Invested Ep. 157 – Stock Market Indicators: Can You Time The Market? (Part 1)

Normally on the podcast we talk about how Warren Buffett, Charlie Munger and the best investors in the world invest….except for today. In this episode, we’re going talk about how we can take advantage of the fact that we’re nimble investors and dive into some stock market indicators that let us know when it might be time to get out of the market.

Disclaimer: These indicators DON’T work for everyone. They WILL burn you if they’re not used correctly so listen to this episode carefully. They MAY help if you’re stuck in a 401k or if you don’t have a long time before retirement.

  1. What are the indicators that tell us when it’s time to get out of the market?
    • These are NOT something you need to invest well.
    • Value Investors don’t typically enter and exit the market based on numbers.
    • These are trading tools that have worked in the past that may continue to work.
  2. There are 2 categories of thing you can use to determine whether or not to buy a stock
    • Fundamental Indicators – Real facts about the price of things.
      • Buffett Indicator
      • Shiller PE
      • Inflation
      • Interest Rates
      • Wilshire Index vs. GDP
    • Technical Indicators – Looks at prices of specific stocks or indexes
      • Dow Jones Index – DIA
      • S&P 500 – SPY
  3. What are these Technical Indicators?
    1. 30 Day Moving Average – Price average of an index over a period of time.
    2. MACD – Moving Average Convergence Divergence
    3. Stochastic
  4. Remember that we don’t have a crystal ball and that it is nearly impossible to time the market. Just because they’ve worked in the past doesn’t mean they’ll work in the future.

Before you try any of these indicators. You should read the books, listen to the podcast, and learn the 4Ms of investing. Next week we’ll go over how to use each of these indicators.

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Phil Town is an investment advisor, hedge fund manager, two-time NY Times best-selling author, ex-Grand Canyon river guide and a former Lieutenant in the US Army Special Forces. He and his wife, Melissa, share a passion for horses, polo and eventing. Phil’s goal is to help you learn how to invest and achieve financial independence. You can follow him on google+, facebook, and twitter.