How Index Investors Run a Monthly Market Review
For long-term index investors · Based on Adam Khoo Monthly Market Analysis Framework
// TL;DR
The Adam Khoo Monthly Market Analysis Framework gives long-term index investors a repeatable, emotion-free process to review the S&P 500 before deciding whether to accumulate, hold, or simply keep dollar-cost averaging. Each month you read the five-moving-average trend stack, confirm the wave pattern, map four support levels, sanity-check valuation via forward P/E, and treat macro news as entertainment. The point isn't to time the market — it's to stay invested through corrections, accumulate at defined support zones, and never panic sell or chase. Use it at the start of every month or whenever a sharp move tempts you to abandon your plan.
Why do index investors need a monthly review at all?
If you're a long-term index investor, you might think buy-and-hold means you never look at charts. But the biggest threat to your returns isn't the market — it's your own reaction to it. A 6% drop in a single month triggers panic selling; a hot run triggers FORO (Fear Of Running Out) chasing. The Adam Khoo Monthly Market Analysis Framework replaces those emotional impulses with a fixed process you run at the start of every month. The output isn't a prediction — it's a probabilistic outlook and a confirmed action rule.
How do I read the trend on my S&P 500 proxy?
Start with your index proxy — SPY, CSPX, or VOO — on the daily chart with five moving averages plotted: 20 EMA, 40 EMA, 50 MA, 150 MA, and 200 MA. This is the trend stack. Ask three questions in order: Is the 20 EMA above the 40 EMA (short-term up)? Is the 50 MA above the 150 MA (medium-term up)? Is the 200 MA sloping up (long-term up)? If all three are yes, state plainly: the path of least resistance is up. Then switch to the weekly chart to see the wave pattern — the natural rhythm of wave up, wave down that happens even in strong uptrends.
This matters because it tells you whether a scary red month is a normal correction or a genuine trend change. A bear market requires the 50 MA to cross below the 150 MA, both sloping down, with the 200 MA also declining. A 20-below-40 EMA cross alone is just a wave down — not a reason to sell your index fund.
Where should I accumulate during a pullback?
Map the four support levels using multiple timeframes: Support 1 is the 20 EMA on the daily (first bounce zone for small dips), and Supports 2, 3, and 4 are the 20 EMA, 40 EMA, and 50 MA on the monthly chart — progressively stronger bounce zones. Record the actual price values and update them monthly. These aren't predictions; they're probabilistic landing zones that answer 'if we pull back, how far?' As an index investor, this is where you deploy extra capital instead of chasing rallies.
Do I need to worry about valuation and earnings?
Glance at forward P/E versus the 5- and 10-year averages as a quick sanity check — not a verdict. More useful: compare forward P/E now to the start of the year. If prices rose but P/E fell, you're in a sustainable earnings-driven market, which is reassuring for someone accumulating. Confirm with the latest earnings season — a big positive surprise versus analyst expectations justifies the strength.
What about all the macro headlines?
Record them for entertainment only. The framework is blunt: Fed rates, 10-year yields, CPI, jobs, and GDP carry zero weight in your buy or sell decisions. The market frequently rallies on bad data because investors bet the Fed won't hike. If you try to time your index contributions on macro news, you'll pull your hair out. Note the reaction, especially when it's counterintuitive, and move on.
What's my action rule as an index investor?
End every session by confirming the rule: dollar-cost averaging continues regardless of the month; accumulate extra on pullbacks to your mapped support levels; no panic selling; no FORO chasing. Seasonality — September being historically weak, for instance — is context for expecting volatility, never a sell signal. If the market drops this month, it's part of the wave pattern, not an emergency.
Next step: Set a recurring calendar reminder for the first trading day of each month. Plot the five moving averages on your chosen proxy, run the ten steps in order, write your one-sentence probabilistic outlook, and confirm your action rule. Consistency is the entire edge.
// FREQUENTLY ASKED QUESTIONS
Should I stop dollar-cost averaging when the market drops?
No — dollar-cost averaging continues regardless of the month. A drop that leaves the medium and long-term trends intact is a wave down within an uptrend, not a reason to stop. If anything, a pullback to one of your four mapped support levels is an opportunity to accumulate extra. The framework's action rule is explicit: no panic selling, keep accumulating on the way down.
As a passive investor, do I really need to check five moving averages?
You don't need them to keep contributing, but they answer the one question that causes bad decisions: is this a correction or a bear market? The trend stack takes minutes to read once plotted and tells you whether to stay calm and accumulate or, in the rare confirmed bear-market case, to expect a deeper drawdown. It's an anti-panic tool, not a trading system.
How do I compare my portfolio to the index each month?
Track both time-weighted and money-weighted returns against your S&P 500 proxy. Time-weighted return judges your allocation decisions independent of when you added cash; money-weighted return reflects the dollar impact of your contribution timing. As an index investor, both should track the benchmark closely — large divergence signals your contribution timing, not your strategy, is driving results.