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If you have been a reader of my weekly Market Reports, you know
that I have been warning you about the growing likelihood of a
market correction in the next few weeks. This week, the market
moved a step closer (see Turner CrossOver Oscillator, below).
Once the Composite Index of this chart 'crosses over' the Short
Sell Index, the directional trend will have moved decidedly
Bearish. When that happens, I will be buying a number of inverse
ETFs and will be shorting the market. The crossover could occur
this coming week.
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The Turner
CrossOver Oscillator provides an indication of the
over-bought or over-sold condition of the market. The
red line (New Short Sell Index) shows a technical
direction and strength (or lack thereof) of investors to
push stock prices lower, triggering new Short Sell
Signals. The higher the Short Sell Signals line, the
more Bearish the market. The black line (Composite
Index) is the combined impact of both the new Short Sell
Signals and the new Buy Signals and is an indication of
the degree of oversold or overbought condition of the
market. Buying opportunities exist when the Composite
Index is moving higher. The higher this line moves, the
more Bullish the market. Market bottoms are represented
by a change in direction of the Composite Index from
moving lower to moving higher. Market corrections become
much more likely the Composite Index crosses the Short
Sell Index from above the Short Sell Index to below the
Short Sell Index. The market is represented by the green
shaded area. |
My Money Show Observations...
Last week, I spoke at an investment conference known as
the Money Show where thousands of investors descended on Las
Vegas seeking investment advice. It was a
humbling experience to see so many people crowding in to
hear my philosophy and rules for investing. At the beginning
of each of these sessions, I would ask for a show of hands
from the audience on their opinion of the market for the
next 90 days. I asked:
How many believe the market is going to move substantially
lower?
How many believe the market is going to move substantially
higher?
How many believe the market is going to stay more or less
the same?
How many do not have a clue where the market is headed?
About 5% believed the market is headed substantially lower.
This was a bit surprising, since I normally see the Money
Show audiences a bit more negative on the market than most.
About 5% believed the market is headed substantially higher.
This did not surprise me. Rarely do these audiences believe
in a raging bull market.
About 20% believed the market was going to stay
substantially the same.
The rest... about 70%... didn't have any idea where the
market is likely to be headed. Normally, I see about half of
an audience respond to this question. This year, investors
seem to be more than a bit confused about the market's
direction.
Of course, no one knows for sure where the market is headed,
but as an individual investor, it is always important to
have a well thought-out investment strategy for the current
market. It becomes more than somewhat problematic to
establish a clear investment strategy with no clue about a
market direction. About the only way to invest in the stock
market without any idea of a market direction is the
buy-and-hope strategy, where you buy a stock and hope it
goes higher. Most investors know that a buy-and-hope
strategy can be catastrophically bad, as evidenced by what
happened to so many investors' life savings last year. And I
suspect the buy-and-hope methodology won't perform much
better this year... especially if a major correction occurs
within the next few weeks.
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On a 110 year chart of the Dow, it is clear that we are in a
"Consolidation Period" where the Dow will likely trade
between a low of about 8,000 and a high of about 14,000.
Before this Consolidation Period is over, we could easily
see one or two more runs to 14,000 and runs back toward
8,000. These kind of market gyrations are devastatingly bad
to a buy-and-hold strategy.
As such, it is important to do your best to ascertain a
market direction. This is why I provide you with my "Market
Forecast" each week in these reports. These weekly forecasts
are not a crystal ball that never fails, but by watching the
changes in direction of the market, I have found these
charts to be uncannily accurate.
This week, it looks like the market is creeping up on a
potential correction. It would not surprise me to see the
market retrace 50% or more of its gains since the March 4
low. Some pundits are expecting the market to fall below the
March 4 low. Some are expecting the market to move back
above 14,000 before another major correction. I believe this
last scenario is highly unlikely.
But, the market could easily move higher before it corrects.
One of the wonderful thing about markets just prior to a
correction... everything looks bullish and share prices are
zooming higher. It is a good time to make money, but be
prepared to take profits. Remember... it can be bad to get
out of the market too soon, but it is many times worse to
get out of the market too late.
I am buying this week, but I am very cautious.
My Investment Strategy
Until the market corrects, which could be any time, I plan
to stay about 30% long and 70% cash. Once the Composite
Index moves below the Short Sell Index on the Turner
CrossOver Oscillator, I will be buying inverse ETFs and
raising stops on my positions that will move lower in a Bear
market.
I continue to be a buyer this week, but all of my limit
orders for this weekend are about 10% below Friday's closing
prices. The Nikkei is down nearly -3% at this writing and
the market dropped 120 points from its high on Friday. If
the market rebounds from last week, I will raise my limit
order prices and get more aggressive about capitalizing on
the continuation of an overbought market. When I do buy,
however, I will be setting stops at about half or less of an
Expected Move.
Have a great week in the market!
--Mike Turner
StreetAuthority.com Analyst
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Thanks, Uncle Sam
Government spending can be
controversial in the investing world, but sometimes it
can create unrivaled opportunities for investors. For
example, which of these companies has raked in a 56.5%
revenue increase since 2006 and a whopping 364.5%
increase in profit over the same period, thanks in part
to the actions of the U.S. Government?
A.)
McDonald's (MCD)
B.)
Ford Motor Company (F)
C.) Vestas
Wind Systems (VWDRY)
D.) The
Medicines Company (MDCO)
E.) MGM
Mirage (MGM)
(Please click on one the
links above. After you make your choice, we'll show you
the correct answer on our web site.)
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Visit this link to read additional articles from today's
leading market experts! |
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 Paul Tracy
Co-Editor
TopStockAnalysts Digest
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