Which Way The Market

I am hearing predictions by brokers, financial planners, talk show hosts and the talking heads on TV that the market is going back to its old highs - DOW 11,700 and NASDAQ 5000 here we come.

It seems to me that in 2000 I heard these same people saying there was no top to the market and were looking into their crystal balls for DOW 30,000 or some other fantastic number. Suddenly the market turned over with the DOW dropping 3,000 points and the NASDAQ losing 80% of its value. Can it happen again? I don't predict and all I can say is the market can do anything.

BUT what if it does turn down? Are you going to sit as you did before and watch your money disappear? Right now everything looks rosy and the momentum is carrying the indexes higher almost every day. Buy and hold is the right strategy.

Hind sight is always 20/20 and you will want to own stocks and mutual funds now, but not get caught in the next down draft. There will be one! There always has and you can see it clearly if you are a student of market history. Since 1900 there have been 16 to 18-year cycles of bull and bear markets and within those there have been other shorter cycles of ups and downs.

Many brokers and investors try to predict when those turns will occur and they are mostly wrong. It is definitely not a good idea to try to outguess the market. You must learn to read the rather obvious signs of the major turns. I say obvious, but it is clear they are not obvious to most brokers or financial planners. Having been a professional trader, exchange member and floor trader for many years I will tell you the obvious 'secret'.

Using a 200-day moving average of any one of the major indexes (I prefer the S&P500) you can plot these every day and when the index penetrates the 200-day line in an upward direction it is a signal to buy. That is where we are now. Inversely when it penetrates that line going down it is time to sell and put your money in cash or bonds. If you don't want to do the math computations there is an excellent chart in the Investor's Business Daily newspaper called their Mutual Fund Index that will do all the work for you.

It is nothing more complicated than that and you can go back into history as far as you wish and you will see it proven time after time. You are holding stocks or funds while the market is going up and you are in cash while it is going down. Don't be fooled by "research" or by any other complicated method. This works.

There is no need to predict the market. It will tell you in simple language what it is doing and whether you should be a buyer or seller.

Al Thomas' book, "If It Doesn't Go Up, Don't Buy It!" has helped thousands of people make money and keep their profits with his simple 2-step method. Read the first chapter at http://www.mutualfundmagic.com and discover why he's the man that Wall Street does not want you to know.

Copyright 2005

In The News:


Barron's

ETFs Chasing Mutual Funds as Stock Buyer
Barron's
Mutual funds' outflows since last year have driven their equity ownership to a nearly 13-year low, according to Goldman Sachs. ETFs, meanwhile, are growing by leaps and bounds as a stock market force. “Corporations and ETFs will continue to drive ...


Bloomberg

ETFs Are Giving Mutual Funds a Run for Their Money - Bloomberg
Bloomberg
Nobody owns more U.S. stocks than mutual funds. But with their position slipping, the question is how much longer can they control the market? Mutual fund ...

and more »

WealthManagement.com

Mutual Funds Still Dominate the Stock Market, But Here Come ETFs
WealthManagement.com
Mutual fund ownership of equities is at its lowest level in nearly 13 years, according to a research note from Goldman Sachs Group Inc. Meanwhile, exchange-traded funds are becoming an even bigger force in the stock market, the team led by Chief U.S. ...


US-based stock mutual funds take in most cash in a year -ICI
Reuters
By Trevor Hunnicutt NEW YORK, March 1 Fund investors' aversion to riding the market's highs showed signs of waning as stock mutual funds attracted the most cash in a year in the latest week, Investment Company Institute data showed on Wednesday.

and more »

Utility Stocks for Retirement Investors: 1 Stock, 1 ETF and 1 Mutual Fund
Investorplace.com
But here's the real kicker for utility stocks. The Fed is raising rates, and that has caused them to flounder. But the sector has historically realized faster dividend growth than the pace of interest rate increases and inflation. For retirement ...


TheStreet.com

Hedge Funds Love These 4 Stocks -- Should You?
TheStreet.com
That's because institutional investors with more than $100 million in assets are required to file a 13F, a form that breaks down their stock positions for public consumption. From hedge funds to mutual funds to insurance companies, any professional ...

and more »

CNBC

Why mutual funds could be on their way to another lousy year
CNBC
The improvement comes amid multiyear lows in the tendency of stocks to correlate up and down together, as well as an elevated level of dispersion, or the difference between returns for various sectors. Stock pickers in actively managed mutual funds ...
Stock pickers lift performance in battle of the benchmarksFinancial Times

all 4 news articles »

Economic Times

5 Aggressive Growth Mutual Funds to Buy in March
Zacks.com
This category of funds also invests heavily in undervalued stocks, IPOs and relatively volatile securities and seeks to profit from them in a congenial economic climate. The securities are selected on the basis of a company's potential for growth and ...
Top 3 Large-Cap Value Mutual Funds to BuyNasdaq

all 4 news articles »

Market Realist

How Hedge Funds and Mutual Funds View Financial Stocks
Market Realist
According to Goldman Sachs (GS), hedge funds have reduced their position in financial stocks (XLF). However, mutual funds have strengthened their position in financial stocks. In the last one month of market rallies, financial stocks have led the gains ...

and more »

Daily Reckoning

The REAL Reason Your Mutual Fund Can't Beat the S&P 500
Daily Reckoning
“According to the numbers compiled annually by performance analytics firm Dalbar, the average stock mutual fund investor has seen average annualized returns of 4.67% over the last 20 years – just investing in the S&P 500 would have paid you 8.19% a ...

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