Market Timing Pro

Following The Crowd... To Conform Or Not To Conform?

Humans have a natural tendency to follow the crowd, but when timing the markets, following the crowd can often result in losses.

Unless you are in the middle of a long term trend, it usually doesn't work to conform to the masses.

Expert market timers know how to spot trends and they make sure to climb on board and profit. But often, the very same buy and sell decisions, which must be executed to jump on board that trend, are in direct conflict with current market sentiment.

It is not easy to make that trade when it conflicts with what seemingly everyone else is doing.

Interestingly, your ability to break away from what the masses are doing, from current sentiment, may have a lot to do with your personality.

Following The Crowd

There is safety and comfort in numbers. In following the crowd. Across the generations, people learned that survival depended on banding together and working as a group.

All humans inherited this legacy, and it is shown in the security we feel when we follow the crowd.

The most successful members of society have seen the virtues in following the crowd. They have learned to look for rules to follow and to decide which standards to strive for. Blind obedience to authority may not be beneficial but compromise is.

To be successful, it was vital to protect one's self interests yet also stay within the bounds of acceptable behavior.

Although you've been frequently warned about the pitfalls of following the crowd, it's important to recognize that it is a survival instinct that is ingrained not only in humans, but in most animals too. Think of herds of deer, flocks of birds, swarms of insects, schools of fish. There is safety in numbers.

Going Our Own Way

Although following the crowd isn't bad all the time, such as during a long term rally, there are times when a market timer should not follow the crowd.

If all we had to do to be profitable was follow our instincts, we would likely be making the same buy and sell decisions as the vast majority of traders. But just as the vast majority of traders are NOT profitable... as market timers we want to "break away" from their emotional trading and BE profitable.

At Fibtimer, market timers trade market trends. Trends are created by the masses. Those same masses who are buying stocks at the top of a rally, and selling stocks at the bottom of a correction.

This means that most of the time, as market timers, we must go our own way. And right there is the crux of the problem.

As soon as our timing strategy, which is NOT based on the emotions of the masses, issues a buy or sell signal contrary to the current sentiment, our very human survival instincts kick in. We want to STAY with the crowd. It is hard to do what your instincts tell you not to do.

But those market timers who are successful, have learned to do just that.

Breaking Away From The Masses

We WANT to follow the masses. It is comforting.

But if we want to profit when the masses do not, we must learn to push down those same instincts which have made us successful in life, and refuse to allow them to control our buy and sell decisions.

It is true that the crowd is often right... until a turning point occurs. But when the markets turn, the crowd holds on, often until most if not all their gains have evaporated.

Going against the crowd takes a special kind of person, a person who isn't afraid of risk but doesn't seek it out, a person who looks inward only, and doesn't need reassurance from others.

FibTimer has spent years developing and fine tuning market timing strategies that are profitable. Look at the historical trading results of individual trading strategies. These results can be yours, but you must commit to trading the strategies for the months and years necessary to realize them.

Break away from the masses and you too can realize the profits that we have achieved over the years.

Support Holds for S&P 500 Index - SPX

June 20, 2008

The S&P 500 Index - SPX has held at support, at least for now. The SPX declined to the 50% retracement of the March to May rally at 1341.22, and though this has not been a week to write home about so far that level has held.

Just below this level is critical support at SPX 1321.49. If the 2008 rally is to stay intact, it needs to reverse at these levels. A break below critical support would point to a decline to test the March panic lows. That would feel like panic time indeed should it occur.

There are bullish indicators though, one of them being the Nasdaq 100 Index - NDX that reversed to the upside on June 13, and so far has seen steady gains. Thursday’s weak advance in the SPX was far exceeded by the NDX gain of almost 1.5%. Strength in the tech stocks is bullish for the entire stock market, even though the economic news and energy prices have everyone spooked.

Utilities HOLDRS (AMEX: UTH) Beats Downtrend

June 19, 2008

Shares of Utilities HOLDRS (AMEX: UTH) have not only held up well in the current stock market declines, but have pushed to within a fraction of their 2008 rally highs.

Utilities HOLDRS has gained ground while the stock market has sold off. Wednesday’s June 18 close at $135.53 is just below the prior May closing highs at $136.29. Considering the turmoil in the stock market, this is a solid performance.

If Utilities HOLDRS can close above $137.50 in coming days, look for a continued advance to test the old December 2007 closing highs at $141.63.

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

Apple Inc (NASDAQ: AAPL) Shares Rally

June 18, 2008

Shares of Apple Inc (NASDAQ: AAPL) were on a tear from March through mid-May adding 58% after bottoming around $120 in the stock market correction.

