Today's Market

by Dr. Invest

The past few days have had some good returns for the DOW. One might think, "We are really flying now!" I do feel like I'm repeating myself, but JUST DON'T GET INTO THE MARKET!".

The market has just started to upright itself, but that doesn't mean "clear skies ahead". While flying on a particular airline, the stewards came and quickly gathered all our drinks. One of them announced, "Please secure all items under your seat or in the luggage compartment over-head". In a few minutes, the pilot came on the intercom saying, "We will be going through some turbulence, so please fasten your seatbelts and remain seated the remainder of the flight." This is usually when you think to yourself, "I really need to use the rest room". But really, why all the preparation? I think you know.

The stock market plane hasn't leveled out yet. STAY OUT OF THE MARKET. On Friday, the 23rd is what is known as "triple witching day". Please read the previous blogs to learn more, but I wouldn't rely on the market to return to spectacular gains.

Remember, my goal is not to trade unless the opportunity for success is optimum. September is the poorest in stock performance. While the sophisticated trader could short stocks, our goal is simply to maximize our return when the trend of the market is moving upward.

Look at the chart below:



This is a SEASONAL CHART for FORD, but does show how the market responds differently to a recession and an expansion in the stock market. The DOW also responds simularly. Not always will the market respond as shown by the graph above, because this graph is based upon averages over a number of years. And as you know, you can't predict future returns by looking at past information. In the stock market, there are always exceptions. If you trade based upon the exceptions, you will LOSE MONEY because you are gambling...speculating. But if you know that more people traditionally use heating oil in the winter, and then purchase stock that sells heating oil, you will likely see a good return. A seasonal chart can show you how a stock typically behaves at a particular time of the year and help you get a 5% return or more. You only need to get that return twice a year to enjoy a 10% gain. (before taxes and brokerage fees).

As you move toward the month of OCTOBER, you need to reassure yourself that the market is not going to continue going down. Let me end with the S&P 500 SEASONAL CHART to drive home the importance of knowing if the economy will turn up in October.



The green line represents expansion, the red line represents contraction. Let me ask, looking at the chart, which line do you think best follows our stock market in 2011? Yes, that's right, the red line! I'm not telling you anything you don't already know. The charts show that we are in a "contraction" or "recession".

At this time, you need to buckle your seat belt and remain seated. Turbulent weather lies ahead.

(note: The above information is soley for entertainment purposes and not to be used to make any finanical decision.)