Intuitive Assessment of Investment Climate update

On 17 May, 2011 I wrote a piece entitled, “Intuitive Assessment of Investment Climate” where I used the intuition skills I teach in my book “The Intuitive Investor: A Radical Guide for Manifesting Wealth” to make a prediction as to the direction of the financial markets, specifically the Dow Jones Industrial Averages.

Then I said:

“[I]f I had to place a probability on a 500+ point decline it would be around 30%.  If I had to place a probability on a 300+ point decline it would be 45-50%.  Declines of less than 300+ points are a 10-15% probability.  Gains of greater than 5% feel unlikely to me at this moment.”

So how have I done using the technique?

17 May, 2011 saw the DJIA open at 12,541.18, as of the close of 8 June, 2011, the DJIA stands at 12,048.94, a decline of 492.25 points, or down 3.9%.

More importantly, where do we stand going forward?  I still feel as if there is some residual queasiness left in the financial markets.  I would characterize it at about 10% of what it had been back on May 17, 2011.  However, I directed my intuition to the collective consciousness of the U.S. financial markets, not to the economy, and to Jane and Joe Blow.

Turning my attention there I find that the U.S. consumer is hunkering down and entering bunker mode.  There is a soldier’s battle mentality, not an attitude of panic, just nervousness.  This combination of factors leads me to conclude that we are in the midst of directionless financial markets.  That is, we are in the midst of turbulence.  News with catalyze the markets.  Positive news will result in uplift.  Negative news will result in downdraft.

Right now there feels a strong bias toward negative reaction, so we may see even bigger sell offs/buying opportunities.

I will continue to monitor this situation and update as appropriate.

Jason