Normally, I'm the kind of person who thinks it's ridiculous when investors sell in a bear market. I didn't flinch when the dot-come bubble burst, or in the downturn after the terrorist attacks. But this time is different.

In January, I pulled back my stock holdings to the low end of the asset allocation models. In the last couple weeks as the credit crunch unfurled while I was on vacation in Canada with my husband, I looked for an up day in the market to sell. On Friday, I cut our stock holdings in our regular and retirement accounts by about one-third.

On Friday afternoon I completely expected the market Monday to rise on word of a successful bailout. I warned my husband that there would certainly be a rally when the deal was approved and we would lose out. Boy, did that turn out not to be the case. It still may happen, but I really doubt it will completely erase Monday's loss.

Friday wasn't even my first choice for a sell date. As I said, we were traveling and the two other times I wanted to sell, we couldn't get a secure internet connection in time.

I still don't believe I've timed this perfectly. You just can't. If I had timed it perfectly I would've taken everything out of stocks last October. I could have saved around 20-30% of my holdings with that. And I'm absolutely certain that I won't jump back in at exactly the right time. I know the market lurches up in big jumps.

But I don't need to get it 100% right to save myself some money. When the market has been up lately, it's been on that crazy market wisdom that, 'Yeah! A bailout plan is coming!' But the big picture is still bad news: A bailout is needed and even it may not work.

Sy Harding, long-known for his work in cycle analysis, takes a look at the history of Presidential Election Cycle and what this portends for the next few years.

Interestingly, he explains how and why this cycle will impact the direction of the stock market in coming years regardless of which candidate becomes the country's next President. Here's his long-term assessment from his Street Smart Investing.

"As Paul Harvey once said, 'In times like these it helps to recall that there have always been times like these.' Yet the world hardly ever comes to an end. The future arrives. The cycles continue. Sunny weather still follows stormy weather, winter still follows summer, spring still follows winter -- every time.

"For investors there's nothing more important than recognizing that business, the economy, and markets also move in cycles, not endless straight lines. Recessions follow boom times, bear markets follow bull markets, bull markets follow bear markets -- every time.

"There are two cycles, one of intermediate-term duration, the other longer-term, which can be of significant importance to investors. The first is the annual seasonal cycle.

This is part of a series of columns by retirement expert Dan Solin. Please bring him your questions in the comments box and he will answer as many as he can.

Is this a good time to invest, or should you sit on the sidelines until the market has "bottomed out"? This is the most common question I am asked.

It would be great if there was a way to tell when the market had reached its low. If you could do this, you would be able to buy stocks when the markets were taking off and retreat to risk-free investments, like cash and Treasury bills, in down markets.

Unfortunately, the data on timing the markets is very dismal.

One large study looked at more than 15,000 predictions by 237 market timing newsletters over a 12-year period. At the end of the period studied, 94.5% of the newsletters went bust. Not very impressive.

The financial media likes to hype stories suggesting that the markets are tanking or are poised for a rebound. These predictions are usually inaccurate and generally unreliable.

Here's a better question for you to consider: Should you be in the markets at all?

Using a proprietary "volume reversal" trading strategy, Mark Leibovit has been consistently ranked among the top newsletter timers. In his VRTrader, he looks at the outlook for stocks, oil, gold & silver -- and offers his choice for exchange-traded funds for traders to play these markets.

Leibovit explains, "The stock market's decline, besides being huge, is relentless. Every rally was met with selling and fresh lows were soon hit. The Dow crashed through the March and January lows and is now trading at its lowest level since September 2006.

"Apparently, that 1500 point rally off the March low was just a giant head fake. The Dow is now down 19% since last October and the S&P is down 18%, approaching bear market territory."

"Breadth is dismal, and down volume is ten times greater than up volume. Sector action is terrible. Seven of the nine market sectors are down more than 2.5%. Ouch! Financials have done it again and have set a new five-year low. Oil spiked through previous records setting a new record high.

"The precious metals also showed strong gains today with gold up 32.80 to 915.10. We cleared the June 9th high of 907.20 touching 909.50 opening up potential to 931.00 (May 21 high).

