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The Mother of All Indicators

By Jeff Clark
Tuesday, October 17, 2006

For my entire investing career, I’ve had sole access to a nearly infallible market-timing indicator.
 
You won’t read about it in any Wall Street research report, and you can’t even buy access to it...
 
Buy and sell signals from this indicator typically occur once every year or so, and they often occur at major turning points for the stock market.
 
For example...
  • In July 1987, this indicator flashed a “sell” signal. The stock market crashed three months later.
  • The indicator generated a “buy” signal in December 1987, and the stock market ran higher for six straight years.
  • Another “sell” signal occurred February 2, 1994. Two months later, the Dow Industrial Average was 10% lower.
A recent signal occurred back in March of this year. In fact, I told a crowd at the Investment U Symposium in Delray Beach that this proprietary indicator was screaming, “SELL.”
 
It didn’t take long after that sell signal for the market to enter a correction phase.
 
The indicator then flashed a “BUY” signal in August. And you know what stocks have done since then.
 
What is this amazing crystal ball, you ask? Why... It’s my dear mother. Let me explain...
Investors Intelligence publishes a survey of investment newsletter writers. The American Association of Individual Investors surveys the sentiment of the average public investor. Barron’s, The Wall Street Journal, and many other financial publications offer their own versions of investor sentiment surveys.
 
But none of them are anywhere near as accurate as my mother. Accurate, that is, in a contrary sort of way.
 
Sentiment surveys are best used as contrary indicators. In other words, if the majority of survey respondents are bullish, then that’s bearish. If the majority of respondents are bearish, that typically bodes well for the immediate future of the markets.
 
So when Mom is interested in buying stocks, like she was back in March, it’s best to be cautious. And when Mom is worried that the market is going to crash, like she was in August, then you can bet on a rally.
 
So today, with headlines of new highs in the Dow Industrial Average plastered across the Internet, television, and the newspapers, wouldn’t you like to know what Mom thinks?
 
Me too.
 
I’m visiting the folks this weekend, and I’ll let you know how it goes.
 
Best regards and good trading,
 
Jeff Clark




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Market Notes
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Volatility Index (VIX) scraping yearly lows around 11.
 
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Earnings today: Intel, Johnson & Johnson, and Office Depot
Market Watch
Symbol Price
Change
52-Wk
S&P 500 1221.53 +1.3% +10.1%
Oil 38.31 +1.4% -0.6%
Gold 138.07 +2.1% +16.3%
Silver 28.60 +2.4% +53.6%
US-Dollar 80.67 -0.8% +8.1%
Euro 1.32 +0.6% -12.1%
Volatility 18.01 -7.1% -19.8%
Gold Stocks 581.56 +3.0% +17.0%
10-Year Yield 3.02 +0.7% -10.7%

World ETFs
Symbol Price
Change
52-Wk
USA 122.89 +0.3% +11.3%
Canada 30.50 +0.2% +16.2%
Russia 21.94 +1.4% +18.1%
India 37.85 +0.3% +22.3%
Israel 16.69 +1.3% +10.8%
Japan 10.64 +0.6% +6.5%
Singapore 13.73 -1.1% +18.8%
Taiwan 14.78 +0.4% +19.2%
S. Korea 57.31 +1.3% +23.4%
S. Africa 71.87 +1.4% +28.2%
China 44.42 -1.4% -0.6%
Lat.America 53.17 +0.7% +8.4%

Sector ETFs
Symbol Price
Change
52-Wk
Oil Service 137.59 +1.0% +18.9%
Big Pharma 64.14 +0.0% -3.2%
Internet 72.07 -0.1% +23.4%
Semis 16.22 +1.2% +29.4%
Utilities 31.28 +0.2% +1.5%
Defense 18.52 +0.1% +10.6%
Nanotech 10.03 +0.4% +1.6%
Alt. Energy 10.08 +1.3% -3.3%
Water 18.49 +1.0% +14.5%
Insurance 16.14 +0.4% +21.1%
Biotech 20.54 -0.2% +28.1%
Retail 19.70 +0.3% +30.2%
Software 24.79 +0.8% +25.9%
Big Tech 53.87 +0.3% +22.7%
Construction 13.10 +0.9% +15.7%
Media 13.64 +0.5% +26.0%
Consumer Svcs 67.39 +0.2% +24.5%
Financials 55.04 +0.3% +7.4%
Health Care 64.30 +0.1% +2.0%
Industrials 63.54 +0.5% +21.0%
Basic Mat 74.35 +1.1% +25.3%
Real Estate 55.32 +0.1% +25.0%
Transportation 91.77 +0.7% +26.9%
Telecom 22.59 +0.5% +17.8%