After reaching the $190 level, AAPL moved mostly sideways till June when the current market weakness pulled shares lower, down to $177 intra-day in the Friday, June 13 selloff.

But again AAPL is packing on the gains, adding some 5% this week alone. During Tuesday’s June 17 market decline while the Dow dropped triple digits, AAPL added 2.5% in share value.

Look for AAPL to test its highs at $200 a share in coming weeks, and if surpassed, the new target for this advance will be $226.76 a share.

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

Downtrend Continues for Streettracks Gold Shares (NYSE: GLD)

June 17, 2008

Although shares of Streettracks Gold Shares (NYSE: GLD) rallied on Monday, June 16, they remain mired in a downtrend that may have further to go.

Three weeks ago Gold Shares rallied to exactly the 50% retracement of its entire March to May correction, and not only was unable to surpass it, but reversed hard to the downside. Since that reversal from resistance, Gold Shares has been unable to mount a rally that holds.

Gold Shares will likely decline to $82.00 a share before it is able to make a sustained move higher. Should Gold Shares close below $82.00, look for continued declines to around $77.66 which is long term support.

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

Markets Go Up, Markets Go Down

Markets go up, markets go down.

It shouldn't matter much, but many new market timers find that their own personal mood fluctuates with the markets, moving from extreme euphoria as the markets soar to new heights to deep despair when the markets plunge to abysmal lows.

Why do market trends have such power over emotions?

They don't need to, but many new market timers have difficulty cultivating an objective mind set.

Following The Masses

By allowing fear and greed to influence their trading decisions, new timers tend to follow the masses, and when they go with the crowd, they soon find that market trends not only influence their moods but their account balance as well.

There's a strong tendency to follow the crowd. There is a feeling of safety in numbers. When you see a steady upward trend, you feel secure. Everyone is buying.

They are all doing the same thing. When other people offer confirmation of your decisions, you feel safe and assured.

In a bull market, it isn't so bad to follow the crowd. When it's a strong bull market, the crowd is often right, and it makes sense to follow them. However, when the market turns around, feelings of safety and security can turn instantly into fear and panic.

Humans Tend To Be Risk Averse

Why? An obvious reason is that many new market timers don't have the ability or financial resources to sell short, and take advantage of a bear market.

But there's a psychological issue as well. It is difficult to know how to handle falling stock prices. For example, humans tend to be risk averse.

When one is in a bullish position and the markets suddenly turn, it's hard to accept losses, and even harder to execute that sell signal, issued by your timing strategy, before more damage is done.

Denial and avoidance set in. At that point, a market timer with a losing position panics, hopes that things will turn around, and waits for events that are unlikely to happen.

Usually the price continues to fall, heavy losses are incurred, and as expected, disappointment and despair set in.

Detached And Relaxed

It's vital for your survival as a market timer to stay calm and objective. Don't let your emotions interfere with your decision-making.

How do you stay detached and relaxed?

First, following a non-discretionary timing strategy and knowing, absolutely, that over time it will be profitable, helps you to rise above strong emotions and allow the strategy to make the decisions.

Second, accepting the fact that you'll likely see many small losses as a market timer and that you should expect to see the markets turn against you. What is important is NOT to react like the rest of the crowd. Staying above the fray is the key to profitability and knowing that the money management rules built into your strategy will keep losses small and allow profitable positions to run as high as possible.

Third, think of the big picture; the long-term profits across a series of trades are all that matters, not the result of a single trade.

Develop A Logical Mind set

Don't allow your moods to fluctuate with the ups and downs of the markets.

By trading in a disciplined, methodical manner, you can cultivate an objective, logical mind set that isn't overly influenced by market moods.

Armed with the right mind set, a disciplined trading approach, and a tested market timing strategy, you will be able to realize the huge profits of winning market timers.

S&P 500 Index - SPX at Critical Support

June 13, 2008

In only a single week, the S&P 500 Index – SPX went from what looked like the start of a rally to test the prior highs, to a decline that is now testing critical support.

On Wednesday, June 11, the SPX closed below 1341, the 50% retracement of the entire March through May rally. Just below this level is the critical Fib 61.8% retracement support level at SPX 1321.

Should the SPX close decisively below 1321, we will be looking for considerably lower lows, possibly a retest of the March lows.

Should we have a bullish reversal day here or at SPX 1321, we could very well have seen the bottom of this correction.

Oil Service HOLDRS (AMEX: OIH) Double Top?

June 12, 2008

Shares of Oil Service HOLDRS (AMEX: OIH) reached $220 on May 21 and pulled back. OIH tried again on June 6 but stopped at the same level and has been pulling back since.

