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Frank started market timing in 1982 when the Federal Reserve cut interest rates and sparked the 1980’s bull rally. Realizing that this rally could have been forecasted, he began to search for indicators which had similar forecasting ability. Within a year, his first newsletter was launched,... More
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  • Can You Predict The Future?

    Most investors believe they can predict the future. Or at least, that someone else can. At Fibtimer, we rely on the fact that most investors are convinced they can predict the future. This is where most of our profits come from. Their errors.

    In the world of investing, it is prices, not investors, that predict the future.

    Looking For The Holy Grail

    As our subscribers know, Fibtimer identifies and trades trends. We do not use hocus pocus to forecast the market's direction. We identify the trend and go with it.

    Over many years of market timing we have realized that trying to predict the future course of the financial markets is a sure path to losses. But trading trends, which is not predicting but going with the already identified direction of the markets, has produced consistent profits for as long as free markets have existed.

    But this is just too simple an answer for most investors.

    Looking for the Holy Grail, investors spend untold sums of money on analysis software, trading systems, and market gurus. All in order to predict the future.

    However there is no Holy Grail. There never has been and there never will be.

    But this doesn't mean profits, indeed huge profits, cannot be made in the markets.

    They are just not made by most investors.

    True Believers And Greater Fools

    Interestingly, Fibtimer profits because we rely on the fact that most investors and traders believe they can predict (forecast) the future.

    As these investors buy and sell, the "Greater Fool Theory" kicks in.

    Investors buy a stock with the belief someone will pay more for that stock in the future. This continues as a stock is traded up in price. As more investors buy and sell the same share for higher sums, sentiment begins to build that higher prices and profits are almost a certainty.

    As more investors believe they can buy a share and sell it at a higher price (looking for the "Greater Fool"), more and more investors (believers) jump on board. Investor psychology in its most basic form.
    Of course, someone has to wind up holding those shares with no one interested in buying them. This is when the trend changes.

    The "Greater Fools" are holding shares they cannot sell without a loss. As sentiment changes, the markets begin to drop. Eventually the new trend, to the downside this time, builds a head of steam. Investors feel they can (or must) sell shares. They will be able to buy them back at a lower price. (The Greater Fool Theory in reverse).

    Market trends are born of changes in sentiment. Fibtimer trades the trends created by the the tens of thousands of traders and investors who make them.

    Trend After Trend

    Trend, after trend, after trend. All defined by changes in price. They are rarely forecasted, or there would not be so many investors on the wrong side of trades.

    But trend traders, who understand that investors move with a herd like mentality, can use this information to profit.

    As the herd starts moving in one direction, what changes? Price.

    Using price to determine trend, then jumping on board the trend and riding it till the end, is where true profits lie.

    Don't Let Anyone Tell You

    Do not let anyone tell you they can forecast the future direction of the markets. We will not tell you that we can do it, and we hope you will not let anyone else convince you they can.

    Obviously, if 100 market forecasters make predictions, someone will be right. But consistently being right is another story entirely.

    Following trends, determined by changes in price, is the only consistent path to solid profits. It is not right all the time. Nothing is. But trends usually move much farther than anyone ever expects, and in trading those large trends, huge profits are made.

    Nothing Has Changed

    Change is constant. Because change is constant, uncertainty is constant.

    From uncertainty, trends emerge. Sentiment changes, true believers begin to buy into the new rally, and another trend is born. Over, and over, and over. Month after month and year after year.

    The markets have come a long way in recent years, with instant quotes, trading software, a mind numbing array of technical indicators. But one thing that has not changed is investor's reactions to change. Fear and greed still hold sway.

    Fibtimer exploits the reactions of investors. Those reactions are embedded in prices and lead to trends. In this respect, though trading is now done at the speed of light, nothing has changed.

    Apr 17 3:48 PM | Link | Comment!
  • Market Timing Facts Vs. Market Timing Fiction

    The phrase "market timing" has been terribly misused, and misunderstood, by market commentators, analysts, traders and investors.

    A stock, etf, mutual fund, commodity, is purchased with the expectation it will be worth more over "time." It is sold when the expectation is that its value will decrease over "time." Any analysis intended to create a profitable return on investing, is a form of market timing.

    The fact is, no one buys a stock expecting it will be worth less over time. They choose a time to buy it, based on fundamental or technical analysis, and expect that over time it will be worth more.

