Preparing For A Little Defense.

The S&P 500 is flirting with its 200 DMA which is an important indicator for me. While I say that the market breaching its 200 DMA is the trigger point for me to take some defensive action it is actually the day after it closes below its 200 DMA, if that next day is a down day. If we are down toward the close on the day after I will take some action. For this go around I am still mulling between the sale of one stock, adding to my double short fund or both. I spent the last couple of days lining up my ducks so that I'll be ready if I need to be but maybe that I spent a couple hours preparing means it won't happen (insert nervous smile). So to be clear the changes I might make at first would be simply a tweak. If, as has been the case the last couple of times this turns out to be a non-event I won't miss a rally, I would just lag a little. Invariably someone will call me an idiot for being wrong about this but I hope I am wrong. I am trying to protect against something that I hope never comes but realistically only comes along once or twice a decade. If this turns out to be wrong I think the reason why might tie in with something Helene Meisler wrote about on RealMoney early on Wednesday morning . To paraphrase; she said that the market going below its 200 DMA is far less likely to be important if the 200 DMA is still rising, which it is. She says that a breach is much more important if the 200 DMA is falling. This is helpful. For now I am not changing my plan. I'll take action as described above if I need to. Then depending on what happens next I will either reduce long exposure more or increase it back if the market takes back the 200 DMA and can keep it for a few days. If I end up being wrong and having to increase net long exposure in a week or two, we are talking about 2-4 trades in total for accounts with 40-45 positions. The important thing is being disciplined without creating undue turmoil in accounts and making sure clients are not too leveraged to one single outcome. [ABSTRACT FROM PUBLISHER]