Retirement Investment Facts

By: Stock Barometer | Sun, Jan 31, 2010
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1/31/2010 10:37:44 AM

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Bi-Weekly Stock Barometer No. 191

Where are you among these groups?

Welcome to the biweekly stock barometer. This article comes out every 2 weeks and gives our big picture view of the market. If you're interested in following our signals and learning more about our system, then I invite you to click here and subscribe to the daily service - since the market can turn on a dime and so too can our interpretation as the market gives its daily clues to the future. Also sign up for our free weekly newsletter, where we provide Alerts from our various traders.

We also offer a daily blog and you can follow our blog posts on on Twitter and on Facebook. We also offer a free weekly indicator chart if you visit our home page and scroll to the bottom. This chart will be updated each week, so be sure to check back frequently for updates. www.stockbarometer.com - don't forget to scroll to the bottom.

Here are some facts from a 2008 study from the Vanguard Center for Retirement Research assessment of their retirement accounts. Where do you fit in these numbers?

Account Balances declined on average 14-16%. 1/3rd saw no change, or a slight increase. And 1/5th saw declines of 30%.

Obviously the more aggressive you are the more you are exposed to market declines. This is all about your ability to tolerate risk and your time frame not to retirement, but to when you have to access the funds in your 401k plan. For example, if you have other funds earmarked towards retirement that you will access first, then even though you may retire in 10 years, you may not need those funds for 15 years and you should invest accordingly.

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Equity Allocations were at 61% at the end of 2008, down from 73% in 2007. 4-points of this change was from investors shifting their allocations away from stocks. The remainder was from the decline in equity prices.

Equity allocation becomes more and more important as you invest. Early in your investment process, a 10,000 account will grow more from deposits than it will from allocation. For example, if you invest 5k into a 10k account, that's 50% growth. The allocation may only account for 8% growth in the same account. However, as that account grows, there's a point where allocation becomes more responsible for growth than contributions. It's at this point, you really need to focus on your allocation.

On average, people contribute 7% to their retirement plans - down from 7.3% in 2007.

I'm a HUGE proponent of maxing out your plan, if you can. Most people contribute 6% to get the company match - which at a minimum is a good start. Some think they can't afford to contribute more, but when they get a raise, they could be adding to that contribution. Even if you raise it by half your raise every year, in 5 years you'll be close to the max without much impact to your family budget.

Vanguard reports that there was mostly NO trading activity in 2008. Then they go on to say that 16% traded and 2% of them abandoned equities and the other 14% engaged in a variety of other portfolio changes.

Mutual funds do not want you trading in your accounts. It is simply not good for their bottom lines as it results in more costs to manage their portfolios. They want you to sit tight, ride the ups and downs, and not take control of your investments. So they will down play trading as much as possible.

However, making one or two changes to your portfolio over the course of the year can result in significant differences in what you end up at retirement because that 1 or 2 percent that you can impact gets compounded for every year you work until you retire or access your funds. That's where market timing comes in.

Of the people who leave their retirement plans, 69% roll them over to an IRA. The remaining 31% take the cash.

It's tempting to take the cash and if you have to, you have to. But in doing so, you create a taxable event so if you don't need the money, roll it over. That's the best plan. Retirement is expensive - and you want to position yourself to enjoy your retirement and not have to work too late in your life. I know it's hard to think that far out.

12% took loans in 2008 against their retirement plans in 2008. 2% took hardship withdrawals.

The issue with loans is if you lose your job, they become immediately due. So be careful here. Loans also impact the growth of your retirement assets. So with time being an important component of growth, this will cost you time and eventually money.

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Message From The Markets

Market action is ruled by sentiment and by monitoring market internals and studying sentiment you can reasonably predict future market movements. The basis of the Stock Barometer system is overlaying extremes in sentiment with sound technical analysis to predict the likelihood of future price movement. Each indicator and chart measures the hope, fear and greed of investors and traders from different angles. Follow along with my charts and over time, you'll also learn to understand how to read the markets, which is essential prior to setting up each and every trade.

