Today's Market
by Dr Invest


Yesterday, I mentioned the old "Head and Shoulders" pattern. No one... and listen... no one can predict where the market is going to go! This is more of an estimation and guess, than a science. If one could accurately predict the market, he would be the wealthiest man on earth.

No, in reality, you are like a cork that is floating on the water. When the water moves up, the cork moves up; when the water moves down, the cork moves down. Likewise, when the market moves up, your investment moves up; then the market moves down, your investment moves down. You can't control the level of the water, but you can remove your cork when the water level begins to fall.

Perhaps this pattern means nothing, but to me, it is a dangerous signal of a decline. My view is that caution is needed. Make sure you have a STOP-SELL in place.

The S&P 500 chart below best illustrates the TRADING RANGE of the Market over the past 12 years.

It is possible that the S&P 500 could range a bit higher, but I feel uncomfortable in buying into the market at this time, knowing that the market is more likely to move downward than to move upward. Most investors that I have spoken to who use a LONG-TERM BUY & HOLD strategy have not profited from the market over the past 12 years and have indeed lost money. In all fairness, a long-term buy and hold method would have performed admirably from 1990 to 2000.

A better strategy in today's market is to be out of the market on the down trend and in the market on the uptrend. Some say, "You can't really know when to get into the market and will miss the big moves." These people are repeating what they have heard by the money managers of the past. Today, you are sure to lose your money by waiting for returns that can't move higher because of our national debt.

Hussman Report

I try to tell people what I think, but occasionally someone outdoes me, eloquently expressing the subtleties of our current economic situation. John Hussman has done that in his news letter at http://www.hussmanfunds.net/wmc/wmc120416.htm.

Though written last week, the synopsis remains the same. He warns that though the trend downward is not yet deep, there is a downward trend. He recommends that people continue their successful trading methods, but be warned that the market could turn nasty at any moment.

John Hussman states: We remain defensive on the basis of an army of hostile syndromes (typified by the "overvalued, overbought, overbullish, rising yields" combination, but coupled with several others), now joined by a breakdown in market internals - not greatly observable on the basis of depth, but of high concern on the basis of uniformity. We also observe clear evidence of economic softening and recession around the world, and an early deterioration in U.S. indicators as well (though these data points are still dismissed as noise). In short, our concern about market risk persists. Our concern about the risk of an oncoming recession persists.

Closing Thoughts

Just this analysis alone brings on a furrowed brow, even though I am almost completely decoupled from the market at this time. I don't recommend that anyone else use the investment methods that I use. You will have to develop your own investment methods. But I do recommend that you recognize the bear when he is breathing in your face.

If the market returns to a brisk upward trend, I too will be looking for investments. I am at this time optimistically pessimistic.

(note: the above information is for entertainment purposes only and not to be used as investment advice.)