Why we advocate becoming defensive
Market Timing: Be Defensive
Now is the time to sit on the sidelines, tighten stops, or play the market to the downside.
One key factor that can influence your chances of success in the market is the overall market trend. As the saying goes, "a rising tide lifts all boats." Similarly, when the stock market is on an upward trajectory, more stocks tend to participate in the rally than those that decline. Investing during a bullish rising market increases the likelihood of selecting stocks that rise in price, even those with weaker fundamentals. Conversely, when the market is declining, even top-performing stocks can suffer.
The VectorVest Composite (VVC), is our broad-market index and the foundation of our stock market analysis. It is an arithmetic indexed average of all the stocks in our database. The VVC provides a more accurate reflection of the overall market's movement. At times, you might notice major indexes showing mixed results—such as the Dow Jones declining while the S&P rises—leading to confusion about the market's true direction. By following the VVC, we gain a clearer understanding of broader market trend. VectorVest has developed market timing signals to identify the current trend of the market movements, thereby enhancing your chances of success. The core philosophy of VectorVest is to buy stocks that are rising in price, in a rising market. We do not advocate buying stocks when the market is in a downward trend.
Let the trend be your friend
The "Be Defensive" scenario indicates that the market has entered a sustained downtrend and is gaining momentum. This is not the time to buy stocks; instead, focus on being defensive and protecting your profits. Keep in mind that holding cash can sometimes be the best strategy. If your risk tolerance permits, it may be an opportune moment to consider strategies that capitalize on a declining market.
Market Timing Trend Graph - Found on the Homepage
In the chart above, you can see that the red ‘Be Defensive’ signals clearly indicate when the market has entered significant downtrend. This helps you identify when it is the time to be defensive and protect profits.
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