Who is Right About the Financial Markets?

Online, July 21, 2010 (Newswire.com) - A recently-published Bloomberg article shows two diverse opinions as to the direction of the stock markets in the United States. The June 2, 2010 article quotes CEO and co-Chief Investment Officer El-Erian of PIMCO as predicting "a new normal of below-average returns" and uses the biggest monthly drop in the Standard & Poor's 500 Index since February 2009 as proof that this may be true. The article also shows combined price estimates from some 2,000 forecasters who are tracked by Bloomberg which predict the S&P 500 "will rise 27 percent in the next year, the fastest projected rate since February 2009."

Dennis Tubbergen, a noted financial advisor and CEO of USA Wealth Management, LLC has his own opinions on which philosophy may be more correct. Go with El-Erian, a guy who manages over $1 trillion in assets, or the 'herd' of analysts tracked by Bloomberg?

"Although I don't claim to have a crystal ball, my money is on El-Erian," explains Tubbergen. "I wrote in my blog a few months ago that there were 6 reasons why I thought the market would correct and why I believed the odds favored that a market top was in. As the last several weeks have unfolded, I still believe this is true."

Below are direct quotes of Dennis Tubbergen's top 3 reasons why he believes the stock market top is in.

Reason #1 - The herd is usually wrong. There's an old cliche that says when there is a bull on the cover of Time magazine, it's time to get out of the market and walk away. (Tubbergen tells us to look at the following magazine covers: The Economist, March 2010; Business Week, April 2010; and Newsweek, April 2010.) When the herd thinks that only good things lie ahead for the market, the opposite often happens.

Reason #2 - The S&P 500 and the Dow Jones Industrial Average have both retraced 60% of their respective downturns, a common reversal level. There's a little known Italian mathematician who lived at the beginning of the 13th century by the name of Leonardo of Pisa, but is more commonly known as Fibonacci. Fibonacci researched and studied the relationships that numbers have to one another and when his research is applied to investing, one discovers that price movements often stop at or near these key retracement levels. One of these key levels is 61.8%.

Reason #3 - Trading volume has been generally higher on down days than on up days. Often, to determine the general health of a market rally, it's helpful to look at trading volume. The more trading volume that occurs on a given day might mean that there is more conviction in the market as to the direction of prices.

"Bottom line: I believe that global debt, private sector debt and sovereign debt point toward a deflationary environment in the short term," concludes Tubbergen. "From my viewpoint, it's possible that we could see a general downward trend bottoming in 2012 or beyond. While I believe that there will be upward swings in this timeframe, I think it's possible, even likely, that the market will make lower highs and lower lows."

For more information on Tubbergen's views, visit www.dennistubbergen.com.

The opinions expressed herein are those of the writer and not necessarily those of USA Wealth Management, LLC. This update may contain forward-looking statements, including, but not limited to, statements as to future events that involve various risks and uncertainties. Forward-looking statements involve known and unknown risks, uncertainties and other factors which may cause actual events or results to differ materially from those that were forecasted. Information obtained from third party resources is believed to be reliable but the accuracy cannot be guaranteed.