Market Timing Pro

Amazon.com Inc (NASDAQ: AMZN) Snaps Back

April 1, 2009

Shares of Amazon.com Inc (NASDAQ: AMZN) regained almost all their Monday selloff losses in Tuesday’s March 31 rally.

Amazon.com has been outperforming the market since its November 2008 bear market lows, and while the stock market made a nice 1% gain on Tuesday, Amazon.com rallied 3%.

This strength is expected to power shares to the $80.00 level in coming days. Amazon.com’s prior August 2008 highs, at $88.09 a share, are the target for this advance.

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

Shares of Biotech HOLDRS (AMEX: BBH) Hold onto Gains

March 31, 2009

Shares of Biotech HOLDRS (AMEX: BBH) outperformed almost every sector during Monday’s March 30 stock market selloff.

Considering losses in the broad market were well over 3%, the 0.1% loss in Biotech HOLDRS felt almost like a gain. Well…almost.

Biotech HOLDRS still appears headed for at least $178.56 in coming days or weeks, with a good chance of reaching $184.38 before serious resistance is reached.

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

Market Timing vs. Conventional Wisdom

Outlandish Claims

We recently did a search for "Market Timing" on several of the most widely used search engines. Some of the market timing results posted are staggering:

Up over 1000%... we guarantee our results! Up over 900%. 138% APR. Up over 1,400%. Up 18,000% since 2000. Up 3,494% in 4 years.

We have one question:

If you could make 1400% every few years (or 18000%, or 900%), guaranteed, would you sell the formula for $20 or $30 or $40 a month? Not us. We would use it for five or six years, and then buy an island, complete with mansion and servants, and retire forever.

These phony numbers are a large part of what gives market timing a dubious reputation.

While Market timing is about profiting, it is NOT about fast gains. It is about capitalizing on trends and avoiding huge losses!

Such marketing scams as we listed above, and believe us they are nothing but fake numbers, play on an investor's greed. You know it can't be true.... but... just maybe...

One of the two emotions which cause the largest financial losses is "greed." And these ads play into that emotion perfectly. The other emotion is fear.

Market timing is NOT about instant gratification. It is about winning over the long haul. It is about withstanding the test of time. Profiting over the years while others go back and forth, from scam to scam, looking for the holy grail to quick riches. Or trading by emotions, news events, and the next door neighbor's secret tips.

Successful timing is about discipline. Following a strategy that will catch the major trends so that your are "in" for the advances and "out" for the declines. Most traders and investors are in for the declines and out for the advances. It is the disciplined following of a timing strategy that separates successful timers, from everyone else.

Fool’s Game?

Critics say trying to time the stock market is a fool’s game. That trying to forecast the future direction of the stock market cannot be done.

They are correct. It cannot be done.

But we do not forecast the future. We trade trends that are currently in progress. It is not hocus pocus but a carefully defined strategy.

Market timing critics have said that, if timing took you out of the market during only the very best days, or the very best months, your performance would suffer enormously. They are right of course" if " that is what market timing did.

"...Missing the worst days is exactly what market timing is all about!"

In 2001, Barrons Magazine published a graph showing the hypothetical results of investing in the Standard & Poor's 500 Index in February 1966 through late October 2001. During that period of almost 36 years, an investment of $1,000 in the index would have grown on a buy-and-hold basis to $11,710.

Then, referring to a study done by Birinyi Associates, (an investment research firm in Connecticut), the article reported that if an investor missed just the five most profitable trading days every calendar year, that $1,000 investment would have shrunk to $150.

Right again! But what an incredible, one sided, misuse of numbers.

To anybody unfamiliar with timing, that statement would be convincing evidence that market timing is truly a fool’s game .

Why would anybody even think of giving up a gain of $10,710 and replacing it with a loss of $850?

True Purpose of Market Timing

Ridiculous though those results are, they are quite damaging to those who do not understand the TRUE purpose of market timing.

Recognizing how one sided an imaginary timing system that kept investors on the sidelines during only the best five days of each year was, Mr. Birinyi took the idea one step further.

