Have you ever been at the right place at just the right time or the wrong place at the wrong time?

Can you relate to getting upgraded to first class because the plane was overbooked or getting a parking ticket within the first minute of the meter expiring?

In day-to-day life, much depends on being at the right place at the right time. When it comes to investing, much depends on being invested in the right “stuff” at the right time. Yes, there will be second chances, but there are no do-overs.

If fact, it is always harder to even out a mistake as it takes a 11% gain to make up for a 10% loss, a 43% gain to make up for a 30% loss and a 100% gain to make up for a 50% loss. In short, it helps to be right the first time.

Wall Street in general expects 2010 to be a very positive year. All 12 strategists polled by Bloomberg and Barron’s expect stocks (NYSEArca: SPY) to be up, on average 12%. This is despite the so-called “job-less recovery.”

Job-less recovery

The idea of a jobless recovery is as convincing as a fat free McDonalds meal. Consumers are the life-blood of any economy. An unemployed worker is not in a position to consume and propel the economy. Any economy can support a limited number of jobless consumers but not 15% or above.

But some say the U.S. only has a 10% unemployment rate, so we should be fine, right? CNNMoney reports that more than a million are set to lose their jobless benefits in March alone. By June this number will jump to about 5 million.

Since the Senate failed to push back the February 28 deadline to extend unemployment benefits, jobless workers won’t be able to rely on extended federal government support.

Federal unemployment benefits kicked in after the basic state-funded 26 weeks of coverage expire. When the economy was in freefall, Congress had approved up to an additional 73 weeks of federal benefits. The average unemployment period has reached an all-time high of 30.2 weeks while the number of workers unemployed for more than 26 weeks has hit a record of over 40%.

Even worse than expected

If you think this is bad, consider the following: The unemployment number commonly publicized is 9.7%. This is the U-3 unemployment rate. The actual unemployment rate – U-6, which is a more comprehensive measure of unemployment – published by the Bureau of Labor Statistics (BLS) is 18% (new numbers to be released on Friday). The BLS is the government agency that tracks unemployment, CPI and many other statistics.

Falling for the hoax

Interestingly, Wall Street and Main Street in general tend to believe the notion of a jobless recovery. As long as stock prices go up, who is there to doubt? As the leading indexes were slowly grinding up to their January recovery highs, investors and investment advisors were overwhelmingly bullish.

While the Dow Jones (DJI: ^DJI), S&P 500 (SNP: ^GSPC) and Nasdaq (Nasdaq: ^IXIC) reached levels not seen in over 18 months, investor optimism spiked to levels not seen in several years, in the case of one indicator, (investors cash allocation) even decades. This kind of extreme and discrepancy provided a serious red flag for the ETF Profit Strategy Newsletter.

On January 16, two trading days before the January 19 trading high, the ETF Profit Strategy Newsletter stated that: “bullish sentiment has reached a level where it is suffocating nearly all bearish currents and undertones. We believe that every day that brings higher prices presents a better opportunity for the bears.”

Within two weeks, the S&P dropped more than 100 points. One day before the S&P dropped to its intraday low for the year, the Newsletter said that “nothing goes down in one swift move and odds that some bounce to the upside will develop sooner or later are increasing. Dow 10,350 – 10,500 and S&P 1,110 – 1,125 are preliminary upside targets.”

With the major indexes having reached those targets, what’s next?

More reason for concern

Before looking at the short-term picture, let’s take a look at another bearish discrepancy – real estate.

January new home sales were expected to clock in at 354,000 (at an annual pace). The actual numbers came in at a record low 309,000. Home prices dropped 2.4% and the supply of homes at the current sales rate increased to 9.1 months worth, the highest since May 2009.

Some 4.5 million homes are expected to hit the foreclosure market this year. As a point of reference, “only” 2.8 million homes were foreclosed in 2009. Over 42% of adjustable-rate mortgages were seriously delinquent and one in five homeowners was underwater in Q4 (according to Zillow.com).

Even the director of economics at Moody’s (the same company that rated AIG as A+) expects home prices to continue falling through the end of the year. It is no secret that Moody’s outlook is generally on the rosy side.

What are the implications of this scenario?

If real estate (NYSEArca: IYR) does not recover, neither will banks’ (NYSEArca: KBE) toxic assets. Even though most have forgotten about toxic assets, it doesn’t mean they have miraculously disappeared.

It makes sense that the FDIC has shut down over 22 banks already this year, following the 140 banks in 2009, most of which are regional banks (NYSEArca: KRE).

More directly than even the bank/financial sector (NYSEArca: XLF), real estate ETFs such as the iShares Cohen & Steers Realty Majors (NYSEArca: ICF), SPDRs Dow Jones REIT ETF (NYSEArca: RWR) and Vanguard REIT ETF (NYSEArca: VNQ) are about to get hit. The only ETFs to benefit from falling real estate prices are the UltraShort Real Estate ProShares (NYSEArca: SRS) and Direxion Daily Real Estate Bear 3x Shares (NYSEArca: DRV). Both ETFs are suitable for experienced investors only.

Analysts vs. reality

For investors, this environment is confusing. Analysts and economists predict higher prices and a general bright(er) future, while reliable long-term indicators point towards lower prices. What are those indicators?

The January S&P high came in just points below the S&P’s 2000-day moving average (MA). Additionally, the 500-day MA has crashed below the 2000 day moving average for the first time in five years (see January issue of the ETF Profit Strategy Newsletter).

Looking back over the past decade, do you remember any mainstream Wall Street analyst or economist predicting a major crash, such as technology (NYSEArca: XLK) in 2000, real estate in 2005 and financials in 2007? Did anyone see the rally from the March 2009 bottom? Analysts are always bullish (and usually bearish at market bottoms such as in March 2009). Generally, their views are proven incorrect and can often be used as reliable gauges.

Much more reliable than contrary analyst opinions are valuation metrics that reflect the intrinsic value of stocks. Like an internal thermometer they show whether the market is running hot or cold – overvalued or undervalued. You may be surprised to know that the market has registered the most overvalued readings of the 20th and 21st century.

The November issue of the ETF Profit Strategy Newsletter includes a detailed analysis of four undisputable gauges – Indicative of their implications, we’ve dubbed them the “Four Horsemen.” Each issue of the Newsletter includes a detailed short, mid and long-term forecast.

A concern for short-term investors should be the absence of volume. There’ve been ten trading days in 2010 that saw less than 1 billion shares of NYSE trading volume, eight of which occurred on days that the market closed upward.  Two of them occurred this week.  Conviction in this rally is drying up, will you be at the right place at the right time?