We are about to witness the next chapter of the stock market unfold, as I shall reveal to you today…
Now, let me make it clear. I am NOT talking about a market “crash” or a “correction”…
A correction is inevitable. It is not a matter of IF it will happen. It is a matter of WHEN. And I think we are very close.
No, I am talking about another important phase of the stock market… which may come as a surprise or shock to many.
But first, let me show you an important chart which will explain where we are in this stock market story. Back in March this year, at my online seminar Secrets to Buying Low and Selling High, I showed you this “secret” index:
I have drawn blue circles to show you when the index goes below the 25% level, and red circles when the index goes above the 80% level.
Notice that in the last 18 months, our “secret” index has generated three blue circle signals: once in November 2011, next in May/June 2012 and then in November 2012.
Now let me shows you what happened to the stock market (S&P 500) every time this index generated the “blue circle” (and “red circle”) signals. Take a look:
Whenever our index goes below 25% (blue), stocks managed to bottom at this point, and then rallied higher. So at the blue circles stocks are considered cheap and undervalued. This is a great time to buy.
On the other hand, when our index is above the 80% level (red), stocks are considered expensive. It does NOT mean sell, but it does warn you to tighten your stop and not to load up on stocks until they get cheaper.
Right now, stocks are expensive. Our index is trailing above the red 80% level. So we are going to wait patiently until we have a correction in the markets. As you can see, a sell-off will be a good thing and will allow us to buy stocks cheaper.
By the way, in case you’re thinking that this only applies to US Stocks, and not to the UK or European markets, think again. Take a look at this chart of the FTSE UK 100:
Notice that the UK markets also bottomed at the same exact moment our “secret” index generated a “buy signal” (shown in blue).
So what about the next chapter of the stock market I’ve been talking about…?
On Tuesday, the Dow Jones managed to close above the psychological 15,000 level. The FTSE UK 100 made new highs on the same day. And this is just the beginning…
The media is fast spreading the message to regular folks that stock markets are reaching new highs… and the message has had a major impact on people.
We are now about to see what Wall Street is calling “The Great Migration”.
You see, ordinary small time investors – regular people – who have been sitting on the sidelines all this time, are about to enter the stock market in droves. Why? Because these folks are getting fed up with the minuscule returns they have been getting from their bond or saving investments.
Of course, as professional investors we know that most people are entering the markets at the wrong time – i.e. they are buying “high” instead of “low”. But it doesn’t matter. These people are afraid of “missing out” on this stock market rally.
Let’s remember that irrationality and emotion is what fuels stock market bubbles.
Ultimately this “migration” of investors will make stocks go higher to unimaginable heights in the coming years. Already we know that mutual funds have seen huge influxes of money and I believe we shall see this continue.
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