STOCK BAROMETER CHART

The Stock Barometer is my proprietary market timing system. The direction, slope and level of the Stock Barometer determine our outlook. For example, if the barometer line is moving down, we are in Sell Mode. A Buy or Sell Signal is triggered when the indicator clearly changes direction. Trend and support can override the barometer signals.

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The CBOE put/call ratio is comprised of two sets of data; equity options and index options. The index component contains items that are used as a hedge, thereby distorting the correlation and interpretation of the indicator. We use the equity put/call ratio. This is one of the most accurate read of investor's fear and complacency and thus an accurate contrarian view of the market.

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TRIN/ARMS CHART

The arms index or also referred to the Trading Index or TRIN for short, is a measure of the ratio of up stocks and down stocks divided by the ratio of up volume and down volume. Our Spread Chart converts the arms index data into momentum Buy and Sell Signals.

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TICK CHART

The tick index is represents the sum of all stocks ticking higher minus all stocks ticking lower (a stock is said to be trading on an up tick when it trades at a higher price than the last sale). It's utilized as a day trading tool as it gives you an up to the second read of the intensity of buying and selling.

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BREADTH (ADVANCE - DECLINE) CHART

Each day several thousand stocks either advance, decline or remain unchanged. The number of advances and declines normally ranges from +2500 to -2500. A high number of advancing stocks normally marks a top just as a high number of declining stocks normally marks a bottom. Monitoring the 5 and 13-day moving averages of this allows us to better predict future prices.

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VXO CHART

The VIX is a measure of volatility on options pricing. We use the old VIX, which is now called the VXO. The higher the volatility, the more likely the market is close to a bottom, as traders are willing to pay more premium for puts, which act as Insurance on their long positions.

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Potential Cycle Reversal Dates

2010 Potential Reversal Dates: 1/19, 1/28, 3/2, 3/23. We publish dates up to 2 months in advance.

We've been looking for a move lower into the end of January and then a rally into March 2nd. I think we're there. Depending on this 'rally' we may get very bearish in March. SO stay tuned.

My timing work is based on numerous cycles and has resulted in the above potential reversal dates. They're predictive and have nothing to do with the barometer cycle times. Due to their accuracy in the past, I post the dates here.

2009 Published Reversal Dates: 1/20, 2/11, 3/7, 3/15, 4/8, 4/16, 4/27, 5/7, 6/8, 7/2, 7/17, 9/14, 10/10, 10/24, 11/12, 11/30, 12/9, 12/21, 12/29. 2008 Potential Reversal Dates: 12/31, 1/11, 2/1, 2/13, 3/6, 4/5, 4/22, 5/23, 6/6, 6/27, 7/13, 9/2, 10/3, 10/22, 11/10, 12/11. 2007 Potential Reversal Dates: 1/10, 1/14, 1/27, 1/31, 2/3, 2/17, 3/10, 3/24, 4/21, 5/6, 6/15, 8/29, 10/19, 11/29, 12/13, 12/23, 12/31, 1/11/08. 2006 potential reversal dates: 1/16, 1/30, 2/25, 3/19, 4/8, 5/8, 5/19, 6/6(20), 7/24, 8/20, 8/29, 9/15, 10/11, 11/28. 2005 Potential reversal dates: 12/27, 1/25, 2/16, 3/4, 3/14, 3/29, 4/5, 4/19, 5/2, 6/3, 6/10, 7/13, 7/28, 8/12, 8/30-31, 9/22, 10/4, 11/15, 11/20, 12/16.

Stock Barometer Buy And Sell Signals

QQQQ or SPY Chart: A chart is provided in every bi-weekly report and shows the barometer Buy and Sell Signals (which are provided in my morning updates) as well as showing the next highlighted 'reversal' window. The numbers adjacent to the buy and sell signals are the number of days between signal (cycle time).

Here are 2009's buy and sell signals for the Stock Barometer.

