When to Sell Is the Market Cheap? How You Know…

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One hundred and sixteen stocks hit new highs yesterday…

The Dow was up and the Nasdaq was down. Gold traded at $1667.80 per ounce. You could have bought silver for $31.05. And it would have cost you $93.97 for 42 gallons of light, sweet crude.

In Japan, the Nikkei was at 10, 801 and is looking almost bullish.

The Malaysia MSCI index is hitting all-time highs.

The Mexican ETF (NYSE: EWW) just broke out and is off to the races. I’ve said it before and I’ll say it again: Put some money in Mexico.

Second Breakfast

I had brunch with my parents this weekend. My father is of the age where he has to start drawing down his 401(k).

In case you don’t know, at age 70 ½ you are required to start taking withdrawals — or face stiff penalties. This is so the IRS can get its cut. This is true of most retirement accounts (IRAs, 403b, 457b), with the exception of a Roth IRA, as you paid your taxes on that when you earned it.

Anyway, Dad has to pull 5% out of his IRA this year. He wanted to know when he should do this.

Knowing I get questions like this from time to time, I pulled out my travel-sized crystal ball and looked deep into its murky essence…

“Look at the S&P,” it whispered.

The S&P 500 is a stock market index based on the common stock prices of the 500 top publicly-traded American companies as determined by Standard & Poor.

It is the best representation of what American companies are doing now and what they did in the past (the Dow Jones Industrial Average is too small, and its constant rejiggering makes it suspect for use as an historical data set; the NASDAQ 100 is tech heavy).

Below is the chart of the S&P 500 Index going back to 1993.

Each candlestick represents a quarter (that’s three months for those of you in the cheap seats). Candlesticks are those red and white things: white means the quarter ended up, red down.

The thin vertical lines show intra-period trade, and the candlestick body shows the open and close:
sp jan 14 When to Sell Is the Market Cheap? How You Know...

I find this chart absolutely amazing…

Look at that bear market from 2007 to 2009: The index went down for a full year and a half — six straight quarters.

And in 1995, the market more than tripled over five years.

Right now the S&P 500 is almost back to its all-time highs. It is at a five-year high after rising 13% last year and another 3.2% this January. Its all-time high was 1,565.15 on October 9, 2007. We are 63 points away from that record, or 6.3%.

It has a good shot to get there this quarter.

Measuring Value

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