Why Investors Should Not Swing for the Fences

Mike Turner |

Baseball SwingThis week, my road team and I are in Las Vegas for the Wealth Building Symposium and Money Show at Caesars Palace. I hope you have made arrangements to attend. This will be our first CycleProphet Users Meeting (Tuesday morning and Wednesday morning... see schedule, below). I'm not sure what to expect but know the interchange will likely be a lot of fun and informative for the CycleProphet staff and our loyal customers, as well.

Quote worth Quoting Again

"We must not let our rulers load us with perpetual debt. We must make our selection between economy and liberty or profusion and servitude. If we run into such debts as that we must be taxed in our meat in our drink, in our necessities and comforts, in our labors and in our amusements, for our callings and our creeds...our people.. must come to labor sixteen hours in the twenty-four, give earnings of fifteen of these to the government for their debts and daily expenses; and the sixteenth being insufficient to afford us bread, we must live.. We have not time to think, no means of calling the mis-managers to account, but be glad to obtain subsistence by hiring ourselves to rivet their chains on the necks of our fellow suffers. Our landholders, too...retaining indeed the title and stewardship of estates called theirs, but held really in trust for the treasury, must...be contented with penury, obscurity and exile.. private fortunes are destroyed by public as well as by private extravagance.This is the tendency of all human governments. A departure from principle becomes a precedent for a second; that second for a third; and so on, till the bulk of society is reduced to mere automatons of misery, to have no sensibilities left but for sinning and suffering... And the fore horse of this frightful team is public debt. Taxation follows that, and in its train wretchedness and oppression."...

Thomas Jefferson

Have you noticed the number of commercials running now that have the theme of, "Ok... I am ready to finally get back into the market... I need help!" 99% of the money managers out there will ask you to pay them to put your money into "long-term investment strategies" because most money managers are NOT traders. They will posit that the market always goes up "in the long run"... and... they are right; if you live long enough and are willing to suffer major losses when the market moves into a bear trend for months or years. I'd like to see one of those commercials go something like this: "Ok... I am ready to finally get back into the market. What happens if the market suddenly reverses and repeats 2008? How will you protect me in a bear market?" Just once, I'd like to hear one of those big name financial institutions respond to those questions. I am a money manager and I have a plan for my clients in bull markets AND in bear markets; and, I have a well-defined strategy on how to anticipate both. In fact, I will be speaking on this topic several times this coming week.

Most "money managers" do not actually trade for a living... most are salesmen that convince their customers that putting money with their funds/managers of funds will result in great returns. Most money managers are good folk and are honest, but few are actually managers of money in the stock market. Keep that in mind the next time you have an occasion to speak with your money manager. Many years ago, before my life in the world of finance, I learned the hard way that most successful money managers are not traders.

When it comes to the buying and selling of securities in the stock market, I have found that it is best to let a computerized set of rules do the "heavy lifting" and leave the nuances of entry price, exit price, percent of portfolio, etc. to the trader. Such things as trend analysis, probability forecasts, fundamental analysis, technical analysis, etc. are far better performed by a well-written computer program. It is the combination of heavy lifting and nuance decision-making that generally produce the most consistent profits in the stock market. This process is not given to a lot of hyperbole and swinging for the fence. It is more the slow-and-steady process where winning trades outnumber losing trades and the average size of winning trades is larger than the average size of losing trades. These should be part of the goals of a serious investor and should be the heart-and-soul of professional traders. Use your head for nuance... use CycleProphet tools for the heavy lifting.

If you are looking only for trades that will result in doubles or triples or more; be prepared for doubles or triples or more in losses. Look for singles and an occasional double (in baseball analogy) and do not try to hit a home run every time you get a chance at bat.


My Take...

Going through my market indicators in Market Forecaster, I have the following observations:

  • All 4 major US indexes have bear trend probability forecasts.
  • 50% of the market Sectors have bear trend probability forecasts.

My conclusion... now is not the time to put 100% of your investable funds into bull trend plays. But, this market is too strong to stay out of, too.

I am willing to stay long just because the market has not reversed, but I am reticent to put a lot more money into long positions right now. In fact, I prefer to begin looking at adding some inverse ETFs; but not before I can see the market put in more than a few down days.

I am 50% long and 5% short in the CP Trades portfolio and will likely stay close to that ratio for this week; pending a market reversal. Oil looks very bearish, so I may put on a short oil play regardless of where the market moves overall.


The Bull/Bear Oscillator Report...

Each week, our computer programs compile the total number of equities in our database (over 6,000) that are issuing new "Alerts" for this coming week. The Alerts can be any one of the following:

  • BUY - This means the status of the equity last week was "OUT" and this week, the weekending closing price moved high enough above my 10-week, time-shifted, moving average to trigger a "BUY". Click Here for this week's STRONG BUYS, or Click Here for this week's BUYS.
  • OUT - This means the equity stopped out by triggering a long-position stop-loss where the equity was sold, or it triggered a short-position stop-loss where the short position was covered.
  • SHORT - This means the status of the equity last week was "OUT" and this week, the weekending closing price moved low enough below my 10-week, time-shifted, moving average to trigger a "SELL SHORT". Click Here for this week's STRONG SELLS, or Click Here for this week's SELLS.

