If you are a go-getter, chances are you tackle any task with a full-steam-ahead attitude. Whole-souled involvement in a project however, can cause the “can’t see through the forest for the tree” effect. Clearing the mind often helps. This could be compared to being stuck in a labyrinth and getting help from someone with a birds-eye view of your situation.

When it comes to investing, it’s easy to get sidetracked by factors that seem important but in essence cloud your judgment. This article is designed to provide a “birds-eye view” of the current investment environment.

Right now for example, it’s earnings season. Not a day goes by where a company doesn’t either exceed or fall short of their earnings. The market rallied when Wells Fargo (NYSE: WFC) beat estimates but dropped when Goldman Sachs (NYSE: GS) also beat estimates. What does that mean?

Small stuff distractions

There is at least a hand-full of commonly used indicators and time wasters that could be filled away in the “don’t sweat the small stuff” drawer. None of them alone is bad per say, but they might keep you from focusing on what’s really important (more about that later).

Distraction No. 1: Stock picking

Buying individual stocks is exciting but dangerous. One piece of bad news might send a stock tumbling (or vice versa). Hyped up stocks tend to fall harder and faster than the broad market. Numerous studies show that baskets of stocks (or indexes) perform better than stock pickers. Mutual fund managers are an outstanding specimen of stock picking under performance.

Not only are broad market indexes and sector indexes safer, they are also easier to predict. Back in October 2008 for example, the ETF Profit Strategy Newsletter marked financials as a “down-ward spiral with no stop-loss protection.” At the time, we did not know which companies would go under, but it was clear that ETFs like the Financial Select Sector SPDRs (NYSEArca: XLF) should be avoided.

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In fact, the newsletter’s recommendation to buy short ETFs such as the UltraShort Financial ProShares (NYSEArca: SKF) and Direxion Financial Bear 3x Shares (NYSEArca: FAZ) in October ’08 and again in early January ’09 racked up profits that would rival any individual stock pick.

Distraction No. 2: Fund Ratings

Choosing your funds based on fund ratings is like steering your car based on the rear view mirror. Ratings by companies such as Lipper and Morningstar are backward looking with little relevance for future moves.

To illustrate, right at the peak of the market, Morningstar crowed the iShares FTSE/Xinhua China ETF (NYSEArca: FXI) with their coveted five-star rating. FXI fell as much as 72% over the next 14 months. In August 2008, the PowerShares Dynamic Large Cap Value Portfolio (NYSEArca: PWV) and PowerShares Dynamic Mid Cap Growth Portfolio (NYSEArca: PWJ) also receive a five-star rating prior to losing between 40% and 50% of their value.

Distraction No. 3: Analyst’s forecasts

How trustworthy are analyst forecasts? In April ’08, Goldman Sachs predicted that global credit losses will reach $1.2 trillion. U.S. bailouts alone approved so far make the estimated global fallout seem like jump-change.

Also in April ’08, analysts believed that the $7 billion raised by Washington Mutual would be enough to get WaMu all the way through. Where is WaMu today?

There are a number of indicators that track investor sentiment and even analyst forecasts. Those include the CBOA Put/Call Ratio, American Association of Individual Investor survey, mutual fund cash reserves and more.

Savvy investors use all of them as contrarian indicators, meaning they’ll bet against the investing masses and pros. Case in point, on March 9th, the day the Dow (AMEX: DIA) bottomed at 6,446, the Wall Street Journal run an article titled “Dow 5,000 – There’s A Case For It.”

Distraction No. 4: News

News is often perceived to be an instant indicator of the stock market’s internal strength as well as the economy’s stamina to weather bad news. Reality check! News and news-based forecasts are probably the least reliable, yet most followed indicator available. Why?

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News tend to be good at the top and bad at the bottom. While individual pieces of news may affect the market for a day or two, if you want to extract any benefit out of news reports, use their composite message as a contrarian indicator.

Distraction No. 5: Getting caught up in details

Once a profit opportunity is identified, the next step is to find the best in class ETFs to maximize the profit. Don’t allow yourself to be sidetracked by overanalyzing factors that will merely amount to “icing on the cake.”

Expense ratios, index construction, security selection, security weighting and product structure are important but won’t be able to make up for a bad investment decision.

For example, if you thought equities were a good value at the beginning for 2009, it wouldn’t have mattered much whether you bought the actively managed Fidelity Contrafund (Nasdaq: FCNTX) or iShares S&P 500 Index ETF (NYSEArca: IVV). The S&P 500 (NYSEArca: SPY) dropped by over 30% and so did FCNTX along with IVV.

The ETF Profit Strategy Newsletter correctly identified levels above Dow 9,000 (reached from January 2nd to January 6th) as a great opportunity to load up on short ETFs like the UltraShort S&P 500 ProShares (NYSEArca: SDS) and UltraShort Real Estate ProShares (NYSEArca: SRS). The recommended short ETFs gained between 60% and 180% over the following two months

Identifying BIG profit opportunities

Profit opportunities of varying degree arise on a daily basis. Hindsight is 20/20 but identifying them in advance is a science mastered by only few.

Gold

Gold was expected to be a sure bet. In fact, gold bugs had every fundamental monetary event “certain” to propel gold prices into the stratosphere. As mentioned above, good news tends to appear at the top. True to form, gold (NYSEArca: GLD) has failed to remain above $1,000/oz. We discussed the prospects of gold weeks ago (click here for the related article: Is A 30% Drop Next For The Gold ETF?).

Treasuries

The news for government Treasuries has also been quite bullish. The Fed's announcement to buy some $1.2 trillion worth of government and government agency debt caused the biggest spike ever in the iShares Barclays 20+ Year Treasury Bond ETF (NYSEArca: TLT). The reaction of short term Treasuries, as represented by the iShares 1-3 Year Treasury Bond ETF (NYSEArca: SHY), was of course more muted.

Despite the positive news, the government's continued manipulation of its financial stability should send T-bonds into their very own bear market. The UltraShort 20+ Year Treasury Bond ProShares (NYSEArca: TBT), a double leveraged short ETF, is likely to be among the better performing funds over the next few years.

Equities

The fact that investors and analysts are still quite skeptical about the sustainability of this rally should be an indication that this rally has more room to grow. As the stock market continues to advance, it “shakes out the weak hands” and converts doubters into believers.

The stage for another leg down will be set at a point where the news will be predominantly good and believers (market bulls) will once again outnumber bears.

Just as was the case with the Titanic, overconfidence will lead to (financial) shipwreck.

Analyst estimates are based on just that – estimates. As even the word implies, estimates are subject to change, and analysts like it that way. They’d like you to believe that it’s never their fault if the underlying projections change. After all, they just follow the trend.

Successful investors are not trend followers, truly successful investors are trend setters and dig deeper to find date that will set them apart from the trend following crowd.

Such data includes an analysis of dividend yields, P/E ratios and investor sentiment indicative of major market bottoms. An analysis of the above indicators reveals that the stock market does not bottom unless dividend yields, P/E ratios and investor sentiment “clock in” at a certain level.

You could compare this set of trusty indicators to a fever thermometer. Unless the thermometer clocks in at 98.6%, you know that the patient is not healthy just yet. The stock market and the economy are still sick. The next big profit opportunity will be on the downside.

The March issue of the ETF Profit Strategy Newsletter contains a detailed analysis of the above mentioned indicators along with target levels for the top of this rally and the bottom of the upcoming crash.