The charts will be updated by
every Saturday. When no change to text, [NC] will be used.
Market Timing (11/12/2022)
Market timing does not work! You have heard that many times, and
have ignored it. I tell myself that I want to be in for several
months at a time, but something always happens to turn my charts
negative and my stop-loss activates handing me a loss. This
happens even in bull markets like in 2021.
We are now in a bear market and it’s best to be out of the
market. There are several indicators tracked here that have gone
to bear market alerts. The Bull/Bear Cycle Alert is probably the
best for timing the market as it was on a bull signal for most of 2020
and all of 2021. To buy and hold during the Bull Cycle Alert
would have made a lot of money and gotten you out in time to keep it.
But folks who watch the market every day want to be more active then
that. So they use methods that are more fun and lose money – or
make much less then they could. I became active in mutual fund
and ETF trading 25 years ago. I only realized that market timing
does not work a few years ago. But I kept doing it as it is hard
to stop and still watch the market while still updating the chart’s
support/resistance lines, etc. I get in too late and sell on a
dip, or get stopped out and loose money. See Long-Term
vs. Short-Term Trading at bottom of this page.
Long-Term Trends Dominate (11/25/2016)
The fortunate among us have enough experience and confidence in their
methods that they do not let the short-term uncertainties of the market
sway their investment strategies. We know that most of the
short-term focus is merely noise and has no affect on the long-term
supply and demand driven trends. Greg Morris See Long-Term
vs. Short-Term Trading at bottom of this page.
See the chart below.
5/9/2015: From November 23, 2007, this
method produced four bull cycles of 12, 11, 6 and
the current 35-month bull cycle. The bear cycles are 17, 3.5,
2 and 0.75 months long.
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12/1/2012: In the past, the longer-term bull cycle was determined by
whether there were higher highs and higher lows on a weekly S&P 500
chart -- plus the price being above the 200-day simple moving
average. It is somewhat arbitrary as to what highs and lows on a
chart are significant enough to use to determine the trend.
Therefore, more recently that was dropped as a criteria.
Just using the 200-day MA causes whipsaws as occurred in
November. The smoothing of a moving average is needed. But one that
reacts fairly fast near the start or end of a market swing -- as
measured on a weekly chart. These cycles are meant to be long compared
to the swings followed on the site's home page.
The following will be used to determine when the bull
cycle changes, and will be called the Bull Cycle Alert
(BullCyc). The weekly chart below shows closing
prices of the S&P 500 and has a 41-week simple moving average
(red) that corresponds to a 200-day SMA. Also shown is a 30-week
exponential moving average (blue). These will be used to determine the
bull or bear cycle. The 30-week EMA was suggested by Gerald Appel in
his "Stock Market Trading Systems" published in 1980.
When the 30-week EMA (blue) moves up for three consecutive
weeks AND the week-end closing price is above the
41-week SMA, a green pole is added to show the start of a bull cycle
with a Bull Cycle Alert. If the price does not confirm the EMA movement
up, a dashed green pole is used. Similarly, a red pole is
added to show the start of a bear swing. A dashed pole is used until
the price goes below the 41-week SMA.
11/17/2018: The MACD shown gives signals very
similar to the criteria above. These, however, come a little earlier,
which is good. The MACD will be used in the future to signal the cycle
Seeking Dividends (8/25/2012)
Bond yields are as low as they have ever been, and they
are too low for retirees to live on. So the search for yield
has been a theme in the markets. Stock and sector ETF investors have
turned to utilities that are yielding about 4% now. However, they "are
more expensive now then they have been roughly 90% of the time.
Likewise, telecoms, which yield about 4.5%, are costlier than they have
been about 80% of the time. The consumer-staples sector, which yields
north of 3%, is in nosebleed territory, too: Its valuation is higher
than it has been in almost 90% of its history." -- says Jacqueline
Doherty in Barron's.
Doherty wants you to make sure your dividend-stock portfolios
are diversified as a stock earnings report can disappoint and the stock
can be hit hard. Funds would be the way to go for diversification. She
recommends not buying the funds with the very best yields. The
lower-yielding funds "may own less expensive stocks that have room to
boost their payouts."
I have found that high-yield bond funds are quite often better
than dividend-paying stock funds. For example, the Fidelity
Focused High Income Fund (FHIFX) sports a yield of 5.8%. This may be
low by previous high-yield standards, but it beats most high dividend
stocks. The analysis below has the details of risk and reward.
and text as of 8/17/2012)
default rate of these low-rated junk bonds may increase as many
are issued by companies in the oil industry. Standard & Poor's
projects that 2.9% of junk bonds will default through the first
half of 2016.
