PseudonymName's  Instablog

Well, we missed it. This latest rally, that is. Our SP500 timing system was very near a buy signal on 11/2/09 and the market was cooperating when Mr. Buffett stepped in and announced that he had just purchased a railroad (must be nice to just go out and buy an entire railroad every time you get a little bored) – and that at a premium price. The result was that the bottom of the market formed a day or two early and this market has not looked back since then. As a result, we have been waiting for more than a month now for the timing system to produce the next trade.

 

So when will the timing system produce the next buy signal you ask? Well, that is a good question because the timing system has finally produced the next buy signal for tomorrow’s (Friday’s) close. The only problem is that the entry point produced by the system is clear down at 1056.91. Monday’s and Tuesday’s entry points will both be higher if we fail to buy Friday’s close but this still requires the SP500 index to fall substantially between now and then - something which seems to be quite out of character for this market lately. If we fail to buy by Tuesday’s close, we will again be locked out of the market until after Thanksgiving which is not all bad because generally I do not like to hold trades over holidays - with Christmas perhaps being an exception to that rule.

 

So, where do I see this market headed in the short term? Well, the timing system is indicating that we are again overbought and that stocks are too expensive. I have to agree. However, I do not see a major correction in the cards either but more likely a retest of the Buffett low.

 

You see, this market has some unfinished business down near 1040 on the SP500 index in my opinion. Before Mr. Buffett stepped in and stopped the fairly rapid decline around Halloween, the index closed below the 50 day moving average. Even though we have rallied from that point there remains a question in many traders’ minds. Why did we break through the 50 day MA? How low would we have gone if Mr. Buffett had not stepped in? Did this market really find support or did it find artificial support ala Warren? There is only one way to know for sure – retest the 50 day moving average. Though we will retest the 50 day MA again at some point, the timing system is indicating that we will do so sooner rather than later.

 

Current Status:          Cash

Next Buy Date:          Friday, 11/13/09, if we close below 1056.91.

*This cannot be calculated until after the next buy.

Buy and Hold Return:            -32%  

Timing System Return:         203% 

Details of this back tested performance are available here.

The SP500 Timing System is specifically designed for those who desire to increase their returns by timing the market in non-brokerage accounts such as 401K or IRA accounts or any account where you buy and sell only at the daily closing price.

The purpose of the blog is to document the performance of my SP500 Timing System. All buy and sell signals are posted in advance of each trade. Before trying to time the market you should be aware of any fees or additional charges that you may incur as a result of frequent trading. Check with your financial institution for a list of these fees. Use this information at your own risk.

Disclosure: No Positions.