A running total of these new conditions (BUY, OUT, SHORT) is kept on a weekly and monthly basis. We have found that an analysis of these data provide a reasonably consistent view of short term (upcoming week) and longer-term (next few weeks) of the market, as follows:

  1. First of all, the ratio of new Short Sell Signals (red line in the Turner CrossOver Oscillator, below) is an excellent indicator of overbought or oversold conditions. Oversold means the market will have a tendency to move from a downward trend to an upward trend.
  2. We have also found that the total number of Short Sell Signals compared to the total number of Buy Signals is a reasonably good indicator of investor sentiment. The more Short Sell Signals, the more bearish the sentiment. The more Buy Signals, the more bullish the sentiment. This investor sentiment analysis is generally more valid for the upcoming week.
  3. The Composite (black) line is produced by subtracting the total number of Buy Signals from the total number of Short Sell Signals. Charting this total over time and observing how the red line crosses the black line, often provides an excellent early warning of a market correction.

These data elements, along with charting the trend of the S&P 500 provide the basis for the brief forecast provided in these weekly Reports. It is important to understand that this analysis is based solely on a technical analysis and anecdotally-derived historical observations of these data. I write the weekly forecast based on my observation of the data and the Oscillator chart. Time-cycle data are NOT explicitly included in this analysis.

The investor sentiment Bull-to-Bear ratio continues to support a move higher in the market in the near term with 4-to-1 ratio favoring of the Bulls.The black line (Composite of Signals) looks to have bottomed a week ago and continues to move in a Bullish direction. The red line (New Short-Sell Signals) is flattening a bit but is still in the range that supports the notion that the market is somewhat overbought.

However, the time-cycle probability forecast charts are becoming more and more Bearish with an indication that the market could reverse course at any time and move rather strongly to the downside.

If you believe the market can only go higher, then you must consider the risk of a correction grows with each day of this unstoppable Bull cycle.

The safer course of action is to stay nimble, small and greedy about profit-taking.

Turner Bull/Bear Forecast
For the Upcoming Week

The Turner Bull/Bear Forecast™ provides a one-week directional forecast on the market, with [-5] being the most Bearish and a [+5] being the most Bullish. This is predicated on the ratio of number of new Buy Signals to the number of new Short Sell Signals for the previous week. The assumption is investors are becoming more Bullish the more lopsided the ratio becomes in favor of new Buy Signals; and the converse is true; the more lopsided the ratio becomes in favor of new Short Sell Signals, the more Bearish investor sentiment.

 

The Turner CrossOver Oscillator™ provides an indication of the over-bought or over-sold condition of the market. The red line (New Short Sell Signals) shows a technical direction and strength (or lack thereof) of investors to push stock prices lower, triggering new Short Sell Signals. The higher the Short Sell Signals line, the more Bearish the market. The black line (Composite of both Short Sell and Long Buy Signals) is the combined impact of both the new Short Sell Signals and the new Buy Signals and is an indication of the degree of oversold or overbought condition of the market. Buying opportunities exist when the Composite of Signals line is moving higher. The higher this line moves, the more Bullish the market. Market bottoms are represented by a change in direction of the Composite of Signals line from moving lower to moving higher. Market corrections become much more likely when the Composite of Signals line crosses the Short Sell Signals line from below the Short Sell Signals line to above the Short Sell Signals line. The market is represented by the green shaded area.

The 2013 Wealth Building Symposium in Las Vegas!

There has been a last minute change in the meeting room for Tuesday and Wednesday. If you are coming to the Symposium, please note the change. Below is the current schedule:

Wealth Building Symposium for 2013
Sponsored by CycleProphet, Inc. and Sabinal Capital Investments, LLC

Tuesday, May 14 in the Verona Meeting Room

8:30a - 9:45a CycleProphet Users Group Meeting -- This session is for CycleProphet subscribers, but is open to anyone interested in CycleProphet. This session is intended for a high-level discussion of the CycleProphet tools and how best to use them. An in-depth Q/A session is included. This session is conducted by Mike Turner and staff.

11:15a - Noon Wealth Building by the Numbers -- This is an in-depth overview of the CycleProphet System and how we recommend that users get the most out of the rules, tools and strategies. This session is conducted by Mike Turner.

12:45p - 1:30p The Top 15 Portfolio -- How to build and manage a portfolio using the stocks with the highest rated fundamentals and technicals. In this session, Will Turner, will teach attendees how he manages the Top 15 Portfolio and take questions regarding any aspect of this type of portfolio management. This session is conducted by Will Turner.

2:00p - 2:45p The CP Trades Portfolio -- In this session, attendees will learn Mike Turner's approach to trading the CP Trades Portfolio and how it is different from his Sabinal One Portfolio. This session is conducted by Mike Turner.

