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Timing the Market

Timing the Market

By Allan

The single best stand alone indicator for timing this market during the past six months has been the SPX 240-minute Trend Model.  I can make a similar case for the 120 minute and Daily Trend Models, but the 240 minute does provide a very nice balance between the two and in fact, between intraday and end-of-day trading. 

SPX_240 Trend Model
 
I've noticed that while overall performance is good across the board of my intraday/daily models, that at various times some individual models tend to be more prescient then others, i.e providing particularly accurate market timing.  In the spirit of what's working now, here are my back-tested statistics for the 240_minute model: 
  • Period: February 3, 2010 - July 16, 2010
  • SPX = 1086 -> 1066 
  • Net = -20 SPX points
  • Trades:    21
  • Wins:   12
  • Losses:   9
  • Percent Winners: 57%
  • Net =  +261 SPX points

The characteristics of this performance that stand out are that first, it is of recent price action, reflecting the personality and character of this market, although subject to change at any time; second, that even though almost half of the trades are closed out as losses, that the winners not only compensate for the losses but go on to provide stellar results.  

Finally, the characteristic that maybe is the most striking of all is that this is a purely objective, mechanical market timing methodology.  There is no subjectivity (read: stress) whatsoever in the trading system.

What does it take to trade something like this?

The jury is out.  Belief is certainly up there on the list, discipline too.  Maybe the elimination of ego is also critical to successful implementation.  All three seem to be essential, along with the simple algorithm that draws the trend line, which is updated throughout the trading day in my subscription service.

The model went SHORT on Friday. 

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Allan’s “Trend Following Trading Model” is based on his trend-following trading system for buying and selling stocks and ETFs. Most trades last for weeks to months. Allan’s offering PSW readers a special 25% discount. Click here.  For more details, read this introductory article. 

Disclosure: none