What would happen, Mr. Birinyi asked, if a timing system could be invested in all but the five worst trading days days each year?

"...Cut you losses short and let your winners run. That is the very definition of market timing."

He found that a $1,000 investment in the S&P 500 Index that missed only the five worst days each calendar year would have grown to $987,120 .

Nobody, of course, has been able to devise any system that could eliminate only the very worst days of every calendar year, nor the very best days for that matter.

But the contrast between "all-but-the-five-best-days" showing an investment that falls to $150, and "all-but-the-worst-five-days" showing the same investment rising to a whopping $987,120, is very telling.

And the next sentence is the most import one in this article.The article suggests that there are great gains to be made by "missing the worst days."

Wake up!

Missing the worst days is exactly what market timing is all about!

A market timing strategy that gets traders onto the sidelines during more bad days than good days inevitably reduces the risk of being in the market.

As subscribers who were with us during the bear market of 2000-2002 found out, as well as the bear market of 2008 and into early 2009, missing the bad days not only protects capital, but in the case of our timing strategies that used bearish short positions, it greatly magnified gains.

Don't fall for the scams. Execute and stay with a successful timing strategy for the long haul, and you will be greatly rewarded over time.

Market timing is the following of successful trading strategies that keep you "in" during long term market advances and get you "out" during long term market declines. If you are in during all up trends and out during all downtrends, you will be "in" for most, if not all, of those five-best-days, and out for most, if not all, of those five-worst-days.

Cut your losses short and let your winners run. The very "definition" of market timing.

Stock Market Powers Ahead

March 27, 2009

The S&P 500 Index (SPX) has now gained a remarkable 23% since March 9. The Nasdaq 100 Index (NDX) has added 22.8% and is now at new 2009 highs.

Typically a 20% gain marks the start of a new bull market. If this is a doomed bear market rally, it is certainly a strong one.

Something to consider is that the second guessing and pessimism over the potential for this rally are bullish contrarian indicators.

Over the past three weeks we have had four trading days of better than 9 to 1, up vs. down volume. These are bullish indicators, especially if there is more than one such day in a short time span. These breadth surges were also unusually strong. 27 to 1 on March 10 and then 19 to 1 on March 12, a 10 to 1 on March 17 and then a powerful 31 to 1 on Tuesday March 24 this week.

We have no record of four such trading days in a row. The 1982 bull market started with just two.

Then, according to Elliott Wave Theory, we appear to have just completed a Wave 5 on March 9. Wave 5’s are usually the bottom of a series of waves to the downside. This forecasts an entirely new sequence of waves to the upside ahead.

Sentiment, using the CBOE Volatility Index (VIX), still shows skepticism ending at 40.36 on Thursday, March 26. Levels over 40 used to forecast a bear market low. Of course we have been at high levels since November 2008, but still, holding over 40 on the VIX while the market gains 23% is a healthy sign of disbelief in this rally.

Bear market rallies have a way of looking good before the axe falls, but this one is looking extra good.

Kollar is editor and chief analyst at FibTimer.com (http://www.fibtimer.com) which offers market timing strategies for S&P and Nasdaq index fund traders, as well as bond, gold, small cap, sector, ETF and stock trading strategies.

Higher Highs for Family Dollar Stores (NYSE: FDO)

March 26, 2009

Apparently the recession has done wonders for Family Dollar Stores (NYSE: FDO) which has seen its shares double in value over the past year.

While the rest of the stock market fell, Family Dollar Stores either traded sideways, or kept right on rising.

Family Dollar Stores should reach its prior 2007 rally highs in coming weeks, at $35 a share. It closed in Wednesday’s March 26 trading at $32.10 a share. A close $35 would be a breakout for this stock, and point to a run to its 2003 all-time highs, at $43.61 a share.

Kollar is editor and chief analyst at FibTimer.com (http://www.fibtimer.com) which offers market timing strategies for S&P and Nasdaq index fund traders, as well as bond, gold, small cap, sector, ETF and stock trading strategies.

