Market Indicator

By: Anthony Green

You may have a wonderful market indicator right in your own home. The magazines you have around the house can be a very good way to get information on the market, as long as you program yourself to do the opposite of what the cover implies. This may sound harsh to some of you. It is not meant to be. That is just the way it is, especially if the magazine in question is a non-financial publication. We have seen Playboy give mutual fund advice on how to pick winners. When the market is so good and so strong that a magazine like Playboy is giving investment advice, you know it is time to be careful.

This is true at market tops and market bottoms. When the market declined strongly in 1998, many people wondered if the long running bull market was over. Time featured a cover in September 1998 with the title �Is the Boom Over?,� while Newsweek�s cover during the same period was �The Crash of �99�.

This phenomenon is not exclusive to such magazines as Time and Newsweek. Business periodicals do the same thing.

Fortune showed a cover in September 1998 proclaiming �The Crash of �98:

Can the U.S. Economy Hold Up?� while Forbes asked, �Is It Armageddon?� You get the idea. Here are four different publications, two business related and two not, and all of their covers are on the market and all are wondering if the end is near. Of course it wasn�t. The market rallied strongly after that, and no doubt the editors quickly forgot these covers. What you want to keep in mind is that these covers appear more often than not once the bad news is out. If the market declines 1 percent or 2 percent from the highs, that is not a story significant enough for the cover of a magazine.

We must fall a great deal, enough to get everyone�s attention, in order to make the cover. And once it has everyone�s focus, it is often the wrong time for you, the investor, to take action, unless that action is in the opposite direction. Remember, the job of the journalist is to report on what is happening today, but as investors, we want to focus on what is going to happen in the future. As another example, on the day after the October 19th crash in 1987, the New York Times had a headline asking if 1987 equals 1929. As you already know, the answer to this question was no, and had you purchased stocks in the aftermath of that major decline in the market in 1987, you did extremely well.

You may ask if this was true for individual stocks, and for the most part, the answer was yes. In 1999, Forbes named Pfizer its stock of the year. It was down for the year. After notable declines on two separate occasions, McDonald�s was featured in a negative light on the cover of BusinessWeek magazine. If you bought the stock a couple of weeks after these magazines hit the newsstands, you did very well. This is not a foolproof method, but it can be a useful tool for you. The next time you are in the grocery line waiting to check out, you may want to take a peek at the magazine covers. You may just pay for those groceries with a trade.

Article Source: http://www.dxarticle.com

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