MARCH 30, 2005 RECOMMENDATION:
SELL
We recommend to move out of the broad USA
market following a clear SELL signal from our Business Cycle Index.
The Business
Cycle Index has dropped below average ending number 14th “IN the market” period
with 1.1% period gain at 3.2% annual profit rate— one of the shortest and
weakest “IN” period on record. The chart illustrates recent performance.
Our
November 30, 2004 Recommendation correctly anticipated this short-lived
and weakest Period. It also correctly predicted a clear turn around in Corporate
Profits from previously falling trend.
USA Corporate
Profits announced on March 30, 2005 by the USA Government at www.bea.gov are up
13.5% from previously falling trend, rising from $1118.0bn in 3rd Quarter 2004
to $1268.8bn in 4th Quarter 2004.
The USA Stock
Market rise has been subdued by historically high oil prices exceeding US$55 per
barrel.
Looking
ahead, we expect a gradually deteriorating environment for USA Corporate Profits
and hence for the USA Stock Market. This does not necessarily mean an immediate
market fall. It might even grow for some time as it did during the past “OUT of
the market” periods.
However, in
our view, Corporate Profits growth should begin to weaken or move sideways and
later fall if unfavorable conditions persist. The USA Stock Market should follow
the lead from Corporate Profits trends given the Market’s strong 93% historical
correlation.
Sincerely
The
Business Cycle Investor Research
March 30, 2005
_______________________________________________________________________________
How to use the buy & sell signals?
Investment Banks, Institutional
Investors and Hedge Funds use the advice
for
proprietary trading, global
asset allocation
and leveraged strategies decision support.
Individual Investors invest
directly on
the quarterly buy and sell
signals in the USA market DJIA or S&P500 index Exchange
Traded Funds (ETF)
or in an equivalent liquid USA market
index mutual fund.
The ETF funds trade on
the stock market just like normal stocks. One transaction in ETFs
provide investors with diversified blue chip portfolio and solid
dividends. Transaction and management costs are minimal.
Stock market follows aggregate Corporate Profits
The proprietary Business Cycle Index is an effective leading indicator of
corporate profitability for the whole USA economy. The aggregate US Corporate Profits are
calculated quarterly by the USA Government and published at
www.bea.gov where
subscribers may independently verify the forecast.
Corporate Profits have historically shown a high 93%
correlation with moves in the major diversified USA stock market indexes: Dow
Jones Industrial Average (DJIA) and S&P 500. Hence, the Business Cycle Index can be
used as a leading indicator of the broad USA stock market.
The Corporate Profits for the whole US economy don't always move in the same
direction or by the same magnitude as the profits reported by
individual companies or even the DJIA or S&P 500.
Validated Methodology
The
proprietary methodology was validated over more than
fifty years of historical data. The Business Cycle Index, first developed and published in
2004, proved to be a consistently accurate indicator of economic conditions
that led to turning points in the Corporate Profits and the broad stock
market indexes.
More information about the research methodology can be found at
www.businesscycleinvestor.com/methodology.htm
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