FAQ 5-Indicator-2 Usage

How do I use the “Major Market Timing Trend Indicator” (Short-Term) #2 for my 401k and ETFs?

  1. The following table provides guidelines to select funds and ETF’s based on current market conditions. There are three different fund allocations that the publisher uses based on the three possible short-term market timing indicator positions.
  2. Make sure that you include the exact funds that you will use in your plan – record which funds and what allocation you will use.  Keep your plan readily available as market conditions can quickly change.
  3. Many 401k providers penalize for moving out of funds after less than 30, 60, or 90 days (or won’t allow you back into the fund for a certain period).
  4. Please make sure that you carefully understand all mutual fund exchange restrictions, fees, penalties, and other policies/charges. Read the 401ktrend.com legal disclaimer before taking any action. 
Indicator #2 Publishers 401k Allocation Publishers ETF Allocation Approach Market Conditions New Contributions
Up 100% Aggressive Growth Fund* (See note) OR

  • 50% Aggressive Growth Fund* (See note) AND
  • 50% S&P 500 or Total Market Index Fund
100% Aggressive Fund (e.g. QLD, SSO, EET) OR

  • 50% Aggressive Fund #1 AND
  • 50% Aggressive Fund #2
Aggressive Suggests that the current long-term market trend for the indices represented is “Up”. Probability of an upward move exists. The publisher adds new monies to “Bear Resistant” fund or cash fund.
Hold-Reduce 100% “Bear Resistant Fund” OR

  • 50% “Bear Resistant Fund” AND
  • 50% Bond Index Fund or Cash fund
100% “Bear Resistant Fund” (e.g., XLP, XLU, etc.)OR

  • 50% “Bear Resistant Fund” AND
  • 50% Bond Index Fund or Cash fund (e.g. TIP)
Moderate Suggests that current long-term trend is unclear – the trend may be flat, slightly up, or moving down. A 5- 10% market decline is likely to occur during “Hold-Reduce” indicator positions. The publisher adds new monies to Bond Index fund or cash fund only.
Down
  • 75%-100% Bond Index Fund OR Cash fund
  • 0-25% Bear Resistant Fund
  • 75%-100% Bond Index Fund OR Cash fund
  • 0-25% Bear Resistant Fund
Conservative A significant market decline has occurred, and there is risk of a larger downward move. The publisher adds new monies to Bond Index fund or cash fund only.

*For “UP” indicators: aggressive growth fund(s) in a 401k plan may be suitable. An “aggressive” fund will have outperformed the S&P 500 during past up trends, but typically falls much more than the S&P 500 during down trends. The “aggressive” fund must have out-performed the S&P 500 since March 2009. “Aggressive” funds may include small stock funds, technology funds, and some emerging market funds. There should be no restriction or penalty for exiting the fund after 30 days. The publisher favors an aggressive growth fund for “Up” indicators and uses the “FDGRX” fund in his 401k account and “SSO” in his brokerage account.

Why didn’t the short term indicator change to down over last two weeks? Not complaining, just wandering why it didn’t catch that down move we had?

  • Indicator 2 is a shorter term market timing indicator, but not a VERY short term indicator.
  • The market has moved sideways since the last “Up” indicator change (Indicator #2). As of today the market is flat on this indicator.
  • There has not been a solid trend in either direction. The market (S&P500) had to reach a certain level up or down to trigger a “down” indicator – this did not occur due to sideways action. The market never went high or low enough to trigger “Down”.

If the publisher had made money on the indicator (the Nasdaq was up quite a bit), he might take profit on half of his position. The publisher often takes half off after a solid gain on the shorter term indicator.