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Author: Al Thomas Article source: http://myshoppingplace.net/. Used with author's permission.
If it walks like a duck, quacks like a duck and looks like a duck it must be a duck.
In the stock market if there are more buyers than sellers, more stocks are going up than down and the trend of the general market is higher it must be a bull.
Not a duck, not a squirrel, not a possum and especially not a bear. And everyone likes bulls better than bears in the stock market.
The mix of news that feeds this bull is indeed strange as is the economic background. Each day there is a report of "better than expected" earnings, employment, confidence, something. The general background tone is quite negative with huge looming long term deficits yet the market keeps chugging away higher and higher. I like that.
The talking heads on CNBC-TV have been jawboning a bull market all the way down from NASDAQ 5000 and now they have turned cautious. Yes, some of them are now cheerleaders for the new bull (if it is a bull and not a duck). One of them said the market is undervalued. At 33 times earnings? The mean P/E ratio (Price Earnings) since 1800 has been about 14 or 15, but "this time it is different". Really?
There may not be any logic in the market going higher, but I don't need logic when it is going up; I just get on board for a profitable ride. My regular readers know I believe in the trend and right now the trend is up. Don't ask me when the trend will end. I don't know, but I will be watching what Mr. Market is telling me and act accordingly. As long as it has four legs, horns and moos like a cow I will stay with it. When the tune changes - goodbye.
The basic question remains. How do you know when the trend changes? Don't ask your broker as he doesn't know; however, there is a very simple and accurate method that many people have used and I also use to know the general direction of the market. If you have a computer or you can use the one at the library you can go to www.bigcharts.com and type in the symbol for the S&P500 Index. It is SP500. You can then put in the value for the number of days you wish for the moving average which in this case is 200. Click and you're done. This is an excellent way to find the trend of the market. When the price of the S&P Index is above the 200-day line you are a buyer and when it falls below you sell out and put your money in cash. Very simple.
Right now there is a loud mooing sound. When you hear the growl you will want to run for cover. Al Thomas' book, "If It Doesn't Go Up, Don't Buy
It!" has helped thousands of people make money
and keep their profits with his simple 2-step
method. Read the first chapter at
http://www.mutualfundmagic.com
and discover why he's the man that Wall Street
does not want you to know.
Copyright 2005
al@mutualfundstrategy.com; 1-888-345-7870
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