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History Says to BUY Stocks Now

By Dr. Steve Sjuggerud
Monday, August 22, 2011

I have some good news for you today...
 
I have a little ray of sunshine in all this darkness lately: you could make A LOT OF money in the next three months... based on history.
 
Let me explain...
 
This recent stock market volatility – down 400 points one day, up 400 the next, then down again – has certainly rattled your nerves (not to mention your portfolio).
 
This kind of recent volatility... especially on the heels of similar volatility in 2008 and 2009... is enough to scare off even the toughest investor.
 
The good news is, volatility has finally reached a high enough level where history shows you can make big money from it...
 
The Volatility Index (the "VIX") just hit 44 as I write. The VIX is the stock market's "fear gauge." The lower the VIX is, the higher investor complacency is, and vice versa. This chart shows what happens to stock prices after the VIX hits 44. You can see that stocks tend to "V" bottom and then soar:
 
When the VIX is High, It's Time to Buy
 
The old phrase is "When the VIX is high, it's time to buy." We tested it, and it's true...
 
Specifically, we tested how the stock market performed once the VIX hit today's level (44) and then fell below it.
 
The results were quite impressive... Three months later, stocks were up 80% of the time... and the median return in the S&P 500 was 9%.
 
I realize 9% might not sound like much to you... but remember, that's just three months... Annualize that number (into the 40% range)... and it's as good as any system around.
 
Granted, we don't have a lot of history to draw from. Twenty-five years might sound like a lot of data, but we haven't had to deal with this kind of volatility that much in our lifetimes (fortunately).
 
Based on our quick number-crunching, it sure looks like:
 
You want to own stocks for three months after the VIX soars to current levels and THEN goes below current levels. Based on recent history, there's a high chance you'll make large gains.
 
Volatility will certainly settle down at some point. (It's settling down as I write.) And as it does, it pays to buy stocks...
 
In short, history tells us that, as volatility settles down, you make REAL MONEY in stocks. Trade accordingly...
 
Good investing,
 
Steve




Further Reading:

Jeff Clark agrees with Steve. He recently told Growth Stock Wire readers that, based on the "VIX" and recent history, it's the best time to buy stocks in five months.
 
When it comes to small-cap stocks, Frank Curzio isn't quite as bullish on buying today. He's using a three-pronged strategy to determine when to jump back in. Get the full story here: Three Trends to Look for Before Jumping Back into Small Caps.

Market Notes


NEW HIGHS OF NOTE LAST WEEK

 
Gold
Petrohawk (HK)... Eagle Ford play
Unilever (UN)... Big Food
Motorola Mobility Holdings (MMI)... bought by Google
Ralph Lauren (RL)... clothing
Yamana Gold (AUY)... Penny Stock Specialist holding

NEW LOWS OF NOTE LAST WEEK

 
General Motors (GM)... another government success story
Arcelor Mittal (MT)... world's largest steel company
Hewlett-Packard (HPQ)... Big Tech
Kubota (KUB)... Japanese heavy equipment maker
K-Swiss (KSWS)... shoes
Credit Suisse (CS)... European Bank
Deutsche Bank (DB)... European Bank
Morgan Stanley (MS)... Big Finance
TheStreet (TST)... financial publishing
Winner Medical (WWIN)... Chinese health care
Ener1 (HEV)... electric cars
Zillow (Z)... another overhyped IPO
Strayer Education (STRA)... secondary education
Ryland Group (RYL)... homebuilder
Sony (SNE)... Japanese electronics maker
Tata Motors (TTM)... Indian automaker
U.S. Steel (X)... giant U.S. steel producer
Ultra Petroleum (UPL)... oil & gas

In The Daily Crux



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