All of this brings me back to market timing, something every investor was focused on a year ago.  Good market timing helped Cabot Market Letter avoid most of the bear market.  But now, after the market has motored higher for months, few are concerned with market timing, and as I mentioned yesterday, that’s a mistake.

The key to good market timing is to keep it simple.  There is no perfect system, of course, but we think getting too technical and following too many indicators will lead you off course.  That’s doubly true if those indicators focus on what we call secondary or tertiary indicators … things like sentiment, interest rates, the U.S. dollar, the economy, etc.  None of those have a consistent record of successfully calling major market turning points.

Instead, we have found that the most reliable indicator of future market moves is the market itself.  In Cabot Market Letter, which I edit, we have three key market timing indicators.

One is called the Cabot Trend Lines; it’s a long-term trend-following indicator.  Its signals are less frequent (last signal was a buy back in early April 2009) but when they appear, they are usually important.

The second is the Cabot Tides.  It’s our intermediate-term trend-following indicator.  Combining the Trend Lines and Tides, you can never be on the wrong side of the market for long.

Last but not least is our Two-Second Indicator, which gives us a clue to the broad market’s health.  Its real value is by signaling major, bear market-type market tops way ahead of time–it began flashing red, for instance, in June 2007, and continued to do so for most of the bear market.

These are the indicators I use and they’ve treated us (and our subscribers) well.  Maybe there are others that you know of that also consistently point you in the right direction.

But the main point here is that you need to have some system that will get you out of the market the next time it heads down for a few months.  Doing so will help you avoid some steep losses … which, as we saw above, will make it easier for your portfolio to keep stretching to new heights.  Something to think about.