Bottom line: If you’re waiting for bad news to stop streaming out of the economy before investing or speculating again, you’re going to miss the profit boat, big time.
Fact is, the stock markets — and indeed most markets — look ahead, not backwards. Always keep that in mind.

B. As I already pointed out to you in my last Money and Markets column, and on several other occasions, the Dow, and indeed all assets, must be looked at in inflation-adjusted terms and, more precisely, in terms of gold to truly understand their values and to put them into historical context.
And in that sense, at its nominal low of 7,884.82 on October 10, the Dow in real terms had already lost 77% of its value and was trading at a real inflation-adjusted equivalent of about 2,550.

When looked at in real terms, that also means that the bulk of deflation is already past us. Ditto for commodities.

Put another way, it also means that the Fed, indeed all central banks’ attempts to reinflate asset prices, should soon begin to have an impact on markets. That’s what happened after the 1973 to 1974 bear market, which I believe is a better analogy to today’s economy and markets than 1929 to 1932.

Reason: As I have oft mentioned before, during the Great Depression, the U.S. and global economy was shackled down by a gold standard. Asset prices only started to rise again once the dollar was devalued by raising the official dollar exchange price of gold.

In the 1973 to 1974 bear market we did not have a gold standard. So the Fed and other central banks printed money like crazy. And even though the economy remained in a severe recession for several more years — inflation went through the roof igniting a rally in both stocks and commodities.

The same thing is about to happen again. Another reason I believe big rallies lie ahead …
C. All of the technical indicators I monitor strongly suggest that both stocks and commodities are more oversold than they have been in decades.

On many indicators, the Dow is more oversold than at any time since 1932. On other indicators, it’s more oversold than it’s ever been.

And on still other indicators, it’s more undervalued and oversold than it has been in at least the last 50 years.

Also consider the following: On October 10, 87% of all stocks on the NYSE hit new 12-month lows.

That kind of downside breadth exhaustion, where more than 50% of NYSE stocks hit 12-month lows at the same time, has occurred only four times — in 1962, 1966, 1970, and at the crash low of 1987.

Each one of those data points was at or within a few weeks of a major bottom.
Similar technical indicators and data show that most commodities, including the majors — gold, oil and grains — may have also made major lows.

D. Additional bullish supporting evidence is coming in from my technical and cyclical models on foreign stock markets, especially India, China, Hong Kong and Singapore. All of my indicators on those markets also suggest powerful rallies lie ahead. The most bullish of them: India and China.
So what to do right now?

First, as bullish as all of the above sounds, don’t rush out and start buying stocks hand over fist. More confirmation is needed before getting aggressive. Second, you’ll want to be very selective. The best performing stocks going
forward will be, unquestionably …

Natural resource stocks. Based on companies producing goods that are needed by people in good and bad times. Goods with intrinsic value.

Defensive consumer staples, similar in a way to natural resource stocks in the sense that they represent products that are always needed. Food. Beverages. Drug companies. Household product companies.

And yes, emerging markets, which will come back with a vengeance. For right now, I recommend getting your toes back in the water with exchange traded funds (ETFs). Consider buying them on the next pullback you see, and use a protective sell stop 7% below your entry price to help reduce risk.

My favorites …
— The iShares MSCI BRIC Index Fund (BKF)
— The Dow Diamonds ETF (DIA)
— The Energy Select Sector SPDR (XLE)
— The SPDR S&P Metals and Mining ETF (XME)

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