If you have been reading this column for a few years you know I am a trend follower and do not do much fundamental analysis.

Fundamental analysts follow the government statistics, look at P/E ratios and pay very little attention to price action of stocks and major indexes.

The technical analyst pays little attention to fundamentals of stocks and primarily watches the price action and interaction.

In March I saw the turn (not the bottom) in the major indexes and sold out of most of my bear funds and short positions. Within a short time it became apparent that there was a rally starting. Very few technicians will guess at how far this rally will carry. I won’t, but I will see when it runs out of steam and turns down again so I can profit as the market turns sour..

You ask why am I still bearish even though this market has risen about 30% from its lows. In past columns I have laid out methods of determining a major market trend.

One of the easiest is following the 200-day Moving Average. There is no better that I have found for the long term investor. He is in the market when it is going up and sells out and remains in cash while the market goes down. Various web sites and all brokerage companies will allow investors to draw charts of all major indexes. These sites will then let the investor create a 200-day moving average.

Here is the simplicity of how to time the market with exceptional accuracy. Do not pay attention to the penetration of the price of the index through the 200-day line. Only when the line changes direction from up to down does the investor either buy or sell. Very seldom will there be a signal more than once in 2 years, yes, years.

The technical indicator gave a buy in the second quarter of 2003 with the DOW at about 8,650 and alerted the investor to sell in the first quarter of 2008 at approximately 13,290. There were no trades during that time and those who follow this method remain in cash now as there is no bottom in sight.

With the current rally drawing in more and more as it goes higher it is obvious that hysterical buying is taking place. Mutual fund managers cannot afford to be out of the market as it goes up and Joe Sixpack thinks he might be missing the boat. They are looking at statistics that are “looking better” and forecasting the “bottom”. It is that the numbers don’t look so bad. So what! The long term trend is down. Stay out until a timing buy signal is given. So far the investor is ahead by not losing almost 5,000 points. 13000 to 8000.

The smart investor will not be caught up in the mass hysteria of buying that is going on now. Cash is king.

Copyright 2009 Albert W. Thomas All rights reserved. Author of "IF IT DOESN'T GO UP, DON'T BUY IT!"