Discontinued

This blog has been discontinued due to lack of interest.

Hello, Is Anybody Out There?

Since starting this blog in April I have received very little, if any feedback. My initial motivation in doing the blog was to help those who were struggling with making wise investment decisions on their own. I gain great satisfaction doing the blog for this reason and for no charge. But I must conclude that few, if any either check the blog on a regular basis or if they do, see any value in what I have to offer. I say this because on several occasions I have asked for feedback but have received no comments whatsoever. Am I preaching to an empty auditorium? Here's the deal; If I receive enough positive comments during the next week I will continue. If not, I will discontinue.

WEEKLY UPDATE...In my July 3 post I stated that the long term trend changed to down (red arrow). This week the market happened to rally quite strongly. This rally changed the color of momentum from red to blue and the moving average from red to blue. BUT...the price bar remains red (click on image). Remember that once a down trend (red arrow) is established it takes a change of color in from red to blue in all three items (momentum, moving average & price) in order to flip the trend from down (red arrow) to up (green arrow). Bottom line is that the long term trend remains down. My money is still out of mutual funds UNTIL all three items change to blue.

Honor

I hope you'll indulge me by taking the time to read through this before I get to the weekly update. One of my heroes ran into the arms of Jesus on Monday, June 28. In the two weeks prior to my Father's death I had the honor of caring for him, along with my siblings. As the reality of the end of his earthly journey set in God brought several memories to the forefront of my mind that I had forgotten, memories that exemplify of life of honor and sacrifice. My Dad was a US Navy veteran, serving his country in the salvage and cleanup effort following WWII. But what I most admire him for was his devotion to his wife, children, grandchildren and countless others he came into contact with. I want to share just a few of those memories with you. My Dad was a flooring installer and the sole bread winner for most of my childhood. I don't remember him ever missing a day of work. I can recall several times where, despite having the flu he would leave the house with a large bucket, which he would use to vomit in at the job site. When I was a child he spent every Saturday with me teaching me how to golf instead of golfing with his buddies. I also remember being very excited when summer vacation approached. I so looked forward to the frequent times that my big, strong Dad would take me to work with him. The final memory is just one of the many examples of generosity that I, my siblings and grandchildren can testify to. Although my Dad had little money he paid for the weddings of his Angie, his granddaughter and Beth, the wife of his grandson. He also walked Beth down the aisle due to the absence of Beth's father in her life. What you really need to know is that he lived this way despite having been physically and mentally abused by his earthly father. As a result he struggled realizing his true identity and suffered from depression most of his life. BUT...he overcame because he realized how much his heavenly Father loved and valued him. I love you with all my heart Dad, and with God's help hope to follow in your footsteps.

WEEKLY UPDATE...Nothing has change since my last post. The S&P Index closed at 1022.58 on Friday. Everything, and I mean everything points to a bearish scenario. As you can see from the attached chart (click on image) the arrow has flipped down (red). The importance of this cannot be understated. The last two times this happened the market declined substantially for the next 29 months and 14 months respectively. IMPORTANT: In case you missed it I am recommending that you check the blog each day after 7 pm in addition to the Saturday and month end updates. The reason is that due to enhancements to the methodology it is no longer necessary to wait for the month end closing price to make a determination on longer term market direction. If there is a post on a week day night it will be because of a change in long term market direction.



FOR YOUR EDUCATION...No article this week. I simply haven't had the time. But next week I have something lined up. Have a great holiday weekend and don't forget to fly your flag!

Head For The Hills

To say the market is behaving badly would be an understatement. I have moved all of my money out of mutual funds. Take a look at the chart below (click on image). As you can see the price bars are red, the moving average is red and the momentum indicator is red. If you don't understand the significance of this please read through last Saturday's post. The long term direction is now down. Unfortunately I can't elaborate much more at this time due to a family emergency. Keep watching on a daily basis for any potential changes.

Jinkies!

