Today's Market
by Dr Invest

Let me encourage you, it is OK to stay out of the market. If you are in the market, enjoy the profits but protect yourself from a sudden downtrend by determining how much you want to lose and selling if there is a sudden downtrend.Staying out of the market is one of the luxuries the small investor can enjoy, that the institutional investor cannot. Let's say that in January through February, the market moves in an uptrend 7%. In 2011, January into February, returned 7.1%; now that doesn't sound much different than 2012 does it? In 2012, to date, the return on the DOW is 5.4%. When compared to 2011, the return on the DOW for 2012 is almost tepid. Interestingly, we are just a little above the high in February of 2011 on the DOW.

Though the comparison is interesting, it really doesn't tell us how the market might behave. In the middle of February of 2011, the market began a decline ending at a bottom in August with losses of 20% to 30% for many portfolios. Because of the weakness of our economy, many analysts are reluctant to take a chance in the market. Because the market is growing, they have to invest and are heavily hedged. (Hedging: to buy a long-term position covered by short positions should the market reverse. IE: buying oil companies, covering with options or shorts x 2 to cover flash reversals. Called an INVERSE ETF, DUG will go up in value $2 for every $1 it goes down. Stay away from hedging unless you really, really, know what you are doing.)

As I said, small investors don't have to play that game and shouldn't. By going to the sidebar on this page, you can find: RESEARCH AND MARKET REPORTS. The first report is HUSSMAN FUNDS. Click on the embedded link and select: FIVE GLOBAL RISKS TO MONITOR IN 2012. Also, go here: http://hussmanfunds.com/weeklyMarketComment.html .  I found the article called: GOAT RODEO funny and revealing.

Second, go to the next REPORT in RESEARCH AND MARKET REPORTS by HOSINGTON MANAGEMENT. You wills see their report for the 4th Quarter Outlook. While my my advice is at best, dubious, I think these investment giants should be carefully respected and their ideas sincerely regarded.

After reading these reports, you can understand my own reluctance to jump into the frivolity presently found in the market. Alan Greenspan coined the phrase: "irrational exuberance" and that is precisely what we are seeing at this moment. The prices are being driven up and up, with no real fundamentals to support the rise in price. At some point, the market will falter and collapse. With the same momentum that the market rose, it will concurrently fall. (See TODAY'S MARKET August 9th, 2011)

A combination of "irrational exuberance" and a "weak economy" doesn't elevate my trust that the market is in an uptrend. Bernake said today, the job market isn't as strong as the steadily declining unemployment rate might suggest.  Bernanke maintained the Fed's position: the economy is improving at a frustratingly slow pace and that low rates are necessary to boost growth.  On January 25th, Bernake used the phrase: GRIM OUTLOOK for the economy.  Regardless the "irrational exuberance" and the news articles touting the "Obama Recovery", the economy is truly grim.

This doesn't mean that there will not be opportunities in the weeks ahead to make some money, but it is a lot like crossing a street. You have to watch for the traffic and wait for a hole. That hole may be a significant 20% to 30% decrease in the market, with a concurrent 20% to 30% rise in the market.

By March 20th, we will know more about what will happen with Greece and if they will default. Potential conflicts in Syria, and between the U.S. and  Iran lie somewhere in the economic chemistry.

There are always geo-political events and economic events effecting the markets, but there should be a clear trend upward before putting money into the market.

(Note: The above article is for entertainment purposes only & not to be used in any way as investment advice.)