Market Timing Pro

Biotech HOLDRS (AMEX: BBH) At Critical Support

January 2, 2008

Shares of the exchange-traded fund Biotech HOLDRS (AMEX: BBH) have declined to within about 1% above critical support.

Biotech HOLDRS, the widely traded biotech ETF, has reversed from the $160 level five times since the August correction lows. If this support level fails, share prices can be expected to go considerably lower.

Watch this level for a reversal that can be traded to the long side, but also for a very possible signal, should Biotech HOLDRS close below $160, that this ETF has a way to go on the downside. Either way, the $160 level will make a good stop to protect trades.

The Fibtimer.com (http://www.fibtimer.com) ETF Timing Strategy holds a position in Biotech HOLDRS .

New Year's Resolutions!

Most everyone makes some sort of New Year's resolution. And, most everyone fails at following them for very long.

The problem with such resolutions is, they are made because you already have trouble sticking to them, so one more promise is not going to change things for very long.

But if this year was different, what would your resolution be?

At FibTimer, we are biased. We want our subscribers to make money. So we will make a list of the resolutions we would like to see our subscribers keep for the year 2006!

Realistic Goals

The most important "first step" is to set realistic goals. It makes no sense to set yourself up for failure by setting a goal that it unlikely to be achieved.

Do not set a goal to reach a specific profit for the year. Those new to market timing will most likely set a profit goal of 30% to 40%. Can such profit be achieved? Of course it can, but no one knows ahead of time what kind of markets we will see in 2008, so such a resolution might very well be doomed to failure from the start

We could see a huge bull market, or a bear market.

So here is a more realistic profit goal. One that can be followed with reasonable expectations of success.

"NO ONE makes money in the markets without following a trading plan. Trading plans are what make the professionals rich. They are what make the difference between winning, and losing"

Promise to stick to your chosen timing strategies, so that you can make as much profit as possible, given what year 2008 offers us.

This is realistic. You will make as much as you can, depending on what the markets offer us.

Sticking to the Strategy

We have said this, and written this, so many times. But it is so critical that we must again say it here.

NO ONE makes money in the markets without following a trading plan. A strategy designed to profit by using the ups and downs of the markets to determine whether you are in a bullish or bearish position.

Trading plans are what make the professionals rich. They are the difference between winning, and losing.

And if you trade a plan, you have to stick to it. The reasons you can come up with to abandon a plan cannot be counted. They are so numerous that no article could list them all. And they always feel right at the time they are made.

But there is one sign which will tell you that you are making a fatal mistake. If you are acting on emotion and making a decision other than what your followed strategy tells you to make, you are setting yourself up for disaster.

Trading plans are not just designed to keep us bullish during a bull market. That is easy. Everyone is bullish then.

Trading plans are not just designed to keep us bearish during a bear market. Again, an easy thing considering everyone will be bearish.

Trading plans are designed to keep us from making rash decisions are times when the markets are volatile, when emotions are high, when the vast majority of investors and traders are panicking and making mistakes. This is when your chosen plan will keep you safe.

So if you decide to make an emotional exit right at a crucial moment, why did you bother to use a trading plan in the first place? You will be jumping out of the frying pan and into the fire. It's up to you, but a super New Year's resolution for this year would be, "stick to the plan!"

Impulsive Trading

Another great resolution would be to avoid impulsive trading.

It is not necessary to trade all the time to be profitable. What is important is to not allow any trade to become a big loser.

"Look back at all your impulsive trades of the past. How many of them turned into disasters? How many of them became big losers?"

This takes us right back to following the trading plan. Impulsive trading is a trait that can only be stopped if you recognize it as a problem. If you are trading when your strategy has not issued a signal, you are likely being impulsive.

Look back at all your impulsive trades of the past. How many of them turned into disasters? How many of them became big losers?

Impulsive trading puts you right in with the majority of traders, and the majority are usually wrong. They are especially wrong at times of high emotions, such as market tops, market bottoms, reactions to news events, etc.

Don't allow yourself to trade unless your trading plan tells you to. Try to relax and realize that the plan is unemotional, and allowing your emotions to rule will cost you money. The plan will not.

Winning All The Time?

This New Year recognize that losing is a part of the game? Every successful trader takes losses. If those losses cause you to jump ship, you will then be without a plan and riding the emotional roller coaster along with everyone else.

Trading plans keep losses very small. This is what is important, not the fact that you had a loss. Trading plans also keep you "in" winning trades. The urge to take a profit is another reason why market timers act impulsively. Everyone wants to profit, but giving up a big profit to lock in a small one is one of the most common reasons for failure.

