What percentage of your client's equities do you sell if the 200-day is breached?
There is no specific answer. Part of the process as mentioned in past posts is having an understanding of market history and combining that with what appears to be going on now to hopefully make a forward looking analysis.
The stock market cycle and economic cycle are both somewhat long in the tooth but there is a relatively low probability of the market cutting half because it did so quite recently. Late 2007 and early 2008 was a little easier than now because the yield curve was inverted and the 2% rule was in play (2% decline three months in a row is a good indication that a bear market has started and the market doesn't drop 2% three months in a row very often). The current decline is a little over a month old which makes it more of a fast decline for now than a slow rolling over.
The 200 DMA is only 17 points away but the moving average is still sloping upwards ever so slightly. That is not a reason to change strategy but to be a little less aggressive. A couple of years ago the SPX danced around the 200 DMA without ever really going down a lot and that was as the moving average was sloping upwards.
If the 200 DMA slopes down and the 2% rule comes into play then our defensive action will be more aggressive, if those things do not come into play then we would be a little less aggressive in taking defensive action.
I have been very consistent over the years in saying the discipline is in taking action upon a breach but that the action taken does vary depending on the situation. Being aggressive early in the financial crisis helped returns (this was all blogged as we went along) but a couple of summers ago the defensive action was drag. It was fortunate that we were not more aggressive then as the drag would have been bigger.