Befriend the Trend

01/12/2007 12:00 am EST

Focus:

Jim Rohrbach

President and Founder, Investment Models, Inc.

For years, market forecaster James Rohrbach has used the NYSE and NASDAQ RIX indexes he created to predict market trends--with great success. His entire focus is on identifying changes in the trend of the stock market...

"The market works because most investors and market professionals do not know when the trend of the stock market changes. Add to that the price fluctuations of individual investments and that creates the situation that allows buyers to buy when sellers decide to sell. They both think they are making the right decision. But one of them is wrong. If they all knew the trend, we would not have a market.

"For 2006, we had a great year following my proprietary, mathematically-based NYSE RIX. For most investors it was a very difficult year because there were many large up and down days which might make you think that the trend changed. Add to that the fact that the "experts" kept telling us to stay out of the market in September and October because historically they are the two worst months for the stock market and you have a potential guessing disaster. I am sure that many investors who thought it was a good idea to "short" the market got nailed.

"In 2006 we were in the market 290 days and out of the market 75 days using the NYSE RIX. It's worth mentioning that the Dow is up about 1,200 points since I issued my NYSE buy signal in July. We are still in as of 1-5-07.

"At each Money Show last year, speakers at the opening ceremonies posed a simple question to investors: "How many of you think that the stock market will be higher at the end of 2006?" At each session, only about 5% of the people raised their hands. I thought it very unusual to have such a small percentage of investors who were positive. Any time a high percentage of people are all leaning the same way, look out. As it turned out, 95% of those investors were wrong. When you are wrong about the trend of the stock market it is very difficult to make a profit.

"If you listen to the rhetoric right now, it sounds like the "experts" are looking for a big drop in the market. It continues to amaze me that these predictors continue to predict even when they are shown to be wrong. Since 1978, I have been using the RIX Index to identify changes in the market trends. My philosophy: The keep It simple approach."

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