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Market Commentary March 5, 2015

March 7, 2015 by Thomas Mullooly

Here is a quick market commentary for March 5 2015.  More than anything else, we focus our efforts on:

How to properly manage the risk in your investments.

With that in mind, there are two noteworthy points that came up this week.
This past week (March 2, 2015), the NASDAQ Index closed above 5000. The last time this happened was 15 years ago.  For those who did not live through that precious moment in time, from 1998 through 2002 (five short years), the NASDAQ Index ran from 1500, up over 5000, and BACK down to 1300.  The NASDAQ went “all one way” for  while, then went “all one way” for a while more.

If you want to see a “bubble” in action, fasten your seat belts:

Quick trip down the NASDAQ Memory Lane
January 1998:  1500
January 1999:  2100
January 2000:  4100
March 2000:  5100
May 2000:  3300 — and the chart broke support dating back to 1992
September 2000:  4200 — a brief recovery, then:
October 2000:  3600  broke newer support
December 2000:  2300 — down 50% in nine months

And finally the five year round trip came to rest:
October 2002:  1300

We know from the charts: when an asset class, a group, a sector — or even a stock — falls out favor, there IS NO BOTTOM. And NASDAQ investors learned that lesson the hard way back then.  Learning how to manage the risk is a full-time job, not something someone can do part-time or on weekends.

As an advisor, watching your investments get dragged down into the dirt — for years — because an investor wants to be “long-term” is not really a game plan for managing risk. At some point even Warren Buffett sells the losers. Individual investors should consider that too.  If you truly want to manage risk in your investments, you cannot simply buy and hold forever.

At the end of February 2015 and heading into March, we continue to push our chips across the table (investing), because our indicator lights are all green — but that does not last forever.  And this is where we can really better manage the risk in our investments.  We will get clear signals from our indicators when to get more conservative. Even if our short-term indicators indicate a possible stall or pull-back, looking at the intermediate and longer-term view we still appear fine.

Right now, we’re seeing small cap stocks making a move. Regardless of whether you hold small, mid-cap or large cap, US stocks remain the place to be. As an investor, if you are diversifying AWAY from the US markets, you are making a mistake. The strongest sectors continue to be healthcare, transportation, consumer stocks and biotechnology.

Yellen and Bernanke have been the most transparent Fed Chairs we’ve EVER had, period. Whenever the Fed does decide to raise rates, it won’t be a surprise. Here is something important to keep in mind: Yellen has mentioned a desire to avoid upsetting markets when rates rise.  Yellen also has an eye on how to manage the risk in the markets.  See pages 17-18 of the Fed Minutes: http://www.federalreserve.gov/monetarypolicy/files/fomcminutes20150128.pdf

How does this impact you and I?  Well, I have written more about that, here: https://mullooly.net/federal-reserve-preparing-to-raise-interest-rates/7977

Remember, it does not matter WHEN the Fed raises rates.
It’s how the market reacts to that news, that will truly matter.

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Filed Under: Asset Management, News, Stock Market Comments Tagged With: NASDAQ

About Thomas Mullooly

Thomas Mullooly is owner and founder of Mullooly Asset Management, Inc. In 2002 Tom opened Mullooly Asset Management, a fee-only investment advisory firm. As an investment advisor, and not a broker, Tom works strictly for his clients. With the help of point and figure charting, Tom builds a realistic game plan for clients.

1971 State Route 34, Suite 102
Wall Township, NJ 07719

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The information on this website and blog do not involve the rendering of personalized investment advice. A professional advisor should be consulted before implementing any of the options presented. None of the content contained in this website should be construed as legal or tax advice. Always consult an attorney or tax professional regarding your specific legal or tax situation.

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