Small losses and small winners do not make you successful. Small losses and big winners do. You must stay with the winning trades.

A subscriber wrote us when one of our stock picks (Whole Foods Marketing) was up some 20%, asking when we would be taking profits. He was concerned because the stock had been up 27%, but had pulled back. He wanted to lock in that 20%.

We do not exit winning trades until the trend reverses. That same stock rose over 50% before we exited. Taking that profit would have resulted in missing another 30% gain.

Pulling The Trigger

For all those subscribers who have difficulty with being impulsive, there are also those who recognize the importance of following the trading plan, but when the signal is issued, have a great deal of trouble executing it.

If the market has rallied that day, and the signal is a bearish one, they decide to wait a day and see if it is correct. Then maybe another day, and another.

"Real-time is different than back testing. Back testing is always profitable. Real-time separates the hucksters from the professionals."

Signals are often not profitable immediately. They are often made against the prevailing sentiment. Those who procrastinate will likely find themselves on the outside looking in. If they wait for the trade to be profitable, they will have lost some of the profits for themselves.

Second guessing a buy or sell signal is a sure way to miss out on profits, or increase your risk of losses.

Diversification

Spread your investments out a bit. This year the falling dollar made substantial profits while gold stock funds rose, but then sold off into the year's end. Having several timing positions that are in different sectors brings in solid gains year after year, while limiting losses to only a portion of your investments

Select several of our timing strategies. Some aggressive, and some conservative. If any one of them under performs, you will be very happy you diversified.

Using the Sector Fund strategy is a great way to diversify!

Conclusion and New Year's Resolution

You cannot know ahead of time what the markets are going to do. Anyone who promises you that "they" know is lying. Anyone who promises huge gains is lying. Any service that shows huge gains very year, with no losses is lying. Real-time is different than back testing. Back testing is always profitable. Real-time separates the hucksters from the professionals.

Promise yourself to stick with your selected timing strategies absolutely. Take every trade. Take those trades when they are supposed to be taken, not after the fact.

Do not place all your investments in any one strategy. Especially do not place it all in the most aggressive strategy just because that strategy has shown good previous gains. No one knows what the New Year will bring. Diversify.

Wishing each and every one of you a happy, healthy and prosperous New Year. Remember that life is short. Investing is important for your future, but it is not the end all.

Spend time with your families. Relax and smell the roses.

Happy New Year!

Holiday Traders Get Stomped

December 28, 2007

The stock market, having advanced at an unsustainable holiday pace the past week, got a dose of reality today when news of former Pakistani Prime Minister Bhutto’s assassination took the Dow down triple digits.

But almost any measurement, the stock market was primed for a fall. This news event was just the catalyst that started it. The Nasdaq Composite Index (COMPX) was sitting on two huge gap higher days, both on low holiday volume. The CBOE Volatility Index (VIX) is well below levels where a decline should have begun. All that was holding it up is the lack of traders who are mostly on vacation this week.

The S&P 500 Index (SPX), also sitting on a gap higher day on Monday of this week, is back below both its 50-day and 200-day moving averages, and while we are at it, those averages have now crossed each other. Bearish.

While there is still some holiday trading left, we would be very careful at the open on January 2nd.

Higher Highs For Anadarko Petroleum (NYSE: APC)

December 27, 2007

Shares of Anadarko Petroleum (NYSE: APC) continued to rally in an advance that has suffered very little downside since a June-August correction.

Even the market sell off of two weeks ago did little to stop shares from moving higher. Anadarko has now closed above two major resistance levels and may very well be headed higher.

When resistance has been surpassed we expect a stock will likely reach the next resistance level and in this case that means Anadarko should reach $70.00 a share in coming days. In fact, the stock may reach as high as $72.87 before significant resistance is again reached.

The Fibtimer.com (http://www.fibtimer.com) Stock Timing Strategy has a position in Anadarko Petroleum.

Intel Corp (NASDAQ: INTC) Shares Surge Higher

December 26, 2007

Shares of Intel Corp (NASDAQ: INTC) continued its holiday rally in Monday’s half day of trading and closed above strong resistance.

The close above resistance at $26.97 forecasts a likely run for the prior highs reached in late November. Those highs are at $28 a share. This advance is a bit over extended though so unless you are an aggressive trader, you may want to wait for profit taking to create a lower entry level.

