Step 3: Evaluate the Stock Market’s Condition

The next step is to find out whether you should be buying, selling, or holding your portfolio positions. That is where the “Stock Market Dashboard” comes into the investing equation. Here you assess the market’s condition using a group of unrelated indicators, waiting for a consensus “buy” or “sell” (a +3 or –3, respectively) signal based on analyzing the eight indicators in the dashboard. If you are using the dashboard for the first time, you may find that there is no clear-cut buy or sell signal at the moment, but instead a neutral signal in the range of +2 to –2 may be shown. You may also find that the last buy or sell signal occurred weeks or months ago. In those cases, you should wait for the next buy or sell signal. After you have been using the strategy for a time, all the signals should be taken as soon as they occur. Only when using the strategy for the first time would you have to decide in between signals what to do, if anything.

If the dashboard signal is +3 or more, you should put existing cash to work in the top-ranked ETFs. Similarly, if the composite signal is –3 or worse, you should sell all existing positions. The optimal time to get in or out of the market is when the dashboard first gives a buy or sell signal, not days, weeks or months later when the existing trend has been in place and the market has already made a big move in either direction. You want the odds in your favor; therefore, you need to act promptly.