Predicting the Stock Market

You can not predict the stock market.  You can not ever predict the stock market or the price movement of individual stocks.  Unless you have insider information, there  is no way to predict the stock market.  How do I know this? I am a smart guy, high IQ, good schools anyway you want to define it, further I have been playing the stock market since I was 15.  I have a good understanding of the way the market works.

Why some people make money in the Stock Market

Some people make money in the stock market not by predicting the market but by luck, Other people use leverage to amplify returns.
Buffet used leverage.  In the most basic sense, he leveraged a 10 percent return to make it a 100% return(not exactly but basically).  He did it with mostly insurance companies and investment assets in a conservative way.  It takes money to make money.  But many times he is wrong in predicting the stock market.  He makes money with leverage.  Other people are lucky.  Even though the Stock market is not a zero sum game, generally for every winner there is a loser.  Many people invest some are bound to be lucky for the long term and then say “I am a genius”.

How to make money in the Stock Market

Stock market prediction in this post I outline a simple way to predict the stock market.   It is not even a prediction method more a ‘get in’ or ‘get out’ strategy.  Use this combined with choosing companies that are making money now, and are solid and you think with your own judgement will make money in the future and is growing and you will make money in the stock market, even if you can not predict the stock market.

A stock market predictor that does not fail

Stock market predictor

Stock market predictor

How would you like a stock market predictor that does not rely on emotions, experts or expensive computer programs? Nothing in the world is perfect but it does pretty good if you look at it over the last 100 years.   Above is a chart of the 1 year moving average against the S&P index for the last 15 years.  It can identify the buy and sell points.

Why the 1 year, for a Stock Market predictor

In the past I tried to predict the market with the 200 day moving average. This is conventional wisdom, but it gave too many false turning points.  I use the one year because although you may not be the first in or first out, you will miss the majority of the up and down turn.

Wall streeters who can not predict the market

There are so many arrogant idiots on wall street who get paid millions (over paid) and yet do not understand the basic idea that ‘all boats rise and sink with the tide’.  Look at the chart above.  You can participate in every major rise in the stock market and get out before ever major fall in the stock market.  Its the easiest way for a stock market prediction. Buy when the 365 day is going up and sell when the market crosses below.  After that you can talk about value.

Stock market prediction

The market will go up.  Why? Expectations have factored in so much bad news and fear in 2008 that with a little bit of good news, the market will respond.  But I personally would not get in until I see a better trend in the moving average.  There might be a January effect and a government honeymoon effect, but I watch the market trend as a whole with moving averages.

Stock market prediction – How I predict the stock market

I look at the 365 day moving average on the S&P, as seen in the stock market chart above. With this you might not be the very first to jump in or leave but you will catch most of the up tend and cut your losses.  Does it work? Yes.  Try it for yourself.  If you did this , you would not be in the market for the last year to year and a half.  Wow.  So if you want to predict the stock market use the 365 day moving average.

Stock Market prediction – individual stocks

After you predict the stock market as a whole “All boats go up in a rising tide”. Then you can choose your stocks based on value, and be one of the countless others that say, I am looking for value over the next two to three years on individual stocks.   Remember, ‘all boats go up in a rising tide’ and the long-term.  So to look for value on individual stocks does not make any sense if the opportunity cost is high as the market moving average is trending down. Read my lips, first look at the stock market prediction as a whole using moving average.