Wow – that was quick. The Skills Index strikes again on the sell of the market.
I’ve been thinking about something else in relationship to the index which is probably obvious to everyone else out there looking at any index that runs from 0 to 100% where zero is oversold and 100% is overbought: that your position size can/should be determined by, as Dorsey Wright would say, your relative field position. So when the Skills Index was in positive territory but at or above 70%, then, if you do enter long, you should probably be thinking about doing it at a small size.
Now, I didn’t get a chance to take much advantage of the sell in this case – my new boy Max has been taking up my time (and that is a great thing) – but another interesting aspect of the Skills Index is that when you are in a bear market, you want to play, immediately (not wait for a retracement) to the short side. The same would be true of a bull market – take the signal with a half position immediately, and then add to the position on confirmation. And you should wait for a retracement for entry on the long side when the bear market is on, and wait for a retracement to the long side when you’re in a bull market. Man, that’s confusing.
Anyway, enough of the diatribe – I’m just happy the index is keeping me on the right side of the market.