Hedging

2007 - 2008 Stock Market Crash

The Stock Market warned us many times from 2007 through 2008 that we could have massive trouble ahead. Five times between 2007 and October of 2008 the S&P 500 Index dropped below its 50 day Simple Moving Average (Blue Line). When this happens the Stock Market is sending a warning signal. The black arrows represent when to hedge assets and put them in neutral, when the S&P 500 Index breaks below the 50 day Simple Moving Average. The green arrows represent when we would have taken off the hedge due to the S&P 500 Index breaking higher through the 50 day Simple Moving Average. Using this hedging strategy one could have avoided almost all of the losses in 2008 and put their money back to work at much lower levels taking advantage of the decline and not riding it down like most did.