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Market Timing And The Presidential Election
After weeks of presidential election questions, concerns and worries, the uncertainty has been lifted. What was the final potential hazard to a strong end of year advance
has been removed, and the odds now highly favor the market to continue its uptrend.
But here is an interesting question; Did the stock market "predict" the Bush/Cheney win? Did it predict a result that would affect the financial markets in a positive
manner?
And if it did, how were we, as market timers, able to take advantage of it?
The Market Knows
If we think of the stock market as the perfect reflection of the combined thoughts, analysis, indeed the intelligence, of millions
of investors... not only in this country, but over the entire world, we begin to recognize just how good a predictor of events it can be.
Many analysts and traders think of the markets as totally random. This is known as the chaos theory. They believe there is no way to forecast ahead of time what the markets will do.
In the short term, we agree with them, but over longer time frames we see an incredibly accurate correlation between how the markets act,
to what then happens in future weeks and months.
Significant Pre Election Gains
The Nasdaq posted significant gains over the last eight sessions before the election, most of which came right when the race was at its most critical and seemingly uncertain time.
In fact the Nasdaq has been advancing since early August.
Volume and momentum have been leaning in favor of the bulls since September.
Although the S&P had some substantial consolidation during October, it nevertheless stands 10+ percent above its early August lows. Over the past two weeks we
have also seen a powerful rally in the S&P, on very strong volume.
Putting Their Money On The Line
Whether you are a chaos theorist or not, there is no doubt a lot of people put a lot of money on the line, and they did it well before this election
took place.
Maybe they did not specifically predict a Bush win but they certainly did predict, well ahead of time, the election would be a "positive" event for the stock market.
Many people have opinions and many are perfectly willing to brow beat you with them. We all know this from our own personal experiences.
But when it comes time to put your money on the line, you can bet that it was more than just opinions that started the buying.
It was, as we described above, the "...perfect reflection of the combined thoughts, analysis, indeed the intelligence, of millions of investors."
And they started to put their money on the line a full two months "before" the election. They escalated their buying in the two weeks just prior to the election even
though all the news, at least all the news that we read or watched, said John Kerry was catching up, that Bush had flubbed the debates, and that in the final days Kerry was
pulling ahead in the polls.
In fact, investors were buying heavily when the exit polls on Tuesday morning were proclaiming a huge Kerry win.
How Do We Use This Knowledge?
It is obvious that the buying started well before election. Investors predicted that the election would be a positive event for the financial markets.
We received several emails from concerned subscribers asking if it would not be wise to be in cash for the election? Their concern was likely felt
by many others who did not write.
But, and this is the most important point of this article, it was not necessary to figure out who would be elected in order to profit from timing the presidential election.
It was not necessary to spend many hours in deep and studious analysis of complex indicators.
Very simply, the market told us how to invest. We are trend followers at FibTimer and long before this election the market began an uptrend.
After we identified it as a probable trend, we climbed on board.
The stock market actually "told" us the election would be a positive event for the financial markets. It told us this in absolutely
clear terms. It was advancing for weeks before. To have bet "against" the trend would have been the dangerous move. Betting to stay "with" the trend was
the easy decision.
Why try to figure out what will happen in the future, when we can use the "...perfect reflection of the combined thoughts, analysis, indeed the intelligence, of millions of investors?"
We are not smart enough to know ahead of time what the stock market is going to do. But the combined intelligence of all
investors can be harnessed in our timing strategies simply by following their lead. Just follow the trend!
And not only did the stock market begin an uptrend two months ago, but we have strong bullish trends in bonds and gold that our subscribers have been invested in
since they began.
Conclusion
It is not necessary to study and interpret multiple market and economic indicators. It is not necessary to be a market genius.
It is not necessary to find some complicated strategy that no one can understand in order to profit from the markets.
All that is necessary is to follow the trends.
The trend in the stock market turned up. It was up for many weeks prior to the election, and it has rallied post election.
Do we know what will happen tomorrow? ...NO!
But what we do know is the market is advancing and we are in the correct position to profit from that advance.
We are
in that position not because we predicted who would win the election. We are in it because we watched for a trend to begin,
and when it did, we jumped on board. We did the same earlier for small caps, gold and bonds, all of which have been and continue to be in strong rallies.
If the market changes direction, based on the collective knowledge of those millions of investors, we will change
accordingly.
That is trend trading.
Simple, realistic, and over the years an unfailing profit maker for those who stay the course and follow the trends with us.
Recent articles from the FibTimer.com market timing services;
Let Your Profits Ride...Rules For Successful Market Timing
Critical Issues For Market Timers
Disappointment And Regret
Job Search: Market Timer Needed
Discipline and Market Timing
Is "Volatility" A Four Letter Word?
Profit Targets... Important? Or A Really Bad Idea.
Emotions And Market Timing
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Disclaimer: The financial markets are risky. Investing is
risky. Past performance does not guarantee future performance.
The foregoing has been prepared solely for informational
purposes and is not a solicitation, or an offer to buy or
sell any security. Opinions are based on historical research
and data believed reliable, but there is no guarantee that
future results will be profitable. |
