USA Corporate Profits & Dow Jones ForecastBusiness Cycle InvestorDJIA QUARTERLY FORECAST - MAY 25, 2006 |
MAY 25,
2006 RECOMMENDATION: STAY
OUT
We
recommend to “Stay Out” of the Dow Jones Industrial Average Index
(DJIA) until the next quarterly update on August 30, 2006.
On March 30, 2006 we recommended to “Stay Out” when DJIA was at 11,150 level. This was a good call although we rarely get excited about one quarter’s result. April and May was extremely volatile: Dow Jones index (black line on the charts) rose to 11,642 level followed by a 3.7% fall to 11,211 today. Staying in cash during the past quarter would deliver higher return without the risk.
The First Quarter’s 2006 US Corporate Profits (blue line on the charts) announced today by the USA Government at www.bea.gov grew at slower rate than in the previous quarter - consistent with our forecast.
3 months outlook:
The latest Business Cycle Index (green line on the charts) remains below its historical average level. This means unfavorable economic environment for the continuation of the Corporate Profits growth rate and correlated with it broad USA stock market represented by DJIA index.
The “STAY OUT of the market” periods identified by our proprietary methodology have been historically characterized by higher volatility and 40% chance of a major fall in excess of -20% (refer to “maximum fall” column in “Out Period” Performance table).
The Charts above illustrate recent performance until May 25, 2006.
Next quarterly update is planned for August 30, 2006.
Sincerely
The
Business Cycle Investor
May 25, 2006
___________________________________________________________________
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.
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.
More information about the research methodology can be found at www.businesscycleinvestor.com/methodology.htm
Important Legal Statement - Please read before making a purchase
Past results are not necessarily indicative of future results. There
is risk of loss as well as the opportunity for gain when investing
in shares and managed funds. When considering alternative
investments, including hedge funds, you should consider various
risks including the fact that some products: often engage in
leveraging and other speculative investment practices that may
increase the risk of investment loss, can be illiquid, are not
required to provide periodic pricing or valuation information to
investors, may involve complex tax structures and delays in
distributing important tax information, are not subject to the same
regulatory requirements as mutual funds, often charge high fees, and
in many cases the underlying investments are not transparent and are
known only to the investment manager.
Disclaimer. This information is not to be construed as an
offer to sell or the solicitation of an offer to buy any securities.
The information has been prepared from a wide variety of sources
that publisher GB Capital Pty Ltd (“GBC”), to the best of its
knowledge and belief, considers accurate. GBC does not warrant the
accuracy of the information and forecasts contained here. Opinions
expressed in these material may change without prior notice.
Warning. No recipients should rely solely upon the general
information and/or general recommendations contained here. GBC
strongly recommends that all prospective purchasers of securities
should make their own enquiries and consider their own personal
financial situation and objectives and, in particular, seek
professional advice from a financial consultant, financial planner
or stockbroker before acting on the information contained here and
especially when using borrowed money and leveraged instruments for
investments. GBC is not a licensed advisor.
Indemnification. Recipient of this information agrees, to the
extent permitted by law, to indemnify and hold GBC, any other
affiliated companies and their respective officers, employees,
consultants, contractors and agents harmless from and against all
losses, claims, damages, liabilities, costs or expenses (including
those resulting from any threatened or pending investigation,
action, proceeding or dispute) arising out of GBC presenting its
views, or arising out of any matter referred to in this material, or
out of any failure or alleged failure by the Recipient to comply
with any requirements of law, regulation or regulatory authority,
securities exchange, any wrongful or tortuous act or omission or
breach of any duty of care by the Recipient.
Private
Client Subscribers obtain access to the forecast after 6 months delay which may result
in additional investment risk and reduced returns or loss. Financial
leverage and investing borrowed money is not recommended.
Right to Cancel Subscriptions. GBC reserves the right to
cancel all subscriptions after refunding the balance of money paid
in case the company enters an exclusive arrangement.
Independence.
Recipients and Subscribers invest directly and GBC does not receive
any commissions or fees on the investments.
Disclosure and employee trading restrictions. Employees
and/or associates of GBC typically follow the advice contained
herein. This should not be seen as a recommendation.
Copyright © 2004-2006 GB Capital Pty Ltd. No part of the
material may be reproduced, except as provided by law, without prior
written consent of GBC.
www.BusinessCycleInvestor.com