I could have used a stronger word to describe what happened in the market last week but this one is more family friendly:} You may recall that last week I stated that I was back in mutual funds. This was primarily due to the fact that the S&P Index closed above 1110 last week, a very important price level. The expectation was that for the next several weeks there was a high probability of a sustained move up. Well, price action this past week may have thrown a wrench into that. The index closed lower at 1076.76 this Friday. It is still possible that we may eventually see a rally due to the fact that the long term trend is still up. But after last week it is conceivable that we may see further short term weakness before that happens.

IMPORTANT ENHANCEMENT...From now on I would highly recommend you check the blog after 7 PM EST Monday - Friday. There will not always be a post but when there is it will be an important one, informing you of an important trend change. No longer will you have to wait until the weekend to find out if you need to make an adjustment in your portfolio. I will still continue with the Saturday and end of month updates as usual.

FOR YOUR EDUCATION...Up until now I've hesitated to show any of my proprietary charts. After all, the knowledge I've gained over the last 20+ years is too valuable. I don't want to just give away my secrets. However, I also understand that some of you may be thinking "Is this guy just flying by the seat of his pants"? Just to help convince you that I'm not I'm going to share with you today one of my most important charts. As I shared with you in one of my April articles I look mainly at four elements to determine the long term direction of the market; price, volume, momentum and market breadth. Of these four I place the most weighting on price action. The chart I'm going to share with you today (click on image) focuses on price action and momentum. The most important things you need to know about this chart:



1) Notice there is an upper pane with what appear to be blue and red bricks. This is actually a method of charting price I discovered which Japanese traders use. In simple terms this technique plots price movement and does not take into consideration the time element. When price moves a predetermined distance up a blue bar forms. When price moves the same predetermined distance down a red bar forms. In my view the advantages of using such a chart over traditional time based charts are many but the most important is that it is much easier to analyze price movement.

2) In the upper pane there is also a moving average which is blue when rising and red when declining.

3) In the lower pane is a momentum indicator. Notice this also turns blue when rising and red when declining.

4) There are two simple rule I use with this chart. A) If the trend has been down then the trend will change to up ONLY if a blue price bar forms, the moving average turns blue and the momentum indicator turns blue. B) If the trend has been up then the trend will change to down ONLY if a red price bar forms, the moving average turns red and the momentum indicator turns red.

IMPORTANT NOTES: Notice I've highlighted the last four major trend changes on the chart with a vertical cursor and arrow. Also note that the long term trend remains up (green arrow) even though the last bar on the chart is red. This is due to the fact that the moving average and momentum indicator remain blue. Have a great weekend everyone. If you have any questions or feedback, please comment.

Back In

Greetings everyone. I stated last week the indicators that I look at pointed to indecision so I moved my money to the sidelines. I also stated that there was a 50/50 chance the market may rally. Well, it did. The S&P Index closed at 1117.51 on Friday. In hindsight it would have been great to get back in last week. But as I stated last week, when all factors do not align, the market could just as easily have dropped last week. It's all about probabilities. The good news is that this week everything is pointing up which indicates a high probability of a sustained up move during the next several weeks . Since the monthly arrow is still up (green) I'm moving back into mutual funds. I will continue to monitor the markets on a weekly basis because things are rather volatile right now.

FOR YOUR EDUCATION...Originally I had planned on unveiling the results of my weekly timing system in this week's article but life got in the way. I spent a lot of time at the hospital visiting my ailing father. Next week will hopefully be a little less hectic so I'll look to share more with you next Saturday. Have a great weekend and for all you Fathers out there...God's richest blessings.

What Now?

If you recall in last week's article I indicated that I moved all my 401-k out of mutual funds. This even though the monthly arrow remains green. If you missed that, please go back and read it to be enlightened as to the reasons why before continuing. This week the market did show some strength but my analysis indicates indecision right now. Half of what I look at suggests there could be a rally over the next week or two and the other half indicates weakness. My experience has taught me that when there's indecision, it's best to stand aside and wait for the market to prove itself. Each week I'll monitor the market and look for all factors to line up. That will be the best time to get back in, when the probabilities favor an extended rally.

