If you've followed my last few posts its very clear by now that the Dow Jones Industrial Average (DOW) is trading right around 14,000. The Dow is a broad representation of many companies throughout the US and is often used as a indicator by many investors. These levels are significant because they are very near all-time highs and more importantly a representation of how far we've come. If we go back four years ago, the DOW was at roughly 8900 and thanks to the American people, companies, government we've bounced back almost 50%.
In PART 1 of this series (Dow @ 14000), I tried to show you how information available to the public can be used to develop your direction on where the markets are headed. In short you should always be invested in the stock market but when the market is cheap you should invest more and when its expensive you should pull back some. So clicking on the link above helps to show that through a little research the average investor can pick up on some signals that assist us in knowing when to buy stocks. And who better to get some tips from then billionaire investor, David Tepper.
So we participated in this nice run up in the markets, however; the REAL question is... will stocks continue to go up?? I guess the first thing to point out is there will be a correction! A correction in this case will be a pull back or a move down in the stock market. Simply put, a correction will likely happen because the markets have moved up in a straight line. And think about the markets like you think about dieting...it never goes in a straight line (no one loses all of the weight all at once). There will be really good weeks and a few bad ones and while the markets are getting healthy and losing the weight but they haven't had any setbacks. You can almost hang your hat on the fact that there may be a pullback because so many investors are talking about the need for one to justify that this market is for real (one with fluctuations) and not just some type of fad (like with diets).
So now its time to listen to some really smart people who believe the market(s) may go lower. First up is Jeffery Gundlach who predicts that another crisis is coming to world markets who will try to stall by pumping money (see 'Making It Rain')...however; this story likely leads to inflation and possible default for some countries. I've read the following link and found his points very interesting:
- Gemstones,
- Art, and
- Commercial Real Estate
- Chinese stocks
- Nat Gas producers
- Gold Mining stocks
The next investor that believes that the picture is also a little murky is Marc Faber. Please click on the link below to hear why Marc thinks the markets are due for a pullback:
What do you believe?!? If you feel that it's intuitive that markets can't just go directly up then you may be in the camp for a pullback because that is natural and healthy. So you could benefit by selling some of your winners and/or by waiting for a pullback to buy more stocks.
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