RECOMMENDATION: We recommend you review your planned withdrawals from your portfolio for the next 18 months and invest this amount in short term bond funds and other stable investments – and, not invest any of this in the stock market or stock market mutual funds.
REASON: We are receiving signals on the stock market pointing in two different directions. The details follow:
- The fundamental analysis signal for the economy, which I report weekly to you as the “Heat Map” continues to be strong. The trend for the 3 pillars comprising the Heat Map is improving. Thus, the fundamental analysis would say BUY. Note: fundamental analysis attempts to be impartial as to investor emotions and behavioral attitudes toward the markets for intermediate and long term time periods.
- The technical analysis signal for the market has weakened materially and indicates SELL. Technicians seek to identify momentum, price patterns, reversals, channels, lines of support, resistance and other market trends based upon charts or computer based computations. Note: technical analysis is typically short-term and used by many day traders to take advantage of investor emotional reactions and behavioral attitudes.
We continue to believe it is exceptionally difficult to time the market for quick developing corrections. For most investors, the best course of action is “stay the course”, but keep out of the stock market the money you intend to withdraw (i.e., to use)during the next 18 months.