A Defensive Strategy That Works

A big theme in my writing -- at TheStreet.com and on my blog -- has been taking defensive action amid unhealthy demand for equities. There are several ways to measure this. I prefer taking defensive action when the S&P 500 goes below its 200-day moving average, then getting fully invested when it goes back above that point.

As Ken Fisher has said many times, the market can only do four things: go up a lot, go up a little, go down a little or go down a lot. My use of the 200-day moving average is to try to miss as much as possible of that last one.

The attached chart shows a way that might help mitigate the full brunt of a bear market. It compares the S&P 500 (with its 200-day moving average in blue) and the CBOE BuyWrite Index(BXM Quote). ...