Approaching ‘Lift-Off Point’ in the Market

The culmination of the last 9 months is almost here. In only 24 hours not only will you learn how you can USE the ‘fusion method’ investing strategy to much better time your stock investments…you will find three cheap companies currently bucking the broader market’s downwards trend.

Fundamentally, all three are appealing. But, importantly, the market is telling you they have turned a corner. They’re moving up. In other words, they’ve hit ‘lift-off point’. You’ll see what I mean the next day.

For now, here’s the final hit of my Facebook video chats with Kris Sayce. Today we talk about gold and maybe it’s a good time to buy. You can check it here.

Ahhh, gold. Why hath thou forsaken me?

I’ve been a long-term bull upon gold. I still am. But I’ve been terribly incorrect. The market’s verdict is, after all, final.

Who would’ve thought though? I mean, cast the mind back to 2012. The ECB has just said it would do whatever it takes to rescue the system. The Bank of Japan had just promised to go ‘Weimar’ on everybody. And the Fed was producing $85 billion per month in quantitative reducing.

Why wouldn’t you want to own precious metal? While I didn’t buy the argument that these actions would create high inflation or hyperinflation, I did think it would cause enough concerns for capital to seek the safety of gold.

What’s that thing they say about views? Something about everyone getting one…

Well, my opinion on precious metal was wrong. Horribly wrong. Yet I couldn’t see it at the time. My judgement was too clouded by my lengthy held biases about what gold ‘should’ do.

Like I said, I’m still bullish on gold. Just I’m cautious for the short term. I’m waiting for the market to warm back to the story prior to getting too enthusiastic.

If you had used the time to hear the market out…to listen to what it was trying to tell you back in 2012 as well as 2013, it would’ve already been a different story.

By the way, I’m telling you this because it’s something that you can learn to do too. That is, curb your excitement. Listen in to what the market says. Let me show you what I mean…

The graph below shows the US dollar gold price. After peaking in 2011, gold went into a remedial period, with support at the US$1,550 level.

Source: StockCharts

Then, on the back of all the central bank activity I pointed out above, gold broke greater and went back into an uptrend. (Note the short term shifting average, the blue line, crossing above the long term moving typical, the red line.)

But it was a confusing and fake move. The gold price quickly turned back down. The moving averages crossed again a few months later, in early 2013. This was a warning sign for anybody willing to listen.

The market had been telling you something wasn’t right. Despite all the bullish basic principles in the world, gold couldn’t create a new high. In fact, it was going back into a downtrend.

The rest is history. Except for parts of 2014, precious metal has been in a well defined downtrend ever since. While I think the long term fundamentals for gold remain outstanding, the market says I’m incorrect.

And I’m not about to argue. I will happily wait for the trend to show around before I start getting too excited about gold once again.

As I’ve pointed out before although, gold in Aussie dollars is a different story. It really bottomed back in 2013. But with the current big pullback in US dollar gold, even Aussie buck gold isn’t looking just like it did a month or so ago.

Despite the recent bounce, you’re ready to be cautious.

Among other things, it was this experience with the gold market that made me reassess and tweak my investment philosophy. As I’ve mentioned this week, I came up with the ‘fusion method’ to identify stocks that are both fundamentally sound AND are in established or emerging uptrends.

The beauty of this methodology is that you can use it in a fluff OR bear market. Because of the weakness the Aussie marketplace has experienced lately, this flexibility comes in handy.

For example, I have analysed the top 50 stocks on the ASX over the past few months in my subscribers. An increasing number of them are in downward trends. That’s telling you to stay away.

Even the stronger shares are under selling pressure. Yesterday, Telstra announced a decent result, but the market reacted negatively anyway. Telstra’s still in an uptrend, incidentally, but it’s not looking as strong as it was.

If this market does morph into a unpleasant bear, you’ll save yourself a lot of cash and angst by staying away from companies whose share costs are in a downtrend. It doesn’t matter if they’re essentially sound or good value. The actual downtrend warns that a change in investors’ emotional state is brewing. Just like it did with precious metal.

This reminds me of something I read in the classic book, The Money Game. So I went and caught it out to look up the passing I had in mind. The following is an estimate from a ‘Mister Johnson’, a revered you’ll need Wall Street in the 1960s.

‘You can have no preconceived suggestions. There are fundamentals in the marketplace, however the unexplored area is the psychological area. All the charts and breadth indicators and technical palaver are the statistician’s attempts to describer an emotional state.’

That’s what the fusion method attempts to do…it fuses the fundamentals using the charts. The charting evaluation is an attempt to describe the actual market’s ’emotional state’.

So if you’re willing to ‘have absolutely no preconceived ideas‘ there’s a whole new trading world that awaits a person. Given that many are now questioning the longevity of this bull market and are nervous about a new bear unfolding, it’s time you considered looking at things differently. The next day I’ll show you how. Keep an eye out on your inbox around 2pm.

Regards,

Greg