11/25/08

Buy

1/30/09

Sell

2/6/09

Buy

3/2/09

Sell

3/10/09

Buy

5/7/09

Sell

6/2/09

close

6/25/09

Buy

7/9/09

Sell

7/13/09

Buy

7/30/09

Sell

8/23/09

Buy

9/1/09

Sell

9/7/09

Buy

9/24/09

Sell

10/6/09

Buy

10/27/09

Sell

11/5/09

Buy

12/21/09

Sell

12/31/09

Year end

Money Management & Stops

To trade this system, there are a few things you need to know and address to control your risk:

Accordingly;

Use the following spread/momentum indicators to assist in your trading of the QQQQ, GLD, USD, USO and TLT. They are tuned to deliver signals in line with the Stock Barometer and we use them only in determining our overall outlook for the market and for pinpointing market reversals. The level, direction, and position to the zero line are keys in these indicators. For example, direction determines mode and a buy signal 'above zero' is more bullish than a buy signal 'below zero'.

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Summary & Outlook

We remain in Sell Mode, looking for the markets to move lower into the end of the month. We are there now and should see a strong rally into March. But we need a reversal first.

This Friday was the Wolf Moon and it was the largest we'll see for some time. Beautiful site. But there are also those that believe lunar events can have some impact on our financial markets. Without saying whether I agree or not (because it's a more complicated topic than you might think) I will say that it is an interesting coincidence.

Point is? There are certain points in the year where it is better to be making investment decisions - and we're at one of them. Whether it's an adjustment in your portfolios from bonds to stocks or a position in gold, bonds or the dollar, now is a good time to consider making change.

Welcome to the biweekly stock barometer. This article comes out every 2 weeks and gives our big picture view of the market. If you're interested in following our signals and learning more about our system, then I invite you to click here and subscribe to the daily service - since the market can turn on a dime and so too can our interpretation as the market gives its daily clues to the future. Also sign up for our free weekly newsletter, where we provide Alerts from our various traders.

We also offer a daily blog and you can follow our blog posts on on Twitter and on Facebook. We also offer a free weekly indicator chart if you visit our home page and scroll to the bottom. This chart will be updated each week, so be sure to check back frequently for updates. www.stockbarometer.com - don't forget to scroll to the bottom.

As always, if you have any questions or comments, feel free to email me here at jay@stockbarometer.com.

Regards,

 


 

Stock Barometer

Author: Stock Barometer

www.stockbarometer.com

Stock Barometer is completely independent. We have never and will not ever accept compensation from any company whose stock we recommend.

Our goal is to make you money. We offer you the tools and information to do so and leave it to you, the individual investor, to apply them in the best way possible.

Important Disclosure: Futures, Options, Mutual Fund, ETF and Equity trading have large potential rewards, but also large potential risk. You must be aware of the risks and be willing to accept them in order to invest in these markets. Don't trade with money you can't afford to lose. This is neither a solicitation nor an offer to buy/sell Futures, Options, Mutual Funds or Equities. No representation is being made that any account will or is likely to achieve profits or losses similar to those discussed on this Web site. The past performance of any trading system or methodology is not necessarily indicative of future results.

Performance results are hypothetical. Hypothetical or simulated performance results have certain inherent limitations. Unlike an actual performance record, simulated results do not represent actual trading. Also, since the trades have not actually been executed, the results may have under- or over-compensated for the impact, if any, of certain market factors, such as a lack of liquidity. Simulated trading programs in general are also subject to the fact that they are designed with the benefit of hindsight. No representation is being made that any account will or is likely to achieve profits or losses similar to those shown.

Investment Research Group and all individuals affiliated with Investment Research Group assume no responsibilities for your trading and investment results.

Investment Research Group (IRG), as a publisher of a financial newsletter of general and regular circulation, cannot tender individual investment advice. Only a registered broker or investment adviser may advise you individually on the suitability and performance of your portfolio or specific investments.

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