Baron Rothschild famously advised to buy “when there’s blood in the streets” – the epitome of a contrarian outlook. But you may not have to wait for blood to become a contrarian. Just visit your local magazine stand. Murray Gunn, Global Rates & Money Flows editor, explains:
Paul Macrae Montgomery’s magazine cover indicator works best when it is a non-financial publication featuring a market trend. That is because, when a trend finally seeps into the general public’s domain, it’s very often near the end. Sometimes, though, financial publications can offer a contrarian signal.
In November 2009, The Economist featured an image of the Christ the Redeemer statue in Rio de Janeiro as a rocket ship, taking off vertically into the sky, with the accompanying headline, “Brazil Takes Off.” This was after the Brazilian stock market had massively outperformed over the last six years. As the chart below shows, that pretty much nailed the peak in relative strength and Brazil has underperformed since:
The recent 19 October issue of The Economist featured an image of a roll of U.S. dollars as a rocket ship taking off vertically with the accompanying headline, “The Envy of the World. America’s Economy: A Special Report” (below).
It’s spookily similar to the Brazil cover and comes after the U.S. stock market has spent over a decade in a sustained outperformance trend, as can be seen below. Will this cover mark the peak in U.S. relative strength?
Murray understands money like few others and, even better, writes so that YOU can understand it too. Get more Murray in the November Global Rates & Money Flows titled “Elliott Waves in Rates & Money” so you can prepare for what’s coming next. Just follow this link.
Speaking of Elliott waves, get Frost & Prechter’s definitive text on the subject so you can learn how financial markets really work. Follow this link to get FREE access to the Wall Street bestseller, Elliott Wave Principle: Key to Market Behavior now.