Intel Corp (NASDAQ: INTC) Reaches December Highs

March 25, 2009

Shares of Intel Corp (NASDAQ: INTC) have reached their December 2008 rally highs after four months of sideways trading.

Those highs were reached in Monday’s huge stock market rally, but Intel Corp had been advancing at a steady pace for almost three weeks already.

This resistance level is critical to Intel Corp’s continued rally. Intel needs to close above $15.65 in coming days to continue higher. If it does, we could see a solid move as high as $18.34 over coming weeks.

The Fibtimer.com (http://www.fibtimer.com) Stock Timing Strategy holds a position in Intel Corp.

Financial Select Sector SPDR (NYSE: XLF) Surges 16%

March 24, 2009

Shares of Financial Select Sector SPDR (NYSE: XLF) skyrocketed on Monday, March 23 with a 16% advance.

After the Treasury Department announced a plan Monday to clear out as much as $1 trillion in so-called toxic assets from the financial sector in an effort to strengthen the banks enough to get them to lend again, the S&P 500 Index (SPX) and Nasdaq 100 Index (NDX) rallied some 7%. The rally was led by the powerful surge in financial stocks.

Is this the start of a new advance that will, this time, last? Probably it is, but still, even with the huge 16% gain in shares of Financial Select Sector (an amount that it managed to lose in the prior two trading days), this ETF did not close above its previous rally highs reached only on March 18 when it closed at $9.40 a share.

Though not technically a breakout, with NYSE up volume outpacing down volume by almost 31 to 1 on Monday, you have to be looking for higher highs ahead.

Our target for the initial move is $13.67. If surpassed, look for $14.43 in coming months.

The Fibtimer.com (http://www.fibtimer.com) ETF Timing Strategy holds a position in Financial Select Sector SPDR.

S&P 500 (SPX) & Nasdaq 100 (NDX) Timing

S&P 500 Index (SPX) Chart Analysis

Last week we wrote:

"Although the proof of a bottom has not been seen, there is reason to expect continued upside ahead. Could this be just a bear market rally? There is no way to tell for certain in the middle of it, but the potential exists for a bottom finally being in place. We discuss the clues below. First, our SPX position has turned positive. The gains this week pushed the trend to bullish and the aggressive Bull & Bear strategy is now 100% in a bullish position."

This week:

There was little chance that we would have another week of nonstop advances, and that was the case this week. Three nice gains early on, followed by selling on Thursday and Friday.

2008 Full Year Results Fibtimer Timing   + 17.3 % S&P 500 Index      - 39.9 %

2009 to Date Fibtimer Timing    + 8.5 % S&P 500 Index      - 14.9 %

Of interest was the Tuesday rally that spiked higher on better than 10 to 1 up vs. down volume on the NYSE.

The key number for these explosive days is a 9 to 1 ratio. Above this ratio and they are considered a bullish indicator. Such days are unusual and in the past, when two of them occur within a three month period, it often is the start of a lasting trend to the upside.

During the prior week there were two such days. A 25 to 1 day on Tuesday and then a 19 to 1 day on Thursday. This makes three of these bullish days in two weeks.

Is this bullish? Yes, very much so, but not infallible. There were two of them before the big declines early this year, so at that time they were quite incorrect. But this is the second time it has happened and three days in a short time frame is something to factor in.

These bullish days have also been accompanied by a substantial rise in volume. Analysts always watch volume during rallies because if is not rising along with prices, the rally is suspect.

Volume has been close to two billion shares daily on the NYSE during this rally and that is considerably above the one and one-half billion share average from earlier this year.

Another bullish indicator is seen in Elliott Wave Theory. This last decline in early March reached right to major support levels and qualifies as a Wave 5 low.

In Elliott Wave Theory, major declines consist of five waves, with the third being the largest wave down and followed by one final Wave 5 before launching a new advance.

The below weekly chart clearly show the five wave pattern (the last four waves are on this chart) and the daily chart has the breakdown of the major waves, into smaller waves.

The early March lows traded below the 2000-2002 bear market lows. This may have been the final washout needed for a new advance.

