Tuesday, June 06, 2006


One of the investment news letters to which I subscribe, The Sentiment Trader, keys off of SMART MONEY VERSUS DUMB MONEY. This ratio has just swung dramatically. Smart money has climbed to a 67% confidence rating while the Dumb money confidence has fallen to a 46% level. Today's market action was enough to scare the pants off the weak players. This means "very bad news" is likely to be revealed soon and the stock market will take off like a rocket on the way to the moon.

Yes, it sounds crazy but it is the way markets work. Within 4 years of the attack on Pearl Harbor, stocks were up 220%, the market climbed 45% in the six months after Roosevelt died, the market ran up for two years after Kennedy was shot, the Dow was at 800 when Three Mile Island leaked radiation, in the two and a half years after July 1950 when the Korean War started and when I was born the market returned 45%. The market anticipates major events by trading down. Then when the "bad news" is out, the market soars. You may say, how could the market have anticipated Kennedy's death. You would be missing the point. The fact is that Kennedy was shot and the market was closed the following Monday to prepare for the onslaught of selling. The market gaped to the upside and never looked back. This market it primed and ready to go. The catalyst could be good or bad news or none at all. Whenever the market moves, you will want to already own stocks!