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The Alchemist (12/26/2007)
By Al Thomas
Listen to the market, not your broker.

During any 10-year period there will be one major break in the stock market. It may be only 20%, but many times it will run to 40% or more. During those times any investor will not want to own stock. Even the best stocks will go down.

The good stocks decline because they fall in sympathy with a lack of buying and also because good stocks are sold to meet margin calls and for other needs.

Few investors are savvy enough to know how to sell. They usually sell those issues that have a profit as they don't want to get out of shares that will show a loss yet these are the ones that should be sold first.

Of course, investors will hear the famous broker line, "The market always comes back". But when?

Almost everyone watches the Dow Jones Industrial Average, the S&P 500 and some also keep an eye on the Dow Transportation Index. These will alert the major market direction. If the investor wants to know how the U.S. economy is doing these indexes will tell. Investors must learn the language of the market.

Everyone including 99% of brokers and financial planners will say it can't be done. Why is it that there are a few who can. You can do it too.

Here is a simple method that will tell anyone the long term direction. If that investor puts his money into buying the major indexes he will over time become rich and sleep nights while it is happening provided he does not remain invested while the market is going down. With very little work the investor can go to the Internet, seek out a graphics chart of the DJIA and on the monitor plot a 200-day Simple Moving Average, SMA. On www.bigcharts.com it is free.

As long as the DMA (Directional Moving Average) line (that's the 200-day line) is moving up he can remain invested. When the line turns down it is time to sell and put money into a U.S.Treasury Bill money market account. That is especially Important in today's interest bearing accounts. Do not look for the highest interest paying account.

The market has spoken. It is not a foreign language. Any investor can see it and then comes the hard part. Investors must pick up the phone and say to his broker, "Sell". That is a four letter word brokers hate to hear unless the investor is planning to buy something else. Don't.

Currently the DMA is still rising so it is safe to stay invested in index funds. Watch that 200 line every week. When it turns decisively down the investor will want to safely be in cash.

Listen to no one. Do not try to outguess the market. Let the market itself tell you when to sell.

Al Thomas' best selling book, "If It Doesn't Go Up, Don't Buy It!"

has helped thousands of people make money and keep their profits with his simple 2-step method. Read the first chapter and receive his market letter at www.mutualfundmagic.com to discover why he's the man that Wall Street does not want you to know.

Copyright 2007 All rights reserved.

 

 

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