In my previous message, I talked about how we moved to defense
twice in 2004, but it seemed the market didn’t go down either time.
If the markets weren’t going down, why get defensive?
It’s an example of where the “generals” stay to fight, but the
“soldiers” were leaving the battlefield.
Sometimes, when the market is on defense, the major indexes, like
the Dow Jones and the S&P 500 remain flat. But you still lose
money in individual stocks.
It’s important to remember that the Dow Jones is a basket of just
30 stocks — 30 stocks that we may not own.
And the S&P 500 index is a “cap-weighted index.” The largest
names — the top 25 names in the S&P 500 — control approximately
36% of the weight in the index.
Meaning the remaining 475 stocks in the S&P 500 — combined —
represent 64% of the index. If the big names at the top of the
list are flat, it looks like the market is going nowhere.
But YOU might be feeling like you’re the only guy or gal in the
world losing money.
Remember, there are times when the indicator will tell us to play
defense, but it appears that the markets really don’t go down at
all during that phase.
But your individual stocks may be getting crushed.