Introduction to our Market Timing

[Super Stock Picker]

Hello 300mmm,

Obviously, there's not a unique answer to your question. It depends on everyone's way of trading.

But, we limit our answer to the way we propose to use this market timing. Then,  members are welcome to try their own stuff.

So, the way we propose to use this indicator is to literally turn on and off the portfolios when the signal changes from UP to DOWN.
When it is down, you're all in cash. When it turns UP, you're back with all the stocks that are in the portfolio at that time.
We did our best to avoid situations when whipsaws occur. But, it is impossible to get a 100% system and we have just experienced a one-day whipsaw. At that time, in theory, you'd have to buy everything on a day and sell everything on the next day.

This market timing is applicable to all our portfolios. We have only produced a few examples up to now to show you what to expect, but once fully implemented, all the portfolios will be affected the same way.

Regarding which portfolio to use with this timing, you have to choose the one you prefer in terms of performances, volatility, strategy, etc...

[sawyer]

Hi SSP,

Thank you for taking the time to answer questions.

I like to use margin, when bullish on the market. On the flip side, I like to go mostly to cash when things are tanking. Your MTI is a great way of deciding when to get in and out. I have been using it and it is helpful. I know it’s used primarily as a tool to improve your portfolios performance, however in a rising tide, all boats tend to get lifted, therefore my question.

I was wondering your thoughts on the use of margin and the alert level.  In particular, I am curious as to your opinion on the relationship between the difference of the alert level and the market. Say we go 100% on margin on an up signal. Subsequently the market continues to rally and the difference between the market and the alert level increases. At some point it would be wise to reduce the margin to zero. In my opinion, that would be when the difference is at its maximum. Would you agree with this? If you do, and looking at the history, what is a ball park figure for this maximum difference? If you don’t agree, would you have any other suggestion to someone who likes to use margin, and monitors your indicator.

[DCA]

Hi Sawyer,

    I am not sure what you meant by 100% margin but it is playing with fire unless you have a saftey valve.  (IE I have a non-tax deductible line of credit at a higher interest rate that I can use to balance out the partially tax deductible, low interest rate margin call)

    That said, I think the spread between the MTI and the current TSX index can be treated as an indicator of market stability.  So the smaller the spread the less you should be in margin.

     Keep in mind two things -- the MTI indicator is new (new is dangerous), and it is linked to the TSX index which is heavily weighted in favour of certain types of stocks.  (If your portfolio is not index related the MTI may not be reliable.)

    One thing I have been meaning to do since the introduction of the MTI is to work out what percentage of SSP calls are on the Index.

D

[garilou]

Hi DCA,

One thing I have been meaning to do since the introduction of the MTI is to work out what percentage of SSP calls are on the Index.

How many are there? Only the S&P/TSX 60? 

Well here's a place to search..

S&P/TSX 60 Index

SMF in certainly not to be found there!

Here's another link: S&P/TSX Composite Index

If you are patient enough to do the search, we'll all be grateful  !

But we getting a little bit out of topic...
If you find interesting things, let us know, maybe in a new topic 

Louise

[sawyer]

Hi DCA (SSP),

Yes I do have a safety valve when using margin. I guess maybe I shouldn't have used the term, 100% on margin. Let's just say the max margin one is willing to use, if willing to use margin at all.

Not sure I understand your point about non-tax deductible line of credit. As long as you are borrowing money to invest in stocks, whether it is from your brokers margin account or your personal line of credit, all of the interest is tax deductible. (in Canada, not sure about US)

I like your comment about the spread between the market and the MTI being a measure of market stability. I hadn't thought of it that way and would be interested if SSP would agree.

I am mainly invested in TSX stocks and right now am very bullish on energy. From a seasonality point were are in the sweet spot for energy. Mid February until the beginning of May as the historic best time of year to be in these stocks. I like stocks like SU and COS.UN or more conservative XEG.

So this brings us to two possible scenerios.

1) Max out on the margin one is willing to use, as soon as the MTI gives us a buy.
2) Wait until the spread between the market and MTI is maximum and then go out on margin.

Any thoughts SSP?

 

[Super Stock Picker]

Hello,

These are definitively interesting thoughts. But, unfortunately, we cannot comment a lot as the MTI has not been built with that in mind.

It seems natural that there is some kind of information in the spread between the alert level and the market. If you think at times like nowadays, the alert level and the market can not get far from each other and we are caught with whipsaws. If we can get a nice and long trend, the spread should become bigger and get some kind of stability.

What level should be considered? No idea yet. We will publish historical values for the alert level and it will be possible to make some research with those figures.

Also, the question has been raised about the number of our stocks that are actually stocks from the TSX index. I do think our recommendations coming from the index are a very small minority.

[seahorse]

Hi SSP

Would it be possible to have the past history of Market Timing Indicator since inception? The only info I could get on the forum is as follows:

Date Signal
17-MAR-09 UP
11-Feb-09 DOWN
05-Feb-09 UP
29-Jan-09 DOWN
28-Jan-09 UP

WOuld it be possible to have the changes prior to 28 jan 09 and after 17 march 09?

[Super Stock Picker]

Hi seahorse,

In this post, on page 1 of this thread, you can find more about the history of our market timing indicator:
http://www.superstockpicker.com/forum/index.php?topic=741.msg1777#msg1777

Check the attached files.