Is this a double top that is forecasting a decline in OIH prices over coming weeks? If OIH closes below $200 a share that may very well be the case.

But the bullish case is also strong. If OIH can close above $220 a share, which is a strong Fib resistance level (fib 127.2%), the way will be clear for a run to the next resistance level at $239.91.

Watch for closes either above $220 or below $200 for clues to the direction of prices in OIH in coming weeks.

The Fibtimer.com (http://www.fibtimer.com) ETF Timing Strategy has a position in Oil Service HOLDRS.

Utilities HOLDRS (AMEX: UTH) Headed Higher

June 10, 2008

Shares of Utilities HOLDRS (AMEX: UTH) have not only held up well in the current stock market declines, but are poised to make a run for their 2007 highs.

Traders, who watched Utilities HOLDRS rise almost one percent Monday, June 9, on a day when the stock market was seeing mostly losses, were just seeing what Yogi Berra called “Déjà vu All Over Again.”

While the Dow and S&P big cap indexes have struggled over past weeks, Utilities HOLDRS has continued higher and closed above critical Fib resistance levels. Utilities HOLDRS should make a run for the $140 high mark again in coming weeks and months.

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

When Your Money Is On The Line... Market Timing And Emotions

The winning market timer is cold, calculating, and unemotional.

Sound a bit unreal? Maybe it is, but the reality is that it is important to control your emotions, rather than let them interfere with your trading decisions.

We have written many, many times about fear and greed and how they are the true motives behind market behavior. Fear and greed may control the masses, but if they are allowed to control you, you become one of the millions who can't understand why they cannot make a profit when, supposedly, everyone else is.

There are also other emotions, such as anger and disappointment, that can influence your decisions. Emotions may interfere with discipline and sound decision-making.

But, they are not "all-powerful". You CAN master and control them.

Fight Or Flight

It is reasonable to be fearful when your money is on the line.

That is why winning market timers protect themselves by trading with a detailed market timing strategy. Timing strategies are NOT affected by the emotions of the masses, and they are also designed to manage risk.

When you KNOW your strategy works over time and also is designed to minimize risk, you can execute the buy and sell signals effortlessly and with less fear. You do not fret over the inevitable losing trade.

Instead you are excited about the next trade. You KNOW that next big winning trend is coming. Whether it begins tomorrow or in several months you trade with the knowledge that when it begins, "you" will be one of the winners who capitalize on it!

This is why trading with a specific timing strategy is critical. The moment you deviate from the strategy, you become one of the masses. But if you stay with the plan, you USE those same masses to your advantage.

Anger And Disappointment

Anger and disappointment are two additional emotions that powerfully influence trading decisions.

Both emotions concern expectations about our market timing performance and how we expect the market to behave.

We become angry when things don't go our way. Because we want to win, we hope that the market will behave in a manner consistent with our timing strategy.

When we feel that fate, or some unidentified external forces (i.e. news events) have created a situation that thwarts our plans, we become angry.

When we think we ruined our own plans because of our incompetence, we feel disappointed.

Regardless, there's a natural inclination to want to control our destiny, and when it comes to market timing, we want to control the market.

We may want to impose our will onto the market.

The market, however, can not be controlled. One must accept what the market has to offer. You cannot make the market do what you want it to do.

Acceptance Is Key

If you accept that you are powerless over market action, you will be less angry or disappointed. If you anticipate and truly accept the fact that the market can, and often will, go against your timing strategy, and that it isn't personal, you will not be fazed by it when it happens.

You will just accept it, and move on.

If, on the other hand, you expect the market to move in your favor, you will feel angry and disappointed, which often leads to feelings of revenge or despair.

These emotions can be paralyzing. It is better to accept the market for what it is. Accept the results you achieve, good or bad, and just move on to the next trade. A good timing strategy is not profitable on every trade. No strategy is.

But if you quit because you are angry or disappointed, think how you will feel when the next trade is the start of the next big and profitable trend!

Emotions are a natural part of trading. The markets don't always meet our expectations. If you accept this fact, you will be able to minimize the influence of emotions.

You will then follow your timing strategy and over time, will achieve the results you desire.

Those Who Leave Never Achieve

Those who leave never achieve. All they do is chase the promises of supposed market experts who will take their money, but seldom ("never" is a more accurate word) give them the profitable results they desire. There are hundreds of them out there making promises so ridiculous we are embarrassed to even print them.

FibTimer does not post inflated timing results like so many of our competitors do. We have years of trading behind us as well as years of posted trading history. All subscribers have full access to all trades and years of trading history.

Stick with the plan and you will succeed.