"Gloom is thick enough to cut with a knife," says market historian and seasonal timing expert Sy Harding, whose timing system has just triggered a new intermediate-term buy signal on stocks. Here, in his Street Smart Report, the contrarian explains why he believes we are now near a market low.

He also looks at four new ETF index positions he has established in his portfolio. "The slowdown continues. Foreclosures soar. Debt problems are spreading to corporate and credit card loans. The housing collapse continues. The problems are affecting employment.

"And of course the credit crunch continues. Gasoline hit a record high $3.26 a gallon last week. Consumer confidence, and corporate CEO confidence is at multi-year lows regarding the economy.

"The gloom and doom has spread from financial publications to local newspapers and magazines, now featuring stories of layoffs and local plant closings, local small businesses suffering, comparisons to previous bad times, even occasionally to the Great Depression.

"Is the gloom thick enough? Are other conditions in place indicating we are near a market low? Here's why we think so:

Jim Rohrbach, a top timer for over three decades -- and one who successfully side-stepped the recent decline -- just issued a buy signal for the NYSE in his Investment Models.

"I am a mechanical investor. Each day my proprietary RIX indicator converts the stock market action into numbers that represent the trend of the market. These numbers then trigger buy or sell signals for the NYSE and the Nasdaq. It's that simple.

"And because the readings are mathematical, there is subjective interpretations. No guessing, no predicting, and no anticipating. I never try to out-guess my strategy. I act on every signal, without question, because I know that over the past 36 years I have caught every major up move and I have avoided every major decline.

"Big up moves do not come very frequently, so you have to take advantage of it by staying in the market until it peaks and turns down. I am going 100% invested today. I believe that the market can give us a nice up move from here.

The Wall Street Journal's "Ahead of the Tape" column looks at (subscription required) one of the age-old market-timing indicators: the election year.

Conventional wisdom holds that election years are a good time to buy stocks because incumbents hoping to hold on to power, for themselves or their party's successor, will try to win voters' favor with fun things like tax cuts and spending to give the economy an upward jolt.

Conversely, politicians usually save things like tax hikes for their first two years in office, hoping we'll forget about it by the time election year rolls around.

The Journal argues that the subprime meltdown and general housing turmoil could make the election indicator less reliable this year. "Investors should also keep in mind the one time in the last half century the presidential cycle didn't work: 2000, when the dot-com stock bubble imploded. No amount of fiscal stimulus could stave off that bear market. It remains to be seen if Washington's pump-priming machine will work this time around."

Markets are too complex to use any one indicator -- no matter how impressive its past performance -- to try to jump in and out of the market. It's been said many times before, but most investors should just buy and hold and pay no attention to the election year indicator, the Super Bowl indicator, or anything else.

A piece in The Wall Street Journal laments that the day to day gyrations of the market are hard to predict. Duh. Furthermore, the methods that once appeared to be effective in making predictions no longer work. Double-duh.

It's an interesting piece, and a good one, focused on the role that hedge funds may be playing in increasing market volatility. The problem is this: who really cares? According to some, days where 90% of shares traded in the same direction, was a good indicator of a bottom:

"This used to be a good signal of a major bottom," says Tim Hayes, Ned Davis's chief investment strategist. "Now, it could be turning into a signal of the end of a less-significant market correction -- or it could be turning into an inconsistent signal" that simply means investors are anxious

Well wasn't that enlightening?

There have been very few market prognosticators, and not enough to make me think it's anything other than luck, who have correctly predicted the markets swings over an extended period of time. Does any of this volatility matter for the long-term investor? No, and the long-term investor is the only one who's likely to do well over the long-term.

So sit back, dollar-cost average, and count on the long-term growth of the economy for long-term returns. And don't pay attention to investment strategists who use the word could twice in the same sentence.

Timing expert Jim Rohrbach, who successfully side-stepped the recent market decline, has just issued a buy signal for the NYSE in his Investment Models newsletter.

To assess what the market is doing, Rohrbach has been compiling an indicator -- known as the RIX -- every day for 36 years. Via this system, he has garned one of the top reputations in among timers.

His latest sell signal came on July 25, and since that time, the market declined some 900 points. His system has now issued a buy signal for the NYSE, and he has now moved to a 100% invested position.