    Market timers usually use index mutual funds and more recently ETFs covering one or more of many possible markets. They can time the S&P 500, the Nasdaq 100, Gold, small caps, bonds, U.S. dollar, etc.

    Timers purchase the index fund with the expectation that it will increase in value. They sell the index fund when they expect it will decrease in value.

    Just about everyone trading the financial markets is, in one way or another, a market timer.

    If you think of market timers as crystal ball watchers, well...there are some out there who believe they can forecast the future. But we do not.

    We use technical analysis to identify and follow market trends and we do so quite successfully.

    At FibTimer, we specialize in trading index funds, as well as sector funds, exchange traded funds, and even selected stocks which tend to trend well and work profitably with our timing strategies.

    Tell Us Another Story

    We believe that some of the worst advice, which is given to the vast majority of investors, is to select an index fund, set up an automatic deposit program to make monthly deposits into it, and then do nothing until you retire. At that time, so the logic goes, you will be rich from the huge profits derived from your investments.

    Buy-and-hold say the experts.

    Buy-and-hold say the advisors who profit from your investment purchases though commissions.

    Buy-and-hold say most mutual fund companies who profit from load fees so numerous in variety it would take too much space to list them all here.

    Buy-and-hold say TV commentators and newsletter publishers who's clients already own the stock.

    Imagine for a moment an investor, following such a buy-and-hold strategy, who planned to retire in 2002 or say 2008.

    Depending on the index fund, the value of his or her retirement funds would be worth 50% to 80% less after the 2000-2002 bear market.

    And if they did manage to recoup some of those losses, what happened in 2008-2009 when the stock market again lost 50%?

    But those mutual fund traders who spent a little time watching the markets, who used even a simple 200 day moving average to determine that their fund investments were no longer performing well and exited to cash, avoided most of the losses and made money in money market funds.

    Market timing doesn't work? Sure, tell us another story.

    Change Is Inevitable

    Market timing is based on the fact that 80% of stocks will follow the direction of the broad market. It is based on the fact that the markets trend over time, and have been doing so since the beginning of freely traded markets.

    It is based on the fact that change in the financial markets is the one thing we can count on to always happen.

    Simply said, the markets will always go up and down, and the majority of stocks in the market will follow the current trend. Change is inevitable.

    And here is the key.

    While over the short term, financial markets can seem very chaotic. Going up one day and down the next, seemingly with no rhyme or reason. Over time, they trend in huge up and down moves, easily seen on historical charts. And those long term moves can be traded profitably. Trend timers (trend traders) have been doing it for years. Quietly making huge sums of money while most investors, following the emotional dictates of fear and greed, lose.

    Either Take Action, Or Go Along For The Ride

    The best tools for making entry and exit decisions, in order to profit during upward trends and safeguard capital during downward trends, are technical analysis tools. Fundamental analysis does not take into account whether a stock is in a down trend or up trend. It is of little use to market timers. What counts is price. Is price rising or falling? Is it trending? Technical analysis can give us the answer.

    As mentioned above, a simple 200 day moving average would have kept mutual fund investors (and most individual stock investors) from losing their shirts in the 2000-2002 bear market. It also would have saved them from losses during the 2008-2009 bear market. Moving averages are very simple technical analysis tools.

    Obviously there are better tools than the 200 day moving average. Not everyone wants to wait until a mutual fund has dropped below its 200 day average. Much depends on a traders time frame. Are they aggressive, conservative, or active? Their emotional ability to handle losses is also a factor.

    Gains can also be enhanced by aggressive traders who are willing to use bear funds during declines. In the case of the 2000-2002 bear market, our aggressive strategies that use bear funds beat the market by over 100%. In the 2008-2009 bear market, our aggressive strategies beat the market by 59%. Even our conservative strategies were safe in money market funds.

    But regardless of a traders choice of funds, whether or not they are aggressive, conservative, or just don't want to lose their shirts when the markets tank, market timing is the only answer.

    You either use a methodology that takes you out of declining markets, or you tank right along with the declining markets (along with all the other buy-and-hold investors).

    There is little choice. Either take action or go along for the ride.

    We are market timers here at FibTimer and have been for a very long time. We have realized the profits, and have also been through the ups and downs of many market cycles; bull, bear and sideways.

