In my book on pages 129-130 I suggested a simple market strategy for the conservative contrarian trader. After a bearish investment crowd like the one which developed during 2008 becomes prominent the conservative contrarian waits for an upturn of 1% in the 200 day moving average of the S&P 500. Once this happens he increases his stock market commitment to above normal levels.
I think this signal will develop sometime during the next six weeks. I think the 200 day moving average of the S&P hit its bear market low at 870.57 on July 27. Once this moving average rises to 879.28 or higher the conservative contrarian will get confirmation that a new bull market is underway. After taking an above normal long position in stocks the conservative contrarian then waits for the bull market to develop. A normal advance would take the S&P up at least 65% from its 666 low to the 1100 level or higher. A normal advance is also likely to last at least 20 months, i.e. until November of 2010. Once both these expectations are satisfied the conservative contrarian then expects to reduce his stock market exposure to normal levels.