FOR YOUR EDUCATION...This week I thought I would address the question of whether or not it's possible to make better returns than what money market funds have to offer during protracted bear markets, the likes of which we witnessed from October 2001 - March 2003 and November 2007 - March 2009. For those who have all their money 401-k plans unfortunately there is not a lot of flexibility. I would suggest checking with your plan administrator to find out which type of funds perform best during those times. In a future article I will post the results of testing the types of funds which are available in most 401-k plans to see if any offer superior returns.

For those of you with IRA's who are not familiar with exchange traded funds (ETF) I have good news for you. As you may know IRA plans allow much more flexibility in investment choices which includes the ability to invest in ETF's. I would suggest you "google" ETF for a more detailed explanation of what an ETF is but for our purposes I'll give a basic definition and the most important advantages that an ETF has over mutual funds. An ETF is designed to be similar to a mutual fund in the sense that it diversifies risk into many different stocks. The two most important advantages over a traditional mutual fund are: 1) An ETF is traded on a stock exchange just like a stock. So you can exit a position intraday. Mutual funds don't offer this flexibility. 2) Fees are lower with ETF's. But here's the most exciting part. There are a class of funds called "inverse" or "bearish" funds. Simply put these are funds which are designed to move in the opposite direction of a typical ETF or mutual fund, which is designed to profit only if the market moves up. One such fund is the Proshares Short S&P 500, ticker symbol "SH" which trades on the NYSE. Remember my long term model gave a red arrow in November 2007? Those of you with IRA plans could have moved all of your money into this fund (SH) at a price of 60.56 in November 2007 and exited at a price of 78.25 in March 2009 when the arrow turned green again (click on image below). This would have earned you a return of 29% over a 16 month period. Much better than the puny returns a money market would have paid, wouldn't you agree?



That's all I have for this week. If you have any questions or feedback regarding this or any other subject, please comment. Have a great weekend.

That's All I Can Stands, I Can't Stands No More!

Remember that familiar refrain? For those of us who are old enough you''ll certainly recognize that as Popeye's lament just before grabbing a can of Spinach which will empower him to dispose of his nemesis Bluto. Well, my response to what's been happening on the stock market is similar. I have moved all of my money out of mutual funds into money market funds. I have done this even though officially we won't know if the green arrow changes to red until the June 30 close. Please click on the image and I'll explain. Notice all the red down arrows from monthly peaks to monthly valley lows between April 2003 and November 2007. During this long term "green arrow" period the maximum monthly decline was only 5%. In November 2007 the long term arrow changed to red and correctly anticipated a bear market. Notice the maximum monthly declines between November 2007 and March 2009 were 15%, 10%, 30% and 19% respectively. Imagine the devastating effect on your account had you stayed in! Ok, now shift your focus to the far right. The S&P Index closed at 1064.88 on Friday, down 10% from the April 30 close. The last time the market declined this much from a peak was in January 2008. This came two months after the long term arrow changed red in November 2007.












So what does all this mean? Until now the long term methodology would have had us out of the market before the "larger than normal" corrections started occurring. As I mentioned last week all the elements of a long term trend change are still not present so the long term green arrow remains in effect. HOWEVER, our primary concern is ALWAYS capital preservation. There is a LOT of time remaining until the June 30 close. It is conceivable the market could decline much further between now and then. Remember the April 23 article in which I presented a table showing the percentage return needed in order to recover given percentage losses? Right now the S&P Index is down 10% from the April 30 high. This means that a return of 11% is all that is needed to recover that loss. The last thing I would like to see is a decline of 15% or more which would require much larger gains just to get back what was lost. It only makes sense to me to sit on the sidelines for now. In each Saturday post between now and the Wednesday, June 30 post I will make a determination as to whether or not it's safe to get back in mutual funds.

