VectorVest Views 1/4/08
I nearly fainted yesterday when I heard the results of the latest CNBC Trillion Dollar Survey of nearly 60 of America's best and brightest money managers and economists. The top headline: "They are Incredibly Bullish." 89% say the S&P 500 will finish higher this year, more than 60% think it will gain at least 8% in 2008 and only two percent say there is greater than a 50% chance of recession. Given the state of the investment climate as it is, how can they say that?
I learned a long time ago, to never listen to what any of these guys ever said about anything. They're just not telling the truth. It's not in their best interests to do so. They want everyone to believe the stock market will go up so that the suckers buy stocks no matter what happens. It's a variation of the old "pump and dump" scam. So you have to be careful about when you buy stocks to go long.
Never, ever buy a stock when it's falling in price. You've heard it before, it's like catching a falling knife. And never, ever dollar average on the way down. You should dollar average only when a stock's price has stopped going down. And when might that be, pray tell? Obviously, when it has started to go up.
I explained exactly how to know this in my essay, "How to Manage Merck," of 10/01/04. So I have a similar, but not exactly the same, situation today. I'm sitting here, waiting to go long and the market is getting killed. So I have to take my own advice and wait until the market starts going up. So how am I going to know when the market has started going up? I'm going to use our Market Timing System, of course. What I do will depend, upon how aggressive I want to be.
An Aggressive Investor would wait until the Primary Wave gives an Up signal. This will happen when the Price of the VectorVest Composite closes above its price of one week ago. The Price of the V V C closed at $29.41 per share on Monday, 12/31/07. It closed today at $28.43, wiping out the lows of 11/26/07 and 12/17/07, so it would have to go up more than 99 cents per share to close above last Monday's Price. This could happen, but I doubt that it will.
A less Aggressive Investor, one who had ProTrader, would wait until the MACD, as described in my essay of 11/30/07, turned from Dn to Up. This signal is often very close to that of the Primary Wave.
A Prudent-Aggressive Investor would wait until the Price of the V V C rose to above its 40-day moving average and the MTI went above 1.00. This is a reliable signal which is faster than our confirmed signals. If this investor had ProTrader, they would use the classic DEW signal to go long.
Finally, a Prudent Investor would wait for a confirmed, C/Up, signal to know When To Go Long.