Choppy summer, then a strong sprint

When J.P. Morgan was asked about his outlook for the stock market, he replied, "It will fluctuate." I concur. With that caveat, here are my predictions for global bull markets over the coming six-month session of Strategy Lab:

1) Last year, the S&P ended on Sept. 1 just about where it started on June 1. The time-tested strategy of "Sell in May and go away" proved its mettle yet again. I expect this year will be a repeat performance. The market will be choppy but flat until September.

2) The fourth quarter is the best time of year to generate big profits in global bull markets. This seasonality has existed every year since the early 1990s. It's the last remaining "free lunch" in global investing, and it offers the best time of year to swing for the fences.

Mr. Market's mood swings

As Harvard economist John Kenneth Galbraith sagely said, "The financial memory is very short." Crises that grab headlines one week -- a sharp sell-off in Shanghai, a nuclear device detonated in North Korea -- disappear with astonishing speed by the next.

Nobel Prize-winning theories about "rational expectations" to the contrary, investors are anything but homo economicus -- the perfectly rational actor assumed by mainstream economic theory. Financial markets are much more like Mr. Market, the metaphorical manic depressive first described by Ben Graham and popularized by investment disciple Warren Buffett. Some days, Mr. Market is euphoric. On other days, he's depressed. If you catch him on a euphoric day, he wants a very high price for his shares. If he's in one of his down moods, he's willing to sell you his shares for a pittance.

Mr. Market's mood swings highlight the one thing you can predict with certainty about financial markets: Investors will always overreact to events, whether positive or negative. That's why the most useful skill for an investor to cultivate is a critical eye. Whenever you see a consensus, ask yourself whether the opposite could be true. Indeed, it often is.

What trends are making the cover of BusinessWeek and The Economist today? China and India ("Chindia") will rule the global economic roost for the next century. The crisis in the housing market will bring the U.S. economy (along with the dollar) to its knees. Apple is the next Google. As compelling as those headlines may seem today, recall how convincing predictions about the Soviet Union's military dominance and Japanese economic hegemony seemed in their day. Magazine covers may be the #1 contrary indicator.

Your edge over hedge funds

There is always a "holy grail" to making money in the markets. It's just that it keeps changing.

As a small investor, you have an edge that is constant. Because your trades do not move the market, you have opportunities to profit in ways most hedge funds only dream about. Giant hedge funds are limited to trading in the biggest and most liquid markets. They may be able to apply massive amounts of computer power to find an edge, but that edge degrades rapidly with time. The bottom line? Large hedge funds have to run very hard just to stay in place -- and that's why returns across the hedge-fund industry are falling.

By following my recommendations in Strategy Lab, you'll be able to profit from opportunities in global bull markets unavailable to large hedge funds. I'll tell you what to buy, how much to buy and when to sell. Add these factors together, and your edge over the world's top hedge-fund managers is greater than you probably imagine.