FOR YOUR EDUCATION...As I mentioned in last week's article I am nearing completion on research based on weekly and daily charts which may allow us to optimize the returns achieve using only the monthly charts. Also, some have asked whether there's a way for those who have IRA's to make returns superior to a money market fund during bear markets. As you may know 401-k plans don't offer such flexibility. But most IRA plans allow you to invest in ETF's (Exchange Traded Funds). There are bullish ETF's that will allow you to profit during market rallies and bearish ETF's that will allow you to profit during market declines. More on this in the weeks to come. Stay tuned and have a great weekend!

...When To Fold Em?

I have to admit that If I didn't have the benefit of following a reliable timing model I might have cashed in my chips by now. After all the S&P Index May month end close was down 8% from the April month end close. This is in fact more than a "normal" correction and is one of the factors I look at which does point to a potential long term trend change. However, it is only one of a handful of factors that I look at when making a determination as to whether a long term trend change is likely. It's important that you understand that a flip to a green or red arrow only occurs when all factors point to the same conclusion. Right now they do not. There is not unanimous agreement. So the green arrow remains in effect and I'm staying put. This strategy has paid off very well for me in the past...leaving my emotions at the door and making my investment decisions based on a reliable timing model.

IMPORTANT: I encourage you to check in each day next week. The reason is that although the monthly green arrow remains in effect it is rare that the model remains long (green arrow) when there's been a monthly decline of more than 5%. Also, the market is near a very important price level, that if broken, could facilitate a rather dramatic move lower. The last thing I want to have happen is wait until the June monthly close and find the market 15-20% lower than the April close. This would take too large a chunk out of the gains we've seen since March, 2009. So check in each day. If I don't post, nothing changes. If I do post It will be because I believe the long term trend has flipped down (red arrow).

FOR YOUR EDUCATION: I have no educational article for you this week but I think I have some exciting news for you. As you may have surmised by now although the monthly methodology I use has been very accurate in calling the long term turns, it weakness is that in most years there are is at least one, 1-3 month time frame where the market is actually declining or moving sideways. For months I've been researching and back testing a weekly market timing methodology whose objectives are to consistently exit the market as close as possible to a monthly market top and enter the market again as close as possible to a monthly market bottom. Obviously if that could be accomplished the already impressive returns achieved with the long term (monthly methodology) can be dramatically enhanced. The results so far are very promising. I hope to have more to report to you within the next 2-4 weeks.

Have a great holiday weekend everyone. PLEASE take the time to honor your country and the countless veterans who have sacrificed so much for our freedoms by flying your flag!

Market Update

Hello Everyone. No doubt most of you are getting a little concerned and rightly so. We haven't seen much to be positive about since April 30. It seems that every time the market has a strong up day, it is met with selling the next several days. Today the S&P Index closed at 1067.95 which is down 10% from the April 30 close. Remember I mentioned two days ago that if the daily close of the S&P Index closed below 1065 on strong volume that would give a high probability indication that the green arrow will flip to red? I stand by that. If the market closes between now and Friday below that level on high volume the green arrow flips to red. It is also possible that after Friday's close analysis of the monthly chart may also flip the arrow to red. If the S&P Index closes below 1065 on Thursday I will post that evening. If not, check the blog after 12pm on Saturday for an update.

Market Update

Not a whole lot to report today. The market did close lower than Friday's close but it did so on much lower volume. If you recall I forecasted higher prices at least earlier in the week. I think there's a good probability of that still happening based on the price action and volume of the last couple of days. However, if the S&P Index trades closes below 1065 sometime during this week on high volume that will in all likelihood flip the long term trend down. IF that happens before Friday I will post so you can get prepared to take any action with your broker/adviser. Otherwise, check the blog again after 12pm on Saturday for the next monthly update. Have a great night!

