After writing my last entry about market timing I decided to abandon it on 3 of my 4 mutual funds and just apply it to Fidelity Over the Counter (FOCPX). That was my intention originally but then I started doing it on the others. Naturally as soon as I gave up it started working.
When I wrote last I had gotten out of FOCPX even though the price had gone back above the 50-day average. But it dipped below again and I bought it on its way back above the line on April 2, having missed out on a 9% gain in the meantime. Soon after (April 16) the price dipped below the 50-day average again and I sold it for less, thus incurring yet another loss. It crossed the line again but then went back down and now is about 10% below what I sold it at.
If it started climbing back up tomorrow I wouldn’t buy it back until it the price reached back up to the 50-day average which is only a few percent below my selling price right now, so really I won’t be able to save the 10%. But the advantage is that because I haven’t gotten the buy signal yet, if the market continues to decline I will still be on the sidelines. The timing thing means you always cut the peaks and valleys off of the big swings so on smaller swings it isn’t as useful.
Anyway, I’ll continue trying this out a while long and we’ll see what happens but I’m about ready to give up on it. If the market has a big correction I could change my mind. Really this only works for big long corrections.