3:00p - 3:45p Using CycleProphet to find the best trades -- This is an in-depth review of stepping through all the CycleProphet tools to find the best trade. This session is conducted by Tom Meyer.

4:15p - 4:45p Wealth Building by the Numbers -- This is Mike's Money Show presentation where he provides an overview of CycleProphet and the Wealth Building Symposium. This will be in Milano V.

5:15p - 5:45p The Top 15 Portfolio -- This stage presentation is a brief overview of how CycleProphet is used to select entry and exit strategies for positions in the Top 15 Portfolio. This session is conducted by Will Turner.

Wednesday, May 15 in the Verona Meeting Room

8:30a - 9:45a CycleProphet Users Group Meeting -- This session is for CycleProphet subscribers, but is open to anyone interested in CycleProphet. This session is for those users who were unable to attend the May 14 Users Group Meeting and is intended to be a high-level discussion of the CycleProphet tools and how best to use them. An in-depth Q/A session is included. This session is conducted by Mike Turner and staff.

10:30a - 11:30a A Woman's Guide to Wealth Building -- This is a session primarily for women who may, for the first time, be faced with managing the investable funds as presented by a woman who has had to deal with just such a situation following the death of her spouse. This session is presented by Jan Rushing and assisted by Tom Meyer.

Noon - 1:00p Building a Winning Portfolio -- In this session, Mike discusses his approach to building a world-class portfolio. He describes how he maintains his Sabinal One Portfolio, including how he selects equities for long positions and how he uses inverse ETFs for bear trends in those same positions. This session is presented by Mike Turner.

1:30p - 2:15p Using Fundamentals and Technicals to Trade Profitably -- In this session, Will reviews and demonstrates the power of Equity Analyzer and how a simple approach that uses scores and changes in scores can produce very favorable results and many winning trades. This session is presented by Will Turner.

2:30p - 3:15p What's the Probability of Trading Success? -- This is an in-depth review of the math and science behind the probability forecasting algorithms used in Equity Forecaster and Market Forecaster. If you like math and cyclical thinking, you do not want to miss this session. This session is presented by Mike Turner.

3:30p - 4:15p Using CycleProphet to find the best trades -- This is an in-depth review of stepping through all the CycleProphet tools to find the best trade. This session is conducted by Tom Meyer.

4:30p - 5:30p Wealth Building by the Numbers -- This is an in-depth overview of the CycleProphet System and how we recommend that users get the most out of the rules, tools and strategies. This session is conducted by TomMeyer.

Thursday, May 16 in the Tuscany Room

9:00a - 9:45a Mike Turner's View of the Market -- Reserved for Sabinal clients and those interested in becoming a Sabinal money management client. In this session, Mike walks the attendees through his take on the market and how and why he is currently positioned in the Sabinal One Portfolio.

10:00a - 11:30a The Sabinal One Portfolio -- Reserved for Sabinal clients and those interested in becoming a Sabinal money management client. In this session, Mike reviews each of the positions in the Sabinal One Portfolio and whether he is playing a long trade or a short trade and why or why not. Intensive Q/A is expected.

Noon - 1:00p Open Q/A with Mike Turner -- Reserved for Sabinal clients and those interested in becoming a Sabinal money management client. In this session, Mike will open the floor to any/all questions concerning his money management strategies and the Sabinal One Portfolio.


Closing Thoughts...

I won't be recording a market commentary video for this coming week or the following. This week will be consumed by the Wealth Building Symposium and Money Show in Vegas. I will be proffering many commentaries on the market this coming week to those who will be attending my speaking sessions.

The following week, Sue and I plan to take a week off in beautiful Boise, Idaho. We plan to do some biking, sight-seeing, maybe some fishing... but mostly just sitting on the patio watching the river roll by. I have asked Tom and Will to keep an eye on my CycleProphet portfolios. I will still have Internet access and will be monitoring my Sabinal One portfolio, personally. But, I do not plan to write a newsletter next weekend. I hope you understand and are willing to give me a little time off for R&R.

Have a great week in the market!

DISCLOSURE: The views and opinions expressed in this article are those of the authors, and do not represent the views of equities.com. Readers should not consider statements made by the author as formal recommendations and should consult their financial advisor before making any investment decisions. To read our full disclosure, please go to: http://www.equities.com/disclaimer

Companies

Symbol Name Price Change % Volume
GGACU Garnero Group Acquisition Company Units n/a n/a n/a 0

Comments

Emerging Growth

MGX Minerals Inc.

MGX Minerals is a diversified Canadian mining company listed on the Canadian Securities Exchange. MGX is engaged in the acquisition and development of industrial mineral deposits in western Canada that…

Private Markets

Airbnb

Airbnb is a community marketplace for people to list, discover, and book unique accommodations around the world — online or from a mobile phone. Whether an apartment for a night,…

8tracks

Our mission is to be the best place for people who care about music to create and discover thoughtfully curated playlists. In essence, 8tracks is a platform for online mixtapes.