Power Of Compound Interest

Greetings all. The S&P Index closed at 1087.69 on Friday, down about 8% from the April 30 month end close (click on image). Remember a couple of weeks ago where I warned about some short term weakness? Well, the weakness has been more pronounced than I forecast. However, the index did close up on Friday with very heavy volume. This buying also took place at a critical support level which leads me to believe that there is a high probability of rising prices, at least through the first half of next week. Right now although the green arrow is still in effect, there are enough warning signs to suggest that the market may be in a transition phase on a long term basis. Next Friday's close will tell us a lot, as it will also be the May month end close. IMPORTANT: I would highly suggest that you may want to check the blog daily next week. The reason is that if early next week the market breaks below current levels on heavy volume there may be some rather serious deterioration in prices. Stay tuned.












FOR YOUR EDUCATION...Remember the article last week which compared three investors? Investor A was good about entering the market on the green arrows but he exited the market whenever he got scared instead of being disciplined and waiting for the red arrows to get out. He averaged a 10% annual return. Investor B followed the advice of many market "experts" and simply left all of his money in mutual funds through the major bear markets. He averaged a 2.4% annual return. Investor C ignored the experts and controlled his emotions by simply putting all of his money into mutual funds on the green arrows and shifting all of his money into money market funds on the red arrows.

I thought it would be interesting to compare the results of all three investors assuming that each was 50 years old, had $10,000 to start, and wished to retire at age 65:

Investor A...$41,772 (A 318% return on original investment)
Investor B...$14,272 (A 43% return on original investment)
Investor C...$135,895 (A 1259% return on original investment)

It doesn't take a rocket scientist to figure out who will still likely have to work at age 65 does it? I hope this motivates you to get serious about taking more responsibility in the planning and managing of your investments. If you don't the probabilities are high that you'll find yourself in the category of Investor B. It doesn't have to be that way.

Know When To Hold Em......

Hello everyone. Hope you all had a great week. The S&P index closed down 4% this Friday from the April 30 monthly close. As you know this correction falls into the "normal" category so the green arrow remains in effect. However, as I mentioned a couple of weeks ago I see some early warning signs of a potential end to this bull market. If any significant developments take place on a Friday close before the next month end update (May 29) I'll be sure to let you know.

FOR YOUR EDUCATION...Today I thought it would be a good idea to recap the most important principles necessary to maximizing returns in your 401-k:

1) Do not make investment decisions based on fear, emotion or gut feel. This is a sure path to substandard results and possible financial ruin.

2) Do not simply put all of your money into mutual funds and forget about it. This also is a sure path to substandard results and possible financial ruin. Hopefully I've demonstrated that to your satisfaction in the April 23 article. If you haven't read that yet PLEASE do so now.

3) The most sensible thing you can do is find a market timing method which has been successful in accomplishing three things: A) Has all of your money in well performing mutual funds when the probabilities favor that over the long term prices will rise. B) Keeps all of your money in mutual funds through the "normal" corrections. C) Has all of your money in safe money market funds when the probabilities favor that over the long term prices will fall.

Let me demonstrate the importance of following these principles. Please click on the following image. Take some time to examine this chart. As you can see the chart shows the important long term buy and sell arrows. A buy in April 2003, a sell in November 2007 and a buy in March 2009. Next I've noted the magnitude of all the "normal" declines in each bull market.












OK, now let's assume three investors:

Investor A tends to be influenced by his emotions. Although he puts all of his money into mutual funds when the green arrows appear he gets scared and looks to exit when the market declines significantly on a daily or weekly basis after negative news.

Investor B has ultimate faith in the market. He leaves all of his money in mutual funds all of the time assuming the market will always bounce back.

Investor C follows my market timing model. He puts all of his money into mutual funds when the green arrow appears and leaves the money in through all the normal corrections. When the red arrow appears he puts all of his money into money market funds. When the next green arrow appears he again moves all of his money into mutual funds.

Let's assume that all three investors start with $10,000 all in mutual funds in April, 2003. How would each have performed from April 2003 to May 14, 2010? Let's take a look:

Investor A puts all of his money into safe money market funds in April 2005 when the market declines 5%. He then shifts back into all mutual funds in March 2009. He then shifts all the money back into money market funds in January 2010. His account balance is now $17,000 which which represents a 70% return on his original $10,000 investment. His average annual return was 10%. Not too bad.

