Outlook November 1

The previous Red Period has ended with a 95 point gain for the Nasdaq.
So we are still in a powerful upswing.

Look for the market to add to these gains in the current Green Period, which will last through this week and well into next.
Mid and late November are likely to bring us a much needed pullback.

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Some readers have been asking us why the market is doing so well in Red Periods recently.
This happens from time to time, and personally I don’t know about any approach to the markets that works all the time.
Just to give you an idea of how our Red and Green Periods have done longer term, here is a performance chart used on the S&P 500 Index from 1950 till July 2009.

The blue line shows you what happened if you invested during Green Periods only.
The result was a 21-fold increase.
So $1,000 invested in the S&P during Green Periods since 1950 would have grown into $21,000.
If you had invested during Red Periods only (shown by the Purple line) , then you would have enjoyed a 2.84 times return.
So $1,000 invested during Red Periods since 1950 would have grown into $2,840.

You wouldn’t have lost money by investing during Red Periods, but the performance was much weaker than during Green Periods. And as you can see in the chart, the outperformance of the Green Periods has been gradual and ongoing.

The S&P500 has shown an average 7.1% annualized increase since 1950.
During Green Periods the average annualized rise was 10.9%.
During Red Periods the average annualized return was only 3.6%.

This may give you some better idea how to interpret our Green and Red Periods for your own trading.

All the best, Danny