    Exceptional results are made by following solid, tested, non-discretionary timing strategies for long periods of time. Poor results are the consolidation prize for those who follow conventional wisdom, park their brains on hold for decades, and let the markets decide whether they retire rich, or unfortunately, poor.

    Apr 10 6:32 PM | Link | Comment!
  • Sector Timing For Conservative Market Timers

    The current markets are as volatile as any seen since the 2008 bear market chopped more than 50% off the major indexes. We may not have a bear market in our immediate future, but knowing that individual sectors will exit in time to protect us is important.

    Volatility is great if it is within a trend, and it often precedes a new trend, causing unnecessary anxiety in inexperienced market timers. But volatility is also needed to profit, something that many market timers forget.

    There is one strategy that is hardly affected by the volatility, and it is also quite profitable, year after year. For those who are conservative market timers, we suggest the Fibtimer Sector Timer.

    Trading the Sectors

    How does a market timer take advantage of volatility, while protecting himself or herself from the very real risks such volatility creates?

    The answer is by trading the sector funds. Here is a "quick" list of reasons why:

    1. Diversification: By having small positions in multiple industries, you reduce exposure to any single industry being affected by a negative news event.

    2. Volatility: While individual sectors are no less volatile than the rest of the market, they do not move together. So the volatility to one's portfolio is considerably reduced.

    3. Drawdowns: Because sector funds go to cash during sell signals, and because there are always some funds in bull markets at the same time there are others in bear markets (during which those sectors are protected in money market funds), drawdowns are kept to a minimum.

    4. Good in All Markets: There are always single industries in their own bull markets. Even during a cyclical bear market, such as we experienced during 2008, there were always some industries moving higher. And if not, you are still protected by being in money market funds.

    5. Active Timing: Though sector timing is not aggressive, it is certainly active. You will always be trading the bullish sectors, and exiting the under performing ones. In some respects, it is the equivalent of running your own well managed mutual fund.

    6. Trends: Industry sectors tend to trend. And when they trend, they often move further (in either direction) than anyone expects. During a strong bull run, it is common to find individual sectors that double the gains of the overall market.

    Winning The Battle

    The Fibtimer Sector Timer strategy covers 16 industry specific sector funds found in the Rydex Fund Family. Several other widely used fund families also have sector funds, including Pro Funds and Fidelity Funds which can be used with our sector timing signals.

    Even in volatile market conditions the Sector Timer strategy performs exceptionally well. This is proactive money management at its best. Constantly putting your money in the strongest sectors while removing it from the weakest sectors during down trends.

    This is where the diversity inherent in sector timing stands out. Top performing sectors are where your timing funds are allocated, and no one sector can cause irretrievable damage to the portfolio should that industry collapse without warning.

    But most importantly, as a portfolio strategy, sector timing has been winning the battle against a stock market that has gained little in the past ten years for buy-and-hold investors.

    Conclusion

    Over the years, sector fund timing may go down as the "best conservative strategy" because of its ability to target funds into "only" those industry sectors which are performing well.

    The low drawdowns, low volatility and diversification inherent in sector timing, not to mention strong profitability, cause this strategy to stand out from all the others.

    In volatile market conditions sector timing can create profits while other traders are watching their capital evaporate.

    While sector timing may not make huge gains during cyclical bear markets, being mostly in cash, the strategy will protect your investment capital. And it will then perform well during bull markets, always keeping you invested in those industries that are in their own bull markets.

    Caveat... sector timing does require active participation. Perhaps we should say it is for "active conservative market timers." The FibTimer Sector Timer often makes several changes each month though the number of changes is much smaller during bull or bear markets when trends are strong.

    Sector timing also requires a minimum account size. Remember, there "could" be as many as 16 open positions at any one time, and closed (bearish) positions should be in cash (money market funds) with those funds remaining untouched. A good guess is that a sector timing portfolio should be at least $25,000 to start.

    A new market timer could select seven or eight of the major sectors and create a smaller portfolio. For example; Consumer Products, Energy, Financial Services, Health Care, Leisure, Retailing, Technology and Utilities.

    The FibTimer Sector Timer only requires a couple of minutes a day to check for and make changes if they are needed. And we email those changes every evening to subscribers.

    Apr 03 5:10 PM | Link | Comment!
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