Sunday, October 8, 2017

Why Market Timing Is A Must

SGS  Market Timer Status:   LONG 
LONG as of the close of September 8, 2017
SGS is a Long-Term (weeks to months) Timer


I time the market, I have been doing that for the last 20 years.  Why I time the market is clearly shown on the semi-log chart above that depicts the entire 55-year history of S&P 500.

$10,000 invested in S&P 500 would have been $325,867 on Sep 29, 2017, but the investor would have had to stomach more than 50% losses at least four times during that period.  Nearly all investors would have bailed at or near the bottom of those crashes.  More tragically, most investors would not have participated in the rally following each crash.

If the same investor had employed a timing system, investment results would have been substantially different as shown below:
  • No Timing (Buy and Hold): $10,000 in 55 years compounding at 6.6% and would have become $325,867.

  • Simple Timing: Exit shortly after a major correction (20% or more) with only 8% loss of accumulated amount.  $10,000 in 55 years would have compounded at 9.3% and would have become $1,330,788.

  • Advanced Timing: Short major corrections (20% and more) with 6% loss prior to shorting and a gain of 60% of each correction. $10,000 in 55 years would have compounded at 14.4% and would have become $15,579,111.
So what is an advanced market timer?  It is a trend-following timer with an optimized lag time with a minimized number of whipsaw.  Earlier this year I developed a new market timer that has those two required characteristics optimized by extensive backtesting.  I have been using the new timer in the last couple of months to time the market.


SGS advanced higher every day last week but on Friday it declined slightly, signaling a possible sell-off of this coming week. 


Q3 Earnings and outlook set the path forward for the rest of the year.  Barring any major surprises, indices very likely continue their move substantially higher.

My Plan

I'm still waiting for an opportunity to open my first (in SPY) long position of three.


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SPX: S&P 500 Index    SMA: Simple Moving Average
DJI: Dow Jones Industrial Index    EMA: Exponential Moving Average
DJT: Dow Jones Transportation Index    PDL: Primary Downtrend Line
NAZ: NASDAQ Composite Index    PUL: Primary Uptrend Line
RUT: Russell 2000 Index    ASL: Active Support Line
OEX: S&P 100 Index    ARL: Active Resistance Line
NDX: NASDAQ 100 Index    DTL: Dynamic Trend Line   
TUL: Tentative Uptrend Line   TDL: Tentative Downtrend Line
TLR: Trend Line Resistance   TLS: Trend Line Support

Disclaimer: The views expressed are provided for informational purposes only and should not be construed in any way as investment advice or recommendation.  Furthermore, the opinions expressed may change without notice.