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As the ASX corrects… three flashing buy signals

Who’d be trading these wild and wacky markets?

Me, actually, as you’ll see if you read on, including my three signals that are telling me this market is a buy.

Overnight, the Dow took another bath, in the process posting its first three-day losing streak this year. The 127 point fall meant in 15 of the last 16 sessions, the Dow has moved more than 100 points.

Correction alert… oops too late

And things could get ever messier, with Bell Potter’s Charlie Aitken, in a note to clients this morning, saying the S&P 500 chart is looking toppy and vulnerable to a 10% trading correction.

Speaking of corrections, the ASX has now officially moved into correction territory, defined as a fall of 10% from a recent peak. That recent peak was as recent as just one month ago.

It has been a stunning reversal of fortunes for Aussie investors, with the S&P/ASX 200 index (Index: ^AXJO) (ASX: XJO) trading below 4,700, falling another 1.15% today.

ASX Jun 13 2013

Source: The Age

To date in 2013, the local market is up less than 0.7%.

Oh where art thou ASX 5,000?

The wheels have fallen off the banking bandwagon

As we repeatedly warned, I just hope you avoided jumping on the bank/supermarket fully franked yield bandwagon. To say the wheels have fallen off is an understatement.

Over the past 6 weeks, Westpac (ASX: WBC) has crashed 19%, National Australia Bank (ASX: NAB) 18%, ANZ (ASX: ANZ) 17% and Wesfarmers (ASX: WES) 14%.

Rational investors are often few and far between during these inevitable times of heightened volatility.

But for those who can keep their heads, and focus on the two or three economic factors that really matter, now is a great time to be putting money to work in the markets. More on the three factors I’m focusing on a little further down…

Adding some excitement to my portfolio

Although we’re all business-focused investors here at The Motley Fool, our opinions and investing styles differ.

I like to add a bit of excitement to my portfolio, taking some calculated risks in the hope of an oversized payout some time in the future, but all within an appropriately diversified portfolio.

And for me, that often means turning to the riskier resources sector.

Last week I mentioned how I’d entered a couple of limit orders, hoping to pick up a couple more bargains, saying…

“In these volatile times, you never know what silly price some (lower-case ‘f’) fool might panic and sell out of what are perfectly good and growing companies.”

Looks like yesterday was my lucky day, as one of my orders was triggered. I’m now the proud owner of shares in an ASX-quoted energy stock.

I can’t reveal its name, yet, but just let me say it’s not something Scott Phillips would buy, nor recommend as a ‘best of the best’ Motley Fool Share Advisor ASX stock pick, or indeed a Motley Fool Hidden Gem.

For him, it’s a little too speculative.

There’s nothing wrong with being cautious, of course. Warren Buffett has accumulated a near $60 billion fortune by being cautious, following two simple investing rules…

Rule #1: Don’t lose money.

Rule #2: Don’t forget rule #1.

Scott may not be the next Warren Buffett, but as of Friday, June 7, 2013, the average Motley Fool Share Advisor ASX recommendation had gained 31.1%, compared to 8.8% for the All Ordinaries, both with dividends reinvested.

These 3 flashing signals say the market’s a buy

The euphoric rush to buy dividend stocks has been replaced by a panicked rush for the exits.

It’s in the latter environment this Fool (upper case ‘F’) likes to play, as witnessed by my heightened buying activity — 2 buys in 2 weeks… and more to come.

I mentioned above, economically, I am focusing on two or three economic factors…

1) Local interest rates are low, and likely to go lower. In comparison, dividend yields already look attractive, and will likely look more so as interest rates fall.

2) The American economy is recovering. The Aussie economy is faltering as the mining boom ends. Everything points to a still lower Aussie dollar.

3) Stating the obvious, the forthcoming Australian election is a foregone conclusion, KRudd or no KRudd. Take advantage of any perceived uncertainty now. “After the election” might be after the stock market horses have already bolted.

I’m not going all-in today, tomorrow, or next week.

Each to their own, but adding money to the market when all others are in a funk is a strategy that’s served me well over a quarter of a century of stock market investing.

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As ever, I wish you happy and profitable investing.

Of the companies mentioned above, Bruce Jackson has an interest in ANZ, Westpac and Wesfarmers.

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