Investor B has had all his money in mutual funds ever since April 2003, enduring even the brutal bear market decline from November 2007 until February 2009. His account balance is now $12,400 which represents a 24% return on his original $10,000 investment. His average annual return was only 2.4%. Obviously not that good.

Investor C keeps all of his money in mutual funds through the normal corrections. He shifts all of his money into safe money market funds in November 2007. He then shifts back all of his money in mutual funds in March 2009. His account balance is now $23,000 which represents a 130% return on his original $10,000 investment. His average annual return was 19%.

Have a great weekend everyone!

Time To Panic?

In a word...no. At least that's my opinion. No doubt you are aware of the the significant down day on Thursday and to a lesser extent on Friday. Please click on the chart which follows. For the week ended 5/7 the market closed down 6% from the April 30 close. If you remember last week I stated that there was a good probability that the market may decline over the next 1-3 weeks. So why did the market sell off so dramatically last Thursday? In my opinion there were primarily three reasons...1) One of the things that led me to believe that the market may be susceptible last week is the lack of institutional volume supporting rising prices. Click on the chart again. Look at the bottom of the chart. This green histogram is simply the monthly NYSE volume. Notice the blue arrow? This shows declining monthly volume since November, 2009. Essentially higher prices were being supported by the retail crowd. 2) The market had moved 63% from the March, 2009 low without a meaningful correction. A market correction was way overdue. 3) When you combine #1 with #2 and a negative news story comes out, like the Greece financial situation, the "herd effect" kicked in. In other words panic selling. Everyone and their brother rushed in to sell at the same time.












So what does all of this mean? Although there has been significant weakness recently which is an early warning sign to potential long term weakness, not all the signs are there yet. This correction although swift is still only 6% which is well within the realm of a "normal" correction in a bullish market. So the green arrow remains in effect at least until the next monthly update, which is May 29. HOWEVER, given the current market situation I will monitor the markets weekly and if conditions warrant, may make an adjustment to a red arrow prior to May 29. So keep a cool head and stay tuned. Have a great weekend everyone.

Stay Focused On The Big Picture

Hello everyone. As you know April 30 was the last trading day of the month so today is the monthly update for April. Below is a chart of the monthly closing prices of the S&P Index (click on image to enlarge). If you shift your eyes to the right edge you'll see that the index closed at 1186.69. This close is higher than the March close which is bullish. My other indicators do point to potential weakness over the next 1-3 weeks. So it would not be unusual to see a decline of 1-5% over this time frame BUT the most important thing is on a long term basis the market remains bullish. The green buy arrow from March, 2009 remains in effect.

FOR YOUR EDUCATION: Some have asked me why I use a chart of the monthly closing prices to determine long term market direction. There are several reasons but the most important is that IMHO examining monthly closing prices allow you to filter out the daily and weekly fluctuations that otherwise may cause you to panic and thus exit you position prematurely. Let me illustrate what I mean. Click on the chart again. Notice the red down arrows numbered 1-10. Arrows 1-8 represent the maximum monthly percentage declines the market experienced between the April, 2003 green arrow and the November, 2007 red arrow. Arrows 9-10 represent the maximum monthly percentage declines since March, 2009. As you can see during these bull markets no decline exceeded 5%. The lesson to be learned is this; it is normal for a bull market to experience "temporary" declines ranging from 1-5% before the market resumes it's upward trend. I guarantee you that during many of these "normal" declines there were days that the S&P may have dropped 30-50 points, causing many to wonder, perhaps panic and maybe even exit their position. They then sat and watched the market take off again while their money earned 1% or less in a money market fund. SUMMARY: Stay focused on the big picture and do not let the daily fluctuations and news stories affect your investment decisions.