Although the actual data used in compiling his RIX indicator is proprietary, he does notes that it coverts the action of the stock market into a specific number that identifies the changes in the market's trend. Whatever its makeup, the RIX has caught most of the major market moves of the past three decades.

Concerning his latest buy, he notes, "I wasn't too crazy about getting in on this signal because I was hoping that the market would sustain a larger loss. But, I never try to out-guess the strategy. I am a mechanical investor. I act on every signal, without question."

Each day, Steven Halpern's TheStockAdvisors.com features the latest investment ideas and market commentary from the financial newsletter community.

A lot people look to religion or spirituality when things appear to be in chaos. But when the financial markets are looking out of control, investors should look up Vanguard Group founder John Bogle for reassurance.

BusinessWeek did just that, and Bogle was his same-old self: Investors should stay the course, ignore the volatility, but make sure that they have an adequate percentage of their portfolio in bonds. Of course, that right ratio depends on your time horizon and the size of your portfolio.

Bogle explains more intelligently than I can here why investors shouldn't do anything. As I said in my Volatile Market: Just ignore it, don't try to time it, individual investors (and the experts too) have a terrible record of timing the market. It's why the average investor's return is so much lower than the market's average return: We have a tendency to jump in and out at precisely the wrong times. What's the solution? Buy and hold!

I love Bogle's use of Shakespeare to describe the current market turmoil: "A tale told by an idiot -- full of sound and fury, signifying nothing."

Unlike many who have turned bearish after the market's recent decline, advisor Jim Stack fortuitously moved to a bear market stance in his model portfolio as the Dow was hitting its record high.

At the time he noted, "When the DJIA scores a new record high, yet there are twice as many stocks closing down for the day (as the number closing up), then something is wrong. Declining stocks overwhelmed advancing stocks by a 2:1 margin, an ominous divergence that has never occurred in the past 75 years of market history."

As such, in his InvesTech Market Analyst, he stated, "We are moving to a full bear market defensive mode." Since that timely market call, he has seen an additional warning sign that has added to his concerns.

In particular, he cites a rare "killer wave" signal from the Coppock Curve, a technical indicator developed 50 years ago by Edwin S. Coppock. It can be described as a 'barometer of the market's emotional state.' As such, it moves very slowly and methodically from one emotional extreme to another.

Mainly, the indicator has been used to signal low risk buying opportunities. Stack notes, "Over the past 8 decades, this indicator shows a remarkable track record when it comes to signaling the start of a new bull market for stocks."

George C. Lane developed the Stochastic Oscillator in the late 1950s, according to Stock Charts. You can view their page for the extensive, mathematical calculations behind the indicator because they can explain it much more simply than I can. However, here's the important thing: I've found that this indicator has predictive value in helping me spot overbought or oversold situations.

I never buy stocks simply because they are overbought -- the stock needs to be displaying the strength needed to stage a rebound or "bounce." For example, in the two situations I highlighted in a recent technically focused article, both of the stocks were oversold (one of them according to stochastics, the other from price action) and both were showing strength.

This is important because, in my experience, stocks can remain overbought or oversold for a very long time. While you might argue that, if this is the case, then why should someone even spend their time looking at the indicator? In my opinion, the same could be said about judging a stock's value -- a stock can remain over or undervalued for a long time before the true value is reached. That doesn't mean performing such measures is a waste of time.


As you can see from the chart, Stochastics certainly aren't a "holy grail" for market timing, if employed with the proper mindset, they do hold predictive value, in my opinion. While I'm sure efficient market theorists are going to attack me for that statement, I think the chart speaks for itself.

You can see that the first time the stock was "oversold" (bottom of oscillator), as soon as the stock began to rally, the rally continued for 10%+.

However, as you see, it is not flawless. For the stock's run from $23-$33, the indicator would have had you selling after just a small percentage of that move. But that's understandable in my opinion, because the market was playing catch-up in Microsoft as people realized that a low double digit earnings multiple was extraordinarily irrational for such an incredibly profitable company.

Through this post I've tried to explain how I use the Stochastic Oscillator so you can better understand what it means if you see it inside charts in my post. Feel free to comment with any questions!