For several months I have been saying that the 2009 Stock Market is acting like a Mirror Image of the 2003 Market. It’s very interesting that investors and “market experts” are saying and doing the same things they did in 2003. In hindsight we can see that the March lows in both those years created “Buying Opportunities Of A Lifetime”. The problem is that when the markets get cheap, it is after major declines and the average investor is too frightened to get in.
From 2000 to 2003 the stock market went into a crash because of the “Tech Bubble”. Investors lost tons of money and when the market started up in March 2003, they were frightened and many did not get back in the market. Also, they had to listen to the “experts” who told them that the market was going to go back and penetrate the November 2002 lows, there was going to be another leg down, we were going into a Depression, and the sky was going to fall. That was enough to keep the frightened average investor out of the market.
Then the unbelievable occurred. The market started up in March 2003 and continued up for an entire year, with only one two week pullback in early August 2003. My RIX Index issued a Buy Signal to my subscribers in on 3-23-03 and it kept us in the market until 3-22-04 except for two weeks from 8-4-03 to 8-19-03.
But what were the “experts” saying during that year? First they said “Sell in May and go away”. Investors who acted on that advice missed what was about to happen. The market kept going up until there was a minor correction from 8-3-03 to 8-19-03 and the RIX gave us a Buy Signal on
8-18-03 so we got back in. We didn’t know it at the time, but that was the only opportunity to buy into the market, for those who missed the 3-23-03 Buy Signal. A month goes by and the “experts” tell us that September and October are historically the two worst months for the market. But the market went through those months like they weren’t there. Investors who listened to that advice and got out again found themselves on the wrong side of the up move. When we got to October the “experts” started to tell us that the market was overbought. What do you think investors do when they are told that the market is overbought? Right, they sell. For the rest of the time from October to March 2004 we kept hearing that the market was “way overbought”. But the market didn’t listen and it kept going up and we finally got a NYSE RIX Sell Signal on 3-22-04. People who listened to the RIX and ignored the “experts” made a lot of money that year.
So why do I say that 2009 is a “Mirror Image of 2003″? Think about it. The 2009 market bottomed out on 3-9-09. The NYSE RIX issued a Buy Signal on 3-17-09. What were the “experts” saying then. The “experts” who told us that the market was going to go back and penetrate the previous lows, there was going to be another leg down, we were going into a Depression, and the sky was going to fall. They said this was only a “Bear Market Rally”. That was enough to keep the frightened average investor out of the market. Again we were told to “Sell In May And Go Away”. But the market kept going up. Investors who missed the up move got their only chance between mid-June and Mid-July 2009. There was a minor pullback and the NYSE RIX took us out on 6-22-09 and put us back in on 7-15-09. We got a one week whipsaw Buy on 7-1-09 and Sell on 7-7-09 which didn’t amount to anything. But we are still on that 7-15-09 Buy Signal and we have seen a significant up move since then. I am again hearing about how bad the months of September and October are for the market, but it is 9-18-09 and the market continues to be in a strong up move. Yes, I am starting to hear people saying that this market is overbought. But what do they know? Will the “Mirror Image” continue? I don’t know, but I think you will have to agree that this market has been amazing and it has fooled a lot of people who stayed on the sidelines and many more who got into the market and sold out too soon.
Take some time and take a look at a chart of the S&P 550 ($spx) or the Dow ($indu) for the period from March 2003 to the present. I think you will see that there have been two “Buying Opportunities of a Lifetime” in March 2003 and March 2009. I think charts tell us all we need to know about an Index or a stock. Fundamental analysis is a lagging indicator, but might be helpful to identify stocks that you want to see on a chart. Charts do not tell us what emotions or thoughts contribute to the movement of stocks or indexes, but those emotions and thoughts are definitely reflected in the chart.
I have written 3 articles in the last few weeks. All have been included in my Newsletters. The first was entitled, “The Market Is What It Is” and focused on the fact that the market does what it wants to do and can’t be predicted. I wrote the second article last week that focused on the emotions and fears of the average investor. I didn’t give it a title, so I will now, “Most Investors Buy High and Sell Low”. And of course, today’s article is, “The 2009 Market is a Mirror Image of the 2003 Market”
I am going to see if these articles can be included on my Web Page and my Money Show Web Page. I will also submit them for publication on one or more of the sites that I write for. Hope these articles have given you some food for thought. But, as always, if you stick with the RIX Signals you will know when the trend of the market changes direction, and you won’t have to listen to the “experts” who try to fill your mind with junk., You know, like the kid in the commercial who when given a cardboard truck says, “This is a piece of junk. I want the red truck”.