The Investment Holy Grail

Hello Everyone. Following is this week's chart (Click Image To Enlarge). As you can see the green arrow still remains and has been in effect since March, 2009. This week the S&P Index closed at 1210.08, which is higher than the March month end close. While the weekly updates are important the most important analysis is done at the end of each month. This is when a determination is made as to whether the long term trend of the market is up (green arrow) or down (red arrow). As you may know the last trading day of April 30. So next Saturday's post will be the monthly update for April.












FOR YOUR EDUCATION: In the last two week's articles I made a case for the importance of consulting a reliable "timing model" to help guide you in determining as to when you should be fully invested in mutual funds and when you should have your money safely in a money market fund. This week I am going to share with you what many investment professionals know to be the "holy grail" of investing. No, it is not having a great market timing system although that is an important component. Below is a table that I put together which displays several scenarios (Click Image To Enlarge). As you can see column 1 assumes a $10,000 account for each scenario. Column 2 assumes that your account suffers losses ranging from 10% to 100%. The most important thing to focus on is column 5. This is the column which tells you how much percentage gain you must make on your account just to recover what you've lost. Take time to carefully examine this table. If you lose 10% of your account you need only earn an 11% return to get back to break even. However, if you lose 50% you must earn an incredible 100% return just to break even! It should become clear to you by now that if you just left your money in mutual funds through the entire 11/07 - 3/09 market decline your account likely suffered a loss approximating 46%. This means that just to get your account balance back to it's 11/07 levels you would have to earn close to 100%. Since March, 2009 the market has moved 52%...very impressive but you're still far short. Kinda depressing isn't it? There is a very important lesson to be learned here. Knowing when to cut your losses is THE MOST CRITICAL element to your investment success.

Which Scenario Do You Prefer?

Greetings everyone. If this is your first visit PLEASE take the time to read through my first two posts. These lay the groundwork for everything I'm trying to accomplish here. You'll gain maximum benefit if you do. Just a few enhancements I want to inform you about before I get into the weekly update. First...as you know I'll be updating the blog before 5pm each Saturday. But it's also important for you to know that I will be updating the blog the day after the last day of each month. Don't worry. I'll remind you in my weekly update of the day I'll be doing the monthly update. Second...in addition to the weekly/monthly updates from time to time I will include an educational article. When I do include an educational article the post will be segmented into "WEEKLY UPDATE" and "FOR YOUR EDUCATION". The subject of any article will be reflected in the title of my post.

WEEKLY UPDATE: Below is an updated chart of the S&P Index (please click on image to enlarge). As you can see the green arrow is still in effect. This market continues to amaze me. There are really very few fundamental reasons why this market should continue to rise but that doesn't matter. All that matters is the market has been rising and my analysis currently supports staying in mutual funds.












FOR YOUR EDUCATION: The subject of today's article is really an extension of the title of last week's post "Why Market Timing Is Important". Today I'm going to show you three different scenarios....

Scenario 1 assumes that in April, 2003 you opened a $10,000 account fully invested in index mutual funds. If you followed the advice of most brokers/plan advisers they would have you simply hold your position. If you had done so then today your account would be worth approximately $13,000 which equates to a 30% increase over a 7 year period. This translates to an average annual return of 4%. Mmmm, a little better than sticking your money in a bank but barely keeping ahead of inflation.

Scenario 2 assumes that you in November, 2007 you opened a $10,000 account fully invested in index mutual funds. Again, if you followed the advice of most brokers/advisers you would have held your position through one of the most precipitous market declines in history. Today your account would be worth approximately $5,387 which equates to a 46% decrease over a time period of about 1.5 years. This translates to an average annual decrease of 18%. OUCH!

Scenario 3 assumes that instead of taking the advice of the so called experts you had decided to go fully into mutual funds on the green arrows and parked your money in a safe money market fund on the red arrows. If you had opened a $10,000 account in April, 2003 your account today would be worth approximately $24,135 which equates to a 141% increase over a 7 year period. This translates to an average annual return of 20%. Ahhh...that's more like it.