One concern is the CBOE Volatility Index -VIX, which reached over 90 during the selling last November, but during these new bear market lows, reached only to about 50. In past years reaching 50 would have been an extremely bullish level and would have marked a market bottom, so we will give this indicator the benefit of doubt and label it as bullish for this rally.

Another concern is the rally in gold. While it is great for our Gold Timer strategy that is up 36%, the rise in commodities points to possible inflation ahead. The fed can do little to fight inflation should it arise with the economy so weak, so this may be a huge speed bump that is likely to be encountered sometime in the future.

Conclusion?

The close below the November lows as well as below the 2000-2002 bear market lows has probably completed the bearish Elliott Wave pattern. If this is correct we are the beginning of a new advance that will last months. How far it will go is unknown, but it should be profitable.

The SPX has reversed at valid support levels. It has a potential Elliott Wave count now in its favor and there have also been three breadth surges of better than 9 to 1 as discussed above.

The rally hit SPX 800 and reversed. This was also critical Fib resistance (at SPX 798). The declines experienced since resistance was reached this Wednesday are not bearish, but expected, considering they occurred right at a widely watched level.

The SPX 800 level was also the 50-day moving average line. This was another reason for traders to take profits. A close above SPX 800 next week would be hugely bullish because it represents so many resistance points.

For subscribers who overly worry about short term swings in the financial markets, remember that you do not have to be an aggressive timer to be a profitable timer. This strategy can and does incur small losses on occasion. Money is made in both aggressive and conservative style trading. Our Conservative S&P Timer strategy trades only the long term trends but that means it profits without the numerous buy and sell signals that active and aggressive traders take. The Conservative S&P Timer has been in cash since January 7th.

The SPX portion of this strategy is in a BULLISH position and in the Rydex Nova S&P 500 Fund - RYNVX (or other bullish SPX index fund).

S&P 500 Index (SPX) Daily Chart

S&P 500 Index (SPX), Weekly Chart

 

Nasdaq 100 Index (NDX) Chart Analysis

Last week we wrote:

"The Nasdaq 100 Index - NDX has a perfect bottom in place in its daily chart (below). You do not often see a bottom that so closely coincides with a previous major trend low. The NDX reached those lows on Monday, and closed just a fraction above them. On Tuesday the NDX reversed in a powerful rally and then confirmed the upside move on every following day this week."

This week:

The NDX also had bullish breadth surges on Tuesday and Thursday of last week, plus again on Tuesday of this week, corresponding to the 9 to 1 surges on the NYSE. Because of the volatility in the Nasdaq, such days are more common and less predictive. Nevertheless, it did have the bullish breadth surges, on spiking volume, which is a positive.

The NDX managed to surpass and close above both the 1193 resistance level, as well as its 50-day moving average. This is bullish even though Friday's declines put the NDX back below NDX 1193. It remains above its 50-day moving average.

The original close above resistance calls for higher highs in coming days.

Even though the NDX lost ground at week's end, it closed with a solid gain of 1.6% for the week.

At this point, we should be looking for a test of the 1274 highs. This will be a major resistance level and likely to result in some strong volatility. But if the coming weeks are to see higher highs and a lasting advance, we should see this level surpassed.

The Nasdaq Composite and Nasdaq 100 Index used in this strategy remain stronger than the S&P 500 Index and our original split position has resulted in profits for this strategy as the markets declined. The NDX position has remained in a bullish mode throughout and continues bullish.

In conclusion:

The NDX still has an Elliott Wave low in place at its November 2008 lows. This week's reversal adds evidence that the bottom, at least for the NDX, was reached in November and it has and will hold.

The NDX continues to outperform the big caps and our split position has done well. Now of course we have a fully bullish position with both the NDX and the SPX in a bullish mode.

The NDX portion of this strategy is in a BULLISH position and in the Rydex NDX 100 Fund - RYOCX (or other bullish NDX 100 index fund).

Nasdaq 100 Index (NDX), Daily Chart

 

 

Have The Markets Changed? Part II

Last week we began to answer the question asked us by many of our subscribers, "have the markets changed?"

Our answer... was no.

To read last week's "Part I " click here .

