Listen To The Market

Listen to the market, not your broker.

During any 10-year period there will be one major
break in the stock market. It may be only 20%, but many
times it will run to 40% or more. During those times any
investor will not want to own stock. Even the best stocks
will go down.

The good stocks decline because they fall in
sympathy with a lack of buying and also because good
stocks are sold to meet margin calls and for other needs.

Few investors are savvy enough to know how to
sell. They usually sell those issues that have a profit as
they don’t want to get out of shares that will show a
loss yet these are the ones that should be sold first.

Of course, investors will hear the famous
broker line, “The market always comes back”.
But when?

Almost everyone watches the Dow Jones
Industrial Average, the S&P 500 and some also keep
an eye on the Dow Transportation Index. These will
alert the major market direction. If the investor
wants to know how the U.S. economy is doing these
indexes will tell. Investors must learn the language
of the market.

Everyone including 99% of brokers and
financial planners will say it can’t be done. Why is it
that there are a few who can. You can do it too.

Here is a simple method that will tell anyone
the long term direction. If that investor puts his
money into buying the major indexes he will over time
become rich and sleep nights while it is happening
provided he does not remain invested while the
market is going down.

With very little work the investor can go to
the Internet, seek out a graphics chart of the DJIA
and on the monitor plot a 200-day Simple Moving
Average, SMA. On http://www.bigcharts.com it is free.

As long as the DMA (Directiona Moving
Average) line (that’s the 200-day line) is moving up
he can remain invested. When the line turns down
it is time to sell and put money into a U.S.Treasury
Bill money market account. That is especially
Important in today’s interest bearing accounts. Do
not look for the highest interest paying account.

The market has spoken. It is not a foreign
language. Any investor can see it and then comes
the hard part. Investors must pick up the phone
and say to his broker, “Sell”. That is a four letter
word brokers hate to hear unless the investor is
planning to buy something else. Don’t.

Currently the DMA is still rising so it is
safe to stay invested in index funds. Watch that
200 line every week. When it turns decisively down
the investor will want to safely be in cash.

Listen to no one. Do not try to outguess
the market. Let the market itself tell you when
to sell.