The usually referenced ideal buying and selling points for any investment are their lowest and highest prices, but from a money management point of view there are also the ideal switch, or exchange, points relative to alternative investments and ideal exit and entry points relative to their downside volatility risk.

For example, while the ideal selling point for the S&P 500 relative to cash, or holding money market funds, was August 3, 2005. But relative to T-bonds, the ideal switch (exchange) point was 14 months earlier on Jun 14, 2004. See also our next day call for buying T-bonds: [See]

Relative to gold, the ideal point to switch from the stock market to gold was also 14 months ago on June 9, 2004.

Here are our buy again calls for gold and foreign currencies (US dollar shorting) since we've been posting on financialsense.com following our initial buy calls during gold's 1999-01 double bottom: [See]

But to disciplined risk-averse investors, who typically only seek gains that are several times larger than the downside volatility risk, the ideal exit point from the S&P 500 was March 5, 2004, a whopping 17 months before the recent price peak. This is when the reward-to-risk ratio dropped unfavorably below 1:1 because following that volatility-adjusted peak -- see our sell call posted three days later: [See]

the S&P declined 8.8 % over five months to its Aug 13, 2004 low and subsequently it only made a 7.1% higher high. And this does not include consideration of the interim near risk-less return from money market funds (see the green line on the first chart above).

The charts below progressively track our latest short term stock market call at September month end as sent to our private e-mail list, which can be joined upon request.

© 2005 Bob Bronson
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Bob Bronson
Bronson Capital Markets Research
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