The markets have been unchanged for hundreds of years, and there is no reason to believe they will not continue unchanged.

Prices must either go up, down or sideways. One of these three outcomes will occur. Change is inevitable and has been the one thing that can be counted on in the markets throughout history.

No advances in technology, no leaps of modern science, no radical shifts in how we see the markets will ever alter this fact.

Thus a market timer does not need to predict the future, or even attempt to predict it. A timer only needs to know the rules of the game and abide by them. If the market goes up, be long. If the market goes down, be short or in cash.

Strategy Based On Change

Trend following, the basis of our timing strategies here at FibTimer, cannot fail over any fair time frame. Why? Because trend following uses the one thing guaranteed to occur in the markets to make its trading decisions... Change.

"A profitable trend following strategy lets winning positions (trends) continue, while quickly exiting positions that go against you."

Trend followers are always poised to jump on board the next unexpected major move in the markets, and to profit from it.

A great trend following system adapts to and uses change. The future is its most important ally.

A good trend following strategy lets profitable positions continue, while quickly exiting positions that go against you.

Systematic Trading

However there is one way a trend following strategy can fail.

A strategy that is exited during unprofitable times, will not work over time, because you cannot know when the next profitable market move will begin.

Starting a timing strategy based on a solid track record of previous profitable results, such as those at Fibtimer, is fine. But if you cannot stick to the plan, the results we achieve over the years will not be the results achieved by you.

A timing strategy that is not applied systematically, with discipline, in both good and bad times, is not a strategy.

Our trend following trading strategies are based on the only constant the financial markets offer us. They are based on change. We make our profits when the markets change.

When the markets are tough, you need only to execute the timing strategy. Having the strategy gives us the ability to avoid making difficult decisions under pressure when we are most likely to make mistakes.

By trading trends we never miss a major trend. We only need to have faith in the system, and trade it. When the inevitable next big move occurs, we are thus guaranteed to be profiting from it.

Conclusion

Change is inevitable, and is the only market forecast we can count on. Trading trends always profits from the big moves we know are in the future.

But trading trends requires that we make the trades, in good times and bad. We will never know ahead of time which buy or sell signal is the one that makes the big profits.

Lastly, a trend following timing strategy seldom enters or exits at the most favorable price in a market trend.

Instead, a strategy based on change seeks to close out losing positions quickly to preserve capital, and to hold profitable positions for as long as the market trend continues to exist.

The change and volatility implicit in the markets work to your advantage. You won't make money without them.

Don't get caught up in the whys of the market.

Markets stay the same because they will always change. But as a trend follower, you don't care, and you always know how to react to change.

Market Rally – the Real McCoy?

March 20, 2009

The S&P 500 Index (SPX) has risen a remarkable 17% since its bear market lows, reached on March 9, though it pulled back a bit on Thursday March 19. Is this, finally, the start of a new bull market?

There are several indicators that suggest we have a great deal of upside ahead.

Last week we had two trading days of better than 9 to 1, up vs. down volume. These are bullish indicators, especially if there is more than one such day in a short time span. These breadth surges were also unusually strong. 27 to 1 on March 10 and then 19 to 1 on March 12.

Remarkably, we had another breadth surge this week, with 10 to 1 up vs. down volume on Tuesday, March 17. Three such days in only two weeks is very unusual.

Then, according to Elliott Wave Theory, we appear to have just completed a Wave 5 on March 9. Wave 5’s are usually the bottom of a series of waves to the downside. This forecasts an entirely new sequence of waves to the upside ahead.

Sentiment is inconclusive as the CBOE Volatility Index (VIX) did not make new highs when the SPX made new lows on March 9 as would be expected. But historically, the VIX is at high levels, in the 40’s, so it is difficult to get a read on this.

It looks like the real McCoy this time, but traders should remain vigilant. Bear market rallies have a way of looking good before the axe falls

Kollar is editor and chief analyst at FibTimer.com (http://www.fibtimer.com) which offers market timing strategies for S&P and Nasdaq index fund traders, as well as bond, gold, small cap, sector, ETF and stock trading strategies.