As discussed on my Fear and Greed Portfolios page, I allocate a portion of my assets to a strategy that applies a trend following rule when risk assets are expensive.

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One way I think about this strategy is by separating market environments in four quadrants based on valuation and momentum. Here is a visual representation:

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The idea here is to be long (consistent with the predetermined portfolio allocation) unless we are in the top right quadrant: Expensive + Negative Momentum. If the expected returns are low and the trend is negative, we are out.

Here is another, classic cartoon depicting the trends in markets and a humorous allusion to the underlying patterns of greed and fear which seem to drive them:

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Attempting to intelligently navigate this cycle of market emotion is the goal.