Stocks Are Done For The Year
by Dr. Steve Sjuggerud
December 01, 2006
I told you to “BUY!” with all I could in July.
We nailed it...
But, today, I want to tell you, the rally that started in July is now over.
In the July 27th issue of DailyWealth, I wrote: “I think we’ll see a rally in EVERYTHING. Starting now... Throw a dart at the stock list, and chances are you’ll make money on the stock it lands on.”
It doesn’t get more bullish than that.
Two weeks before that issue, at the very bottom of the market, I recommended that my True Wealth newsletter subscribers buy stocks aggressively. We chose a play that returns twice whatever small-cap stocks return. We are now out of that position, with an extraordinary profit in just over four month’s time.
Why are we getting out now? Because the reasons we entered the trade in the first place no longer exist. We made the right contrarian move. We bought because nobody else would...
Back in July, we said:
“For the first time this year, starting right now, we’re buying stocks. Like I said at the beginning, it seems impossible to contemplate a rally now... and it seems counterintuitive to buy right now. But history shows us that buying when nobody else is willing to is the right thing to do… and nobody is wiling to buy stocks right now.”
Now we’re reaching the exact opposite extreme... “the crowd” thinks the big money is in the stock market, not the real-estate market. We’re seeing people leave jobs in real estate to go and peddle stocks. The switchover is taking place now.
Investor sentiment has shifted from being incredibly bearish to fairly bullish, so the reason we entered the trade is no longer valid. Jason Goepfert maintains more data on investor sentiment than anyone I know...
Right now, 15 of his sentiment indicators are at bearish extremes – while ZERO indicators are at bullish extremes.
Sentiment is never a perfect timing signal. It’s more of a gauge of where we are. We can’t know if the peak for the year has just passed, or if it’s still a few days in front of us. All we know is that the “free money” in this trade is behind us.
It’s time to move along. If you’ve followed our advice, you should be pocketing some large profits on what we thought could be – and what turned out to be – a very smart speculation.
Take your profits now...
Good investing,
Steve
Editor's note: Steve Sjuggerud is a regular contributor to DailyWealth, a free investment newsletter focused on the world's best contrarian opportunities. We write with a simple belief in mind: You don't have to take big risks to make big money with your investments.
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