Today's Market
by Dr Invest


A lot of people want to know what is going on in this head of mine in 2012. I don't feel the need to press into investments until the time is right, that one characteristc has paid off some great dividends for me.

What I am looking for a trend. Here are some rules worth remembering in JANUARY of each year. If you look at the performance of the first five trading days in January, since 1950, an incredibly accurate pattern emerges. January's first five trading days preceded full-year gains 86.8% of the time! If the first five trading days end up, the entire year will close up. If the first five trading days end down, the entire year will close down.

Second, if you look at the performance of the entire month of January, since 1950, another awesome pattern emerges that can really help your trading. The entire month of January has preceded full-year gains 88.5% of the time! If the entire month of January ends down, the entire year will close down. If the entire month of January ends up, the entire year will end up.

Perhaps you now know why I am not jumping into the market, after all, good times for the market still remains until MAY. (The trader's rule: Go away in May, come back another day.")  If January is down, then there is a large likelihood that bad times will gather until November. I don't want to get caught in bearish crush if I can avoid it.

Concerns for Bad Stock Weather

Look, if the sky is dark and lightning is flashing, it is not the time for a picnic. You can still take a picnic, but you have to be prepared for wind, rain, and the potential storm to come. Along with the storm will come confusion, anger, and the resulting depression. It is the reverse of the joy and enjoyment you had hoped for.

The market has reflected stormy weather since August. Eventhough we have seen an eratic rise in the DOW, it is not indicative of an up trend in the market. Bernake has already warned of a tepid market and the potential slide into a recession.

While the NEWS MEDIA have talked up the fabulous up trend in the market, the Federal Bank, today, sent a white paper to Congress asking that they take some specific steps to help the housing market.

The U.S. Federal Reserve on Wednesday called for more action to stabilize the nation's ailing housing market, warning that failure to do so could harm the broader economy. In a 26-page white paper sent to Congress, the Fed outlined several potential ways to stabilize the housing market, many of which are already under discussion or being implemented by the Obama administration and housing regulators.

Read more: http://www.nasdaq.com/aspx/company-news-story.aspx?storyid=201201041417dowjonesdjonline000559&title=feds-bernanke-tells-lawmakers-more-action-needed-to-fix-housing#ixzz1iYHgQadQ

Please help me to understand this. If the stock market is in such a rally in 2012, why would Bernake be requesting help from Congress to stabilize the nation's ailing house market? I am not being an extremist, but a realist. Housing is in NO WAY turning around; the EuroEconomy is teetering on the brink, the economy is at best tepid, and the economic boosts and temporary rise in employment  from the recent Christmas season will be forgotten at the reports of the further economic and employment declines.

Let me be clear, I am not on the gloom and doom page with certain economists and analysts. I see the U.S. economy as very resilient. Yes, cuts are necessary to reduce this nation's debt and some changes must be made to our tax structure to resume an orderly trend in the market.

But as I have already said, the stock market weather looks bad and I would rather stay inside. Should the skies clear and the sun shine again, I would be more interested in returning to equities until May.

Over the next few weeks, I will make some suggestions on an immediate investment course that should be less volatile than individual stocks and less volatile than individual bonds. I have already hinted that there are some ETF's that can be purchased like stocks, can utilize a STOP-SELLs, and can be easily sold.

Many finanical institutions will sell you and indiviual bond, which you will either hold to maturity or try to sell on the market. You will buy that bond with a 2%, 4%, or 6% return, but when the market heats up and inflation climbs, the new bonds will be sold at 8%, 10%, or 12%. What will you do with your bond then? Will you keep your bond, paying you 2%, when every one else has bonds returning 12%? To whom will you sell your bond? Here is what you will do, you will sell you bond to someone else, taking a loss on your 2% gain and taking another 4%, 6%, or 8% loss from the initial investment, so you can reinvest your money elsewhere.

If you have a Bond EFT like BND, you don't have to go to the bank to sell, if the bond moves down, you simply sell it at your on-line brokerage. Another feature is that the EFT bond contains many different bonds and so is diversified. A stock ETF like VTI, contains a cross section of U.S. stocks. This kind of diversity brings you better protection if the EFT is bought and sold carefully. This kind of investment is not difficult and can bring remarkable returns if you follow some basic rules. More later, but now is not the time to invest. Perhaps later, depending on the weather.

(note: The above article is for entertainment only and not to be used as investment advice.)