main determinant of how well one's investment portfolio performs and that 70% of an individual stock’s return is a result of the stock market’s overall trend.
The remaining 30% is driven by the stock’s industry or sector (20%) and individual stock performance (10%).
That's why people say: "The TREND is YOUR FRIEND".<g>
However, I think your question is important and while trying to answer it, let me remind you that, as Mark Twain said: "There is more than one way to skin a cat".<g>
Jesse said: " A market can and does often cease to be a bull market long before prices generally begin to break. Usually stocks that had been the leaders retrace some points from the top and for the first time in many months and do not come back, while the rest of the market is still advancing under new standard bearers."
He also said: "There is no sense in anticipating what the next big move is gong to be.The thing to do is to wait until the price breaks through the resistance in either direction."
There is still a lot of bearish sentiment around, and a lot of problems for the economy,with the unemployment, housing situation, debt ceiling, medicare and social security funding with the baby boomers ready to retire, Greece, etc.
And is always important to remember another of Jesse's advice: "IT DOESN'T PAY A MAN TO BE WRONG".
But he also said:"You never grow poor taking profits, but neither will you grow rich taking a few points profit in a bull market".
Some people use many indicators to tell them when to buy, hold, or sell because no single indicator can accurately and consistently identify every market turning point.
For example, among those are:
The Percentage of NYSE Stocks Above Their Moving Average.
NASDAQ Composite Index 100-Day Moving Average Crossover.
The ratio between NYSE New Highs/New Lows.
The MACD on NASDAQ Composite.(Actually, the nine-period moving average of the MACD seems to give a better signal.) <g>
The NASDAQ Summation Index Moving Average(NASI) Crossover With MACD Confirmation.
And several others. <g>
And then there is the question of the "Time of the year", besides the well known "January Effect".<g>
According to Sam Stovall, chief investment strategist for S&P Equity Research, since 1945 the S&P 500 gained an annual average of 6.6% for the period November through April, versus an annual average return of only 1.4% for the May through October period.
That's why Tuck seems to like the "Sell in May and go Away". <g>
Yale Hirsch, the founder of the Stock Trader’s Almanac, developed the "Best-Six-Months Strategy", which involves buying a stock index on November 1 of each year, then selling it on April 30 of the next year and holding cash equivalents until the end of October.
According to him, since 1950, investing in the DJIA using this strategy would have generated a 7.3% annualized gain, while investing in the DJIA in the May through October period would have generated an annual loss of 0.1%.
An adaptation developed by Sy Harding, publisher of the Street Smart Report, uses the MACD indicator to time buying and selling instead of following Hirsch’s fixed buy and sell dates.
That approach increased the annualized return since 1950 to 9.2% (versus 7.3% for Hirsch’s original research). <g>
It is also important to remember that Capital comes in two varieties:
Mental and that which is in your pocket or account.
Of the two types of capital, the mental is the more important and expensive of the two. Holding to losing positions costs measurable sums of actual capital, but it costs immeasurable sums of mental capital.
They say that a trader’s gut or instinct, is the very best indicator of all.
And that traders most of the time use indicators incorrectly, looking at them to tell them what to do, as if an indicator can really reveal the “truth” of a market.
The way to use indicators is as a confirming mechanism.
One should decide in one's actions, and indicators should help confirm one's convictions, but don’t derive convictions from them.
They either agree with the conviction or they don’t. When they don't, one need to re-examine why we arrived at that conviction and if they do, one can play a bit more aggressively.<g>
As Jesse also said:"No one can give me a tip or a series of tips that can give me better results than my own judgement".
I and many people I know, like using moving averages and feel they are superior to anything else that can be called an indicator.
The ones I use most are the 5, 10, 20, 50, 100 and 200 EMAs.
For timing purposes, one can also employ an oscillator like the Commodity Channel Index or a short-term Relative Strength Index and the SAR.
And of course, now a days one can buy and sell at much lower cost than years ago, since the cost of commissions is negligible compared with what it used to be. <g>
That makes it much easier to try to stay on the RIGHT side of the market.<g>