Opening Statement from September 2014 Intelligent Investor (Part 3)

Opening Statement from September 2014 Intelligent Investor (Part 3)

First published on September 2, 2014 for subscribers to the Intelligent Investor

...we wanted to mention one point from the August US Stock Market Forecast. First, you will recall in the July Forecast we advised more active investors to begin buying into the Dow Jones at around 16,500. We also advised more conservative investors to hold out for around 16,200.

In the August Forecast when the Dow was trading around 16,600, not only did we state that the worst possible scenario for downside was 16,000, we also mentioned that once the selloff was finished and the rally began, we would recommend selling or at least trimming newly purchased positions if the Dow Jones rallied to around 17,000 over a short period. This is exactly what happened.

After hitting an intraday low of 16,333 on August 7, the Dow rallied back up to 17,000 within one week. Thereafter, it has spent the next two weeks lingering around the 17,000 level. 

What that means is that our recommendation turned out to be accurate and prudent because those who sold the position(s) purchased recently (when the Dow Jones was 16,500 or lower) were able to capture nice gains in a few days without being exposed to market risk.

In contrast, those who have remained in the market since that time (more than two weeks) have risked this newly deployed capital without any gains beyond the rally up to 17,000ish. We will discuss this in detail in the September forecast.

The above discussion pertains to...