“Patience” Making a move AFTER buy sell indicators change

“Patience” Making a move AFTER buy sell indicators change

In last Monday’s Weekly Wire, we talked about the rise in ranking of the international equity sector. Over the past week, we saw that momentum continue. Whether this is due to the quantitative easing overseas that we mentioned last Monday or other factors, the beauty of relative strength indicators is that the “why” something is happening is not nearly as important as the fact that it “is” happening.

Speculating on the “why”, although sometimes interesting to debate, can unfortunately lead investors into decisions based on plain old guessing. The problematic assumption with a guess is that whatever the investor is attributing the momentum to is – a) correct and b) will continue.

We follow a less emotional or gut-based decision making process, focusing on what actually has happened as the inflection point for changes to any portfolio. The key is – patience. Our indicators have to actually move from buy to sell or vice versa for us to make a change. It’s not enough to just guess that an indicator move may happen, guessing is not part of a repeatable process.

So for now, we wait. Would we be surprised if our international equity indicators move to buy signals in some portfolios? No. Are we making portfolio changes early based on a hunch? Also no, but stay tuned!

In case you missed them last week, Here are links to Investopedia’s definitions of Quantitative Easing and Relative Strength.