Thursday, February 11, 2010

Metropolitan West High Yield Fund (MWHYX) - SELL SIGNAL

I do not know if the current intermediate-term downtrend in stocks is about over or if it is just the initial decline in a much longer-term downtrend. Fortunately, we do not have to worry; we have been out of equity funds since January 22nd.

Junk bond funds tend to follow the general direction of the stock market, but with less volatility and often with a delay.  They also trend very well, both up and down. These are the qualities that make high yield funds very manageable. We want to be invested in these funds when they are in an intermediate uptrend and we want to exit them when an intermediate downtrend develops.

Our high yield / income fund moving average stop loss model delivered a sell signal for Metropolitan West High Yield fund (MWHYX) this morning. Consequently, in line with our strict discipline we have entered an order to liquidate MWHYX.

View the chart below for recent MWHYX performance figures.
(Click on chart to enlarge it for easier viewing)

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