By Gil Morales & Dr. Chris Kacher, Managing Directors, Virtue of Selfish Investing, LLC

Over the past several weeks the Nikkei has been on the move, rallying off the lows of a multi-decade consolidation. The move has been fueled by the election of Japanese government officials who are ready to go "all in" on quantitative easing and a subsequent devaluation of the yen. The new Japanese Prime Minister Shinzo Abe and the newly parliament-approved governor of the Bank of Japan, Haruhiko Kuroda, are both known for advocating easy money policies to boost growth in the world's third-largest economy. Consequently, the yen has dropped substantially spurring demand of Japan's automobile exports. Japanese stocks have overall been in a strong uptrend since November 2012.

Since as stocks go so goes the economy, and since automobiles are a critical part of the Japanese economy, should Japan's bull market continue, companies such as Toyota

While the demise of Apple (AAPL) has left many owners and bargain hunters of that stock high and dry, Google (GOOG) has gone the opposite way, rallying not quite 8% after coming in with a better-than-expected earnings report on January 22nd. In the short-term, Google may emerge as a beneficiary of money flows out of Apple and into the internet search giant's stock, but what are the real long-term prospects for Google going forward?

While GOOG has dominance in search engine technology and derives more than 95% of its revenues from pay-per-click Adwords services, the playing field is becoming increasingly crowded at breakneck speed. Further, GOOG stock has failed to keep pace with the general market since 2010, as it has become a super-cap company valued at just under $200 billion; the rapid growth it enjoyed when it was a smaller company as a strong, powerful 30-something has

"I'm not smart. I try to observe. Millions saw the apple fall but Newton was the one who asked 'why.' " - Bernard Baruch, legendary investor

While Sir Isaac Newton was able to achieve a moment of scientific insight regarding the phenomenon of gravity through his visceral observation of the behavior of apples falling from a tree, these days one seeks slightly different insight into the state of today's stock market by observing the role of Apple, Inc. (AAPL) in the current environment. What is observable in this instance is that the direction of Apple stock, which reported earnings on April 24, has had an increasingly greater correlation to the Nasdaq 100 and by inference, the Nasdaq Composite Index. Today, Apple represents about 17% of the Nasdaq 100 but its effect on the markets seems to have an even greater impact on the direction of the Nasdaq 100. Since major

Quantitative easing (QE) has been with us since early 2009. It has rendered many tried-and-true market indicators impotent since price/volume action in leading indices has become somewhat less reliable. Stock market timing techniques since 2009 have been more or less decimated with only the exception of this website and a couple of others, and that said, it has not been an easy environment. One key is to capture the big gains when they occur, while keeping losses to a minimum on false signals which is done by the fail-safe built into the model. Further, pyramiding trending vehicles such as silver (Ishares Silver Trust SLV, Proshares Ultra Silver AGQ) and a couple key stocks in 2011 made all the difference. In 2012 (as of this writing, March 12, 2012), jumping on board a basket of leading stocks we reported on in real-time puts 2012 in a much better light than

We think things will get worse before they get better. The breakdown in gold shown in the chart below is likely signaling another liquidity crunch like we had in late 2008, and we think it could bode ill for the markets in the near- to intermediate-term. In the chart below, note that gold broke down below its 200-dma in August of 2008 and stocks followed soon thereafter, in September.

We see potential for another type of sell-off or at least continued choppy consolidation for the first part of the year. As we approach summer the market should begin to discount the coming 2012 election, which we believe could provide a rationale for a bottom to all of this correcting and consolidating and a new bull phase to begin. This will depend on whether the market begins to see that there will be sufficient change in government in the 2012 election

If you are a trend-follower, the market's volatile and choppy tendencies in 2011 have made for one of the most difficult environments for catching profitable trends. In this market environment, any trend that begins to develop tends to be short-lived. For example, our market timing model at Virtue of Selfish Investing did catch the steep drop in early August with a sell signal on August 2nd, as well as part of the market’s steep ascent in early October. But these profitable trend signals have been sharp, short affairs, and any gains made during such movements end up being whittled away when the short-lived trend turns into a “chop zone.” Thus, we think investors can best avoid dying the “death of a thousand cuts” by taking a slower pyramiding approach in this market so that if a trend signal proves to be false, risk is kept to a minimum.

The general market has been in a “chop zone” since its plunge in early August 2011. This period of exceptionally high volatility in a directionless market means higher than normal risk. While many stocks have been decimated, gold continues to form a constructive basing pattern.

Quantitative Easing 3 (QE3)

Last year's meeting in Jackson Hole, Wyoming had Ben Bernanke signaling for QE2, and the markets were off to the races once again on September 1, 2010, just a few days after the meeting.

The question is whether QE3 will have as strong an effect on the markets as QE2, or whether the troubles underlying the markets are so deep that QE3 becomes a way for big money to more easily exit stocks, thus keeping a lid on the ability for the general market to rally. Keep in mind QE2 was alive and well through June 2011, yet the general markets