One of the important features of being a long-term trend follower is that it eliminates all the daily "market noise." From my perspective, an investor wants to be fully invested during the "Bull" phase and short, or in cash, during the "Bear" phase. This is nothing more than adhering to the Wall Street adage of buying low and selling high. However, investors usually have a very difficult time in implementing the adage. A key point for an investor to remember is that one is not going to be able to "buy" at the exact low and "sell" at the exact high. What is important to remember is to be fully invested for 80% of the "Bull" phase and be out of the market for 80% of the "Bear" phase.
How is this investment strategy implemented? The following chart gives the specifics. It illustrates the 17-week and 43-week moving averages of the S&P 500 over the past decade. When the 17-week moving average is above the 43-week moving average, the market is in a "Bull" phase; and an investor should be fully invested. When the 17-week is below the 43-week, the market is in a "Bear" phase; and an investor should either be short or in cash (money market fund). There you have it. This investment strategy is very simple but, yet, very profound. Just check it out. Its performance has been excellent. By the way, an investor would have been out of the market debacle during 2001 and 2002 and in since 2003 following this strategy.
One other feature of the above chart is the index on the bottom. It is the "Relative Strength Index (RSI)" of the S&P 500. Its significance is that the index remains consistently above 50 during the "Bull" phase and consistently below 50 during the "Bear" phase.
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