Stay tuned. In the weeks to come I'll be sharing more information with you which I believe may help you reach your financial goals quicker than you may have thought. Please feel free to post comments if you have any questions or suggestions for future articles. Have a blessed week!

Why Market Timing Is Important

Wait. If this is your first visit make sure you read through my April 2 post first. That posting and this one is vital if you wish to gain maximum benefit from future posts.

Well, as I promised last week below is the historical chart I promised you with all the buy (green) and sell (red) arrows going back to 2000 (click on chart to enlarge). This chart is of the S&P 500 which as you may know is a widely quoted market index which basically measures the overall health of the stock market. In simplest terms if it is going up, the stock market is healthy. If it is going down, it is not. Each black dot that you see is a plot of the closing price of the S&P index on the last day of the month. At the end of each month I look at four different factors; price action, institutional volume, momentum and market breadth. Based on my 20 years of experience I synthesize this information and make a determination as to whether the market is bullish or bearish. If it's bullish that month will be given a green arrow which will remain until a monthly bearish determination is made at which time a red arrow will show.

















Did you know that studies show that at least 70% of stocks rise when the market rises and fall when the market falls? This is why it is so important to have a market timing model you can rely on. How much more money would you have in your 401-k if you had moved all of your 401-k into money market funds on the red arrows and back into mutual funds on the green arrows?

So how might you utilize this information? Well, for me...when there's a green arrow all of my money is in mutual funds. When there is a red arrow I move all my money into a money market fund. Most 401-k plans offer several different mutual funds to the participant, including "index" funds. In my own 401-k I prefer to put all of my money into an S&P index fund when there is a green arrow. The reason is that this fund will mirror the S&P index, which is what I base all my analysis on. If you can't find an "index" fund in your plan I would suggest you consult with your plan advisor/administrator to see what he/she may suggest. Well that's it for this week. As you can see the chart still has a green arrow. I will post another update next Saturday. So stay tuned and please...submit questions.

What I'm Doing & Why?

Hello. My name is Chuck Harkes. I am a self taught investor/speculator. Back in 1990 I gave up on investment real estate and developed a passion for learning about what makes the stock market tick and how I could profit from it. For many years now I have been successfully managing my own 401-k investments based on the knowledge and experience I’ve gained. This experience was never more valuable than in the fall of 2000 when most other advisors were suggesting to be fully invested in the stock market. Meanwhile, my methodology was telling me that not only was a correction likely, but that this correction could result in a steep or protracted bear market. Two years later the bear market did end, but only after many lost 40 – 50% of their retirement wealth due to placing their faith in well meaning but misguided advisors. In March, 2003 my methodology/system told me that the probabilities favored a substantial move up. The market did indeed rise over the next 4 ½ years. In November of 2007 my methodology again indicated a high probability of a substantial decline. The market did indeed decline, in percentage terms very similar but much faster than the previous bear market. In March of 2009 my methodology indicated a high probability of a substantial rise in the market. The stock market has been rallying ever since.

So what is the purpose of this blog? Quite simply, my heart is for people who needlessly lost too much of their retirement wealth. My plan is to post my analysis of the stock market on a weekly basis along with a chart which will either have a green arrow or a red arrow. A green arrow means the market direction is up and I’m fully invested in mutual funds in my 401-k. A red arrow means the market direction is down and I’m fully in cash. I will also show you in my next post a historical chart showing you the signals that have given me timely entry and exit points since 2000. What you do with this information is up to you. You may choose to take the same actions that I do or you may choose to follow along for a time to see if I’m for real. Whatever you decide you need to understand that I am not a licensed advisor. I am not offering advice. I’m simply showing you what has worked for me. For now I am offering it for free. My wife has been twisting my arm to charge for it. But I figure too many people have been burned by so called “experts” who earn a fee whether they win or lose. Let’s let them take a free peek for a while and judge the merit of what I do. From now on my weekly posts will be completed on Saturday. So you should plan on checking in late Saturday evening or on Sunday. I look forward to this journey and hope many of you benefit from it. Happy Easter everyone!