The Fibtimer.com (http://www.fibtimer.com) ETF Timing Strategy has a position in the Intel.

Following A Market Timing Strategy

When it comes to making decisions, our minds tend to perceive and react to the information available to us, each in its own particular way. This is not something we think much about. It is a part of each of us. Trying to change this process is almost impossible.

This is usually not of any consequence in our everyday lives, but in the realm of investing, our perceptions and reactions, and the emotions they generate, are very often the opposite of what is needed to be successful.

How do we start making consistently correct trading decisions? How do we make decisions without emotions interfering? How do we trade with confidence?

The answer is simple. We follow an unemotional timing strategy which keeps us on the path to profitability. Strategies that have been profitable for many years in real-time trading. Strategies that keep us with the current trend.

Gunslingers

Many traders, market timers, investors have no plan at all. They are like the proverbial Gunslingers of the Old West. A news event causes the market to decline and BANG, they go short. An economic indicator comes in better than expected, the market rises, and POW they go long.

Trading by emotion, they make trades that seem solid at the time, and they hold that position until it becomes more painful to hold it than to not hold it. They may even make an occasional profit. 

But that lack of focus...lack of planning, will ultimately lead to poor performance, and to outright losses.

Why do so many traders sell at bottoms, and buy at tops? It is such a well known fact that it is almost funny, except when you are the person at that top or bottom.

Have you (or someone you know) ever said, "well, I finally decided to go long (or short), so expect the market to reverse on me, again." Actually expecting" ahead of time" that the trade will be unprofitable.

You will not hear that from someone following a timing strategy. He or she knows that following the strategy will avoid emotional trading errors, and lead to long term profits.

Strategy Equals Long Term Success

Trading requires discipline. Some have it, and others that wish for success must learn it.

The benefit of of following a proven trading strategy is twofold.

First - If you have a trading strategy, you'll be able to ignore all the data that doesn't affect your trading. The media is rough on traders - at any given time, you could find ten reasons to buy and ten reasons to sell. That emotional roller coaster is a nightmare, but if you are following a trading strategy, you won't talk yourself out of good trades, nor will you keep yourself in bad ones.

Second - Our emotions cannot cause us to make unprofitable decisions if they are not involved in decision making. We have a trading strategy. We know it works. All we need do is follow it. Never second guess the trading strategy. That is allowing your emotions to come back into play, and emotions result in losses.

Only through following a proven market timing strategy will you save yourself a great deal of frustration, and successfully grow your investments.

Is The Selling Over?

December 21, 2007

Only one week ago, Fed Chairman Bernanke pulling the plug on a nice rally in the making. Since then it has been downhill for stocks.

The selling hit a bottom on Monday of this week and over the past two days the markets have struggled higher. In fact both the S&P 500 Index – SPX as well as the Nasdaq Composite Index – COMPQ stopped falling right at seemingly strong support levels on Monday.

So, all is ready for a rally? Maybe, but then maybe not.

The SPX remains below its 200 day moving average, a bearish indicator, and the 50 day moving average for the SPX is about to cross below the 200 day average. A very ominous sign for future months.

Volume has been okay, but not great over the past two trading days and more worrisome is the CBOE Volatility Index, a measure of fear used to determine potential tops and bottoms by many analysts. It has not bottomed nor is it near levels that would indicate a bottom is in place.

Traders who just must take bullish positions should stay very cautious and keep their finger on the sell button.

S&P 500 SPDRs (AMEX: SPY) Hanging By A Thread

December 20, 2007

Shares of the S&P 500 SPDRs (AMEX: SPY) reversed course last week when the Fed released their non-statement and the financial markets reacted negatively.

But now the S&P 500 SPDRs are at a critical support level that may determine whether the selling is over, or that more selling, and lower lows, are ahead.

That support is at 144.99 and the S&P 500 SPDRs closed at that level on Monday, December 18 th. If they close below this level, and they remain only a fraction away from it as of Wednesday’s close, it will forecast an imminent test of the correction lows at the $141 level. A failure there would open the S&P 500 SPDRs as well as the rest of the stock market to substantial declines.

The Fibtimer.com (http://www.fibtimer.com) ETF Timing Strategy has a position in the S&P 500 SPDRs.

Streettracks Gold Shares (NYSE: GLD) At Support

December 18, 2007

Shares of Streettracks Gold Shares (NYSE: GLD) have pulled back to support that could determine the direction of the next several weeks.