Also, there have been no new signal since Mar 17th, the indicator has been always UP.

With this information, you may still have a hole in the indicator history.
We still have to complete the indicator pages with the history of the signals and the alert levels.

If you want to get all the signals as of today, you can take the file describing the history of one the portfolio using the indicator (with the "+" suffix) and check the days when the portfolio performance does not change. That means the indicator was DOWN...

[garilou]

Hi seahorse,

It would be difficult I guess yo have the data prior to 28 Jan 09, because the system was not completely ready yet.

Here are the data that I have gathered either from the post where they used to be updated until they were updated both on the daily newsletter and the specific page: http://www.superstockpicker.com/market-timing.php

I send this but I cannot give any guaranty that each and every day is 100% correct, as I think once or twice I forgot to update, but this should give you an idea.

Louise


PS, I am sorry to reply so late, I have tried to post this spreadsheet for a while, there was a glitch in the forum program that SSP has repaired now.

[jeff]

it is obvious that the market timing indicator works. it's a big help. thanks. 

[markcle]

Question: right now timing is at 11749.33 If TSX drops to,say, 8000 (could happen!) would we wait til 11749.33 to reenter market or does the indicator drop in tandem with the TSX .

[Super Stock Picker]

Hello markcle,

The alert level is updated everyday and follow more or less the direction of the index.

So, if TSX drops down to 8000, the alert level will follow lower.

[bryanmcn]

Hi Jeff
Don't be too quick to praise the timing indicator. Check out the 2 Weekly Portfolios. While the "timed" version has out performed the original in the last month, it has done much worse in the past 3 and 6 months.
Bryan

[garilou]

Oh Bryan... not again!

Yes, some stocks go up while the MTI is DOWN! We have seen that before.

Lots of other newsletters gave a similar signal: "stay at cash for now" (meaning for me "go for the shorts!").

You "cherry pick": look at the UPM v4, that is supposedly the best and most secure of the SSP portfolios, and compare the YTD (less the one month), with or without the MTI: 18.55 % versus 7.95 % !

And sorry to contradict you, but yesterday (Friday) the only SSP portfolio that ended up was the Earnings Estimate Upgrades Monthly, up 4.17 %, regaining its -4.06 % loss YTD.
What does that mean? That when the general momentum is down, investors go to hopes based on "fundamentals".
But in the moment, even good earning results do not help.

Not only the TSX, all markets went down.
Every night, some analyst finds a reason why it went down:

• New jobs in the US not good enough,
• Apple results good but seemingly not good enough, (APPL went up 7% after hours, when the better then expected results came out, and what happened after?)
• Next day, IPad not convincing the investors, and APPL was supposedly responsible for the drop of all tech stocks!
• TSX down due to commodities and to financials... yes the commodities were down and the TSX is so full if them!

This is ridiculous: from the 3 main US indexes, S&P, DOW and NAS, not ONE sector was positive,
For the TSX, one or 2 sectors stayed positive, but most were down.
Like if no one had the courage to openly say: we are in a well due strong correction!

When commodities, indexes and stocks futures start to go down, this is THE cue as they were doing before the MTI triggered. I do not know the secret recipe of the MTI, but if I were to build one, I would weight in a lot of those in the recipe.

What happened to you IMN? Are you still long on this one?
I went short on it, and for the 4th time short again on SXP.
Too bad I had not enough margin to short APPL.

Beginning of January, I heard a "specialist", (also Mutual funds manager...) interviewed in a time where all fight for those who might want to invest in their RSSP).
He said: "yes we are probably due for a correction, but not before the middle or the end of 2010."
I could have screamed at him: every chart showed it was coming very soon, and that rally from the first 2 weeks of January was crazy and by it-self a cue of what was coming.
I was surprised that the MTI did not go red few days before.

When the MTI went DOWN, I "went with the crowd", and took my profits, already slightly reduced (and some losses too) on almost all my long holdings. I kept AW.UN, even if it goes down, because it brings a good dividend, and is almost impossible to sell, re jumped in shorts that I had covered, and then I happily calculated each evening how much I would have lost, had I stayed long.

I kept a small penny stock that had not moved one penny since I had bought it, (IT), had I sold (or tried to, there were days without a single trade) my loss would have been twice the fees: I was lucky again, it jumped 35%, on no news. Don't know why. But I had bought it because it was typically the type of company that could well be bought. This one might have been helped by the IPad!.

Does this prove that we should not "praise the MTI"?

Often very low priced stock or penny stocks do better during corrections, or stocks that look ready for "bottom fishing".

I have tried to go long a stock that had beautiful fundamentals, was rated 90 to 100% BUY everywhere, and seemed to have some momentum, I've had it for 2 days, an hour after I was in gain 5%, 2 days after, I am in loss -5%!

But when you look at markets maps, and you subtract the total advanced and the total declines, and the difference stays significantly negative day after day, you know that the MTI was right!
I follow almost a hundred of stocks (both US and CND), spread between the main sectors.
I did not count exactly, but I would say that 95% were down!

Year to date, my 3 portfolios (RRSP, US MRG and TFSA) are reasonably or well over the indexes: expecting that correction, I took my loses very fast, and my gains too!

I do praise the MTI, as I always have! It is a good Indicator, even if it has made on or 2 short wrong calls.
BRAVO SSP!

Louise   

[bryanmcn]

Louise
We'll see.
Bryan