Apr 22, 2012
As I mentioned in LOSE YOUR BROKER NOT YOUR MONEY, I get my information from a lot of different sources. Gathered from all different kinds of news services, I prepare these blogs for independent financial managers and discuss what they should be keeping their eyes on from the view of an independent investor. Though I do pay for some information, most comes from free sources like the BEA. I do this to prove that massive amounts of money and time aren’t required to gather the required information to achieve financial success and independence – especially if you are using this website and reading these blogs.
Lose Your Broker strives to become the perennial source of information provided to independent investors. It is with that mission that I caution you against taking investment advice from a currently overzealous news media and Wall Street establishment.
Mass media has become more about Romney beating Obama than about rational market commentary. The political impact on stocks is at all-time highs and will certainly correct after much more volatility. Get used to it – it’s going to be a rocky road until way after the November elections. Prepare now.
Here is how major market activity looks year-to-date:
The above-average 15-51 Indicator is leading the way up and to correction. That’s what happens in up markets – above-average portfolios outperform average ones. And that’s what is happening right now. Strength is outperforming as proven by the 15-51i’s 29% gain compared to the Dow's 7% return and to gold’s 5% advance.
And the same is true for the last twelve months.
Gold hit its annual high in August 2011 -- one month before the Dow hit its low for the year. Gold is down 13% since reaching that high. The Dow peaked during the week of March 15, 2012 and is off just 2% from there; while the 15-51 strength Indicator peaked on one month later on April 5, 2012, and is off 6% since.
All indications point to lower and more volatile stock market valuations. The same is true even when taking a step back. From the 2009 lows the picture looks like this.
The 15-51 strength Indicator is up 285% while the Dow and gold have advanced just around 80%. That means strength is more over-valued than the Average is right now – it has more room to correct – and that is why it is behaving like it is. We’re due for a correction and stock market strength is indicating it before anything else. That gives you plenty of time to get out at high valuations.
And stay tuned...
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