Gold Shares has formed a very obvious pennant formation since hitting rally highs back early November. The formation has lower highs and higher lows, culminating in very little wiggle room for GLD. Monday’s lows were right at the lows of the pennant, around $77.80.

A close below these lows will likely result in considerably lower lows for this volatile ETF. But if GLD moves higher from here and closes above $90.00 a share, we would expect to see a run for the November highs.

If you trade this ETF, be sure to keep a stop in place, as gold and gold stocks are the ultimate of volatile commodities.

The Fibtimer.com (http://www.fibtimer.com) ETF Timing Strategy may have a position in Streettracks Gold .

Want High Performance In Bull Markets Plus Safety In Bear Markets? Sector Fund Timing May Be Just For You

While aggressive timing strategies can achieve large profits over time, not every trader is emotionally able to handle them.

The good news is, you don't have to be an aggressive market timer to achieve large profits. Trading sector funds with a solid timing strategy is not only profitable, but drawdowns are usually very small because sector timing strategies are very diversified.

Trading the sectors deserves your consideration.

Trading The Sectors

Lately is seems like the financial markets are being pushed in different directions almost daily. How does a mutual fund market timer take advantage of such volatility, while protecting himself or herself from the very real risks such volatility creates, as well as from the potential drawdowns that can occur during such times?

The answer is by trading specific industry sector funds. Here is a "quick" list of reasons why:

1. Diversification: By having small positions in multiple industries, you reduce exposure to any single industry being affected by a negative news event.

2. Volatility: While individual sectors are no less volatile than the rest of the market, they do not move together. So the volatility to one's portfolio is considerably reduced.

3. Drawdowns: Because sector funds go to cash during sell signals, and because there are always some funds in bull markets at the same time there are others in bear markets (during which those sectors are protected in money market funds), drawdowns are kept to extreme minimums.

"In some respects, it is the equivalent of running your own well managed mutual fund."

4. Good in All Markets: There are always single industries in their own bull markets. Even during a cyclical bear market, such as we experienced during 2000-2002, there were always some industries moving higher. And if not, you are still protected by being in money market funds.

5. Active Timing: Though sector timing is not aggressive, it is certainly active. You will always be trading the bullish sectors, and exiting the under performing ones. In some respects, it is the equivalent of running your own well managed mutual fund.

6. Trends: Industry sectors tend to trend. And when they trend, they often move further (in either direction) than anyone expects. During a strong bull run, it is common to find individual sectors that double the gains of the overall market.

Winning The Battle

The FibTimer Sector Timer strategy covers 16 industry specific sector funds found in the Rydex Fund Family. Several other widely used fund families also have sector funds, including Pro Funds and Fidelity Funds, that can be used with our sector timing signals.

Even in volatile market conditions during which the overall stock market is performs poorly, the FibTimer Sector Timer has performed exceptionally well.

Sector timing is proactive money management at its best. Constantly putting your money in the strongest sectors while removing it from the weakest sectors.

This is where the diversity inherent in sector timing stands out. Top performing sectors are where your timing funds are allocated, and no one sector can cause irretrievable damage to the portfolio should that industry collapse without warning.

Conclusion

Over the years, sector fund timing may go down as one of the best strategies ever created. Its ability to move funds into only those industry sectors which are performing well keeps it profitable in most market conditions.

The low drawdowns, low volatility and diversification inherent in sector timing, not to mention strong profitability, cause this strategy to stand out from all the others.

"...sector timing can create profits when other traders are lucky just to be holding onto their capital"

In volatile market conditions sector timing can create profits when other traders are lucky just to be holding onto their capital, while drawdowns, if they occur at all, become almost a non-event.

While sector timing may not make huge gains during cyclical bear markets, being mostly in cash, the strategy will protect your investment capital. And it will then outperform during bull markets, always keeping you invested in those industries that are in their own bull markets.

Caveat.. sector timing does require active participation. The FibTimer Sector Timer requires that subscribers check the online report each evening (the Sector Timer is updated daily).

Sector timing also requires a minimum account size. Remember, there "could" be as many as 16 open positions at any one time, and closed (bearish) positions should be in cash (money market funds) with those funds remaining untouched. A good guess is that a sector timing portfolio should be at least $25,000 to start.

The FibTimer Sector Timer is my personal choice for IRA accounts (including my own accounts). Its potential is excellent, there are no short (bearish) trades, and it only requires a couple of minutes a day to check for and make changes if they are needed.

Be sure to read the "Trading rules and Details" at the bottom of the FibTimer Sector Timer report page.