10/25/2014: The yield spread between
high-yield bonds and Treasury bonds has diminished over the last
year or so. However, Barron's reported on 10/20/14 that John
Bellows, bond portfolio manager at Western Asset, stated that
"As long as inflation is low, growth is moderate, and the Fed remains
accommodative, there's value in high-yield [bonds]."
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High-yield bonds act more like stocks than bonds. In an economy that is
slowly recovering, high-yield bond funds are often better
than stocks or stock funds due to their low volatility -- even if they
are called junk bond funds. Slow and steady would be good, and if the
market drops, these funds will move slower so that one can get out
without much damage.
Junk bond funds are
sensitive to the economy, however, the current default rates are
between 1% and 3.5%, whereas the historical average is 5%. Default
rates are expected to stay below their historical average through 2013,
according to Beverly Goodman in Barron's (8/20/12). She also states:
"The more important indicator in today's
market is the spread -- the price difference between high-yield bonds
over Treasury bonds with comparable maturities. As junk-bond prices
rise, the spread narrows. This past week the spread was 510 basis
points [5.10%], a bit lower than the historical average of a 535
basis-point spread, though the the spread has dropped as low as 300
For fund selection, Eric Jacobson, director
of fixed-income fund research for Morningstar, suggests looking at how
a fund did in 2008 . . . and in the third quarter of 2011 (see chart),
when interest rates fell and investors moved into safer investments.
Chart and data by FastTrack.net
The fund FHIFX, that was mentioned in
Barron's as a low-cost fund "with a good long-term track record," only
dropped -3.40% during the quarter, whereas FAGIX dropped -10.84%. The
chart below shows the rise from the bottom of the dip on 11/25/11 to
the present [8/17/2012].
This time, FHIFX rose the least of the
funds shown, 10.76%. FHYTX is the aggressive leader rising 18.21%. But
which fund came out better if bought on 6/30/11 and kept to the present?
The winner is FHYTX (10.37%) by only 0.89%
over FHIFX (9.48%). BUT would you have kept FHYTX during the -11.33%
down-draft of Sep. 2011 -- or would you have sold for a loss (to
protect principal)? FHIFX only dropped -5.61% during that time. The
standard deviation measure of volatility favors FHIFX by 1.52% to
2.36%. FHIFX has a short-term redemption fee of 1.0% if kept less than
90 days. FHYTX has a fee of 2.0% if kept less than 90 days.
One of the better ETFs is HYG, iShares
iBoxx High-Yield Corporate Bond Fund. Over the above time period, it
went up 9.06% with a dip in Sep. 2011 of -8.98%. It's standard
deviation is 3.53%.
Long vs. Short-Term Trading (12/2/2011, updated 9/5/2012)
Each investor or trader has a certain time frame the he (she)
is comfortable with. There is the long-term investor who looks at the
market and calls it a bull market starting with the March 2009 low. It
will remain a bull market until we have a lower major low -- when a
pull-back drops below 1100 on the S&P 500. Of course this
indication of a change from bull to bear will lag behind the
market top by many months of down-side action.
So to avoid the large drawdown, if one should sell when the
bear indication occurs, one looks at a shorter time frame. We have been
following an intermediate-term outlook where a cyclical bull or bear
market is defined on the page called Longer
Term. Supplementing this approach is the page that addresses Market Cycles of various periods, including the
average market action for the month.
The Health of the Market and
the Market Status pages describe
the shorter-term outlook. It is designed to catch the beginning an end
of market swings that last 2 to 4 months. This is momentum trading. Of
course all indicators that flag buy or sell points lag real time by
time constants that are designed to smooth out the market fluctuations
and minimize lag -- two conflicting requirements.
The problem in 2011 was that the market swings have been sharp
and occur very often. Momentum trading does not work well in this
environment. One tends to buy well off the bottom of the swing, and
sell after the peak has occurred by too much to make a decent profit.
Emotions get in the way also. It is hard to buy near the bottom of a
swing due to fear the market will go lower; and it is hard to sell when
the market is doing well as greed requires a bigger profit. So often
one buys too late (near the top of a swing) and sells too late (near
the bottom of a swing). It is also hard to cut your losses when a trade
goes against you. This is why an investing or trading system is
required. But no system where chart reading is involved is totally
reliable and timely. Mechanical systems have not done well either as
they were back-tested during more tranquil times. Company or sector
fundamentals are helpful, but not for timing entry and exit points.
software and data is used for most of these charts. This
page is for amusement only, and should not be taken as advice to buy or