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Opening Statement from the November 2014 Intelligent Investor (Part 3)

First published on November 5, 2014 for subscribers to the Intelligent Investor

In the Opening Statement section (Part 3) of the October 2014 Intelligent Investor we characterized the behavior of the US stock market by predicting the appearance of trading micro cycles that would trend down over time.

In the September 2014 Market Forecasting section we advised that only active or aggressive investors look for an entry if our sell off target in the Dow of 16,600-16,400 materialized because we felt there was a good chance of these bearish micro cycles materializing as a result of increasing volatility. We did not discuss these details at the time because it was speculative, and we wanted to focus on the bottom line analysis.

Needless to say, less active investors who might have opted to enter a position at our selloff target might have gotten stuck in the market at lower levels if they had not sold after what we felt would be some quick rallies. This accounts for the reason why in the September issue we recommended that only active or aggressive investors look to enter a position if the market sold off to our 16,600/16,400 target.

You will recall we mentioned even in the September 2014 Market Forecast that Dow 16,000/15,800 was possible, but during that forecast we were leaning more towards the 16,600-16,400 range as a bottom. This turned out to be absolutely correct.

A few days after Part 3 of the October 2014 Intelligent Investor was published, we released our October 2014 Market Forecasting presentation (Part 2). In this video presentation, we placed a higher chance of the Dow selling off to the 16,000/15,800 level.

In contrast to the September forecast, in October we recommended even less active or conservative investors enter new positions in the market around these levels, but only after signs of bottoming were apparent. This is precisely how things materialized as shown in the charts below. Our analysis and guidance was similar for the S&P 500 and Nasdaq.

Thus, all investors should have been able to capture large profits from this recent market forecast and guidance. For some, this two-month period of related forecasts is likely to have provided very substantial investment returns.

Moving forward