Market Timing Pro

Are You Trading The Market? Or Is The Market Trading You?

2009-12-25T10:07:09-05:00

Markets go up and markets go down. It shouldn't matter much, but many new market timers find that their own personal mood fluctuates with the markets, moving from extreme euphoria as the markets soar to new heights to deep despair when the markets plunge to new lows.

Why do market trends have such power over emotions?

They don't need to, but many new timers have difficulty cultivating an objective mind set. They allow fear and greed to influence their trading decisions.

They tend to follow the masses, and when they go with the crowd, they soon find that market trends not only influence their moods but their account balance as well.

Following The Crowd

There's a strong tendency to follow the crowd. There is a feeling of safety in numbers. When you see a steady upward trend, you feel secure. Everyone is buying. They are all doing the same thing.

When other people offer confirmation of your decisions, you feel safe and assured.

In a bull market, it isn't so bad to follow the crowd. When it's a strong bull market, the crowd is often right, and it makes sense to follow them.

"...a trader with a losing position panics, hopes that things will turn around, and waits for events that are unlikely to happen."

However, when the market turns around, feelings of safety and security can turn instantly into fear and panic. Why? An obvious reason is that many new market timers don't have the ability or financial resources to sell short, and take advantage of a bear market. But there's a psychological issue as well.

It is difficult to know how to handle falling stock market prices. For example, humans tend to be risk averse. When one is going long and the markets suddenly turn, it's hard to accept losses, and sell off a losing position before more damage is done.

Denial and avoidance set in. At that point, a trader with a losing position panics, hopes that things will turn around, and waits for events that are unlikely to happen.

Usually the price continues to fall, heavy losses are incurred, and as expected, disappointment and despair set in.

Emotions And Decision Making

It's crucial for your success as a market timer to stay calm and objective. Don't let your emotions interfere with your decision-making.

How do you stay detached and relaxed? First, it's important to accept the fact that you'll likely see losses as a timer and that you should expect to see the markets turn against you. Small losses are an unavoidable part of dealing with the stock market. The trick is, keep them small.

Follow a proven trading strategy and stick with the plan.

Don't allow your moods to fluctuate with the ups and downs of the markets. By trading in a disciplined, methodical manner, you can cultivate an objective, logical mind set that isn't overly influenced by market moods.

Armed with the right mind set, a disciplined trading approach, and a trading strategy, you will be able to realize over time, the profits of successful market timers.

Apple Inc (NASDAQ: AAPL) Headed for Possible Breakout

2009-12-23T17:40:40-05:00

December 24, 2009

Shares of Apple Inc (NASDAQ: AAPL) are again headed towards their 2009 highs (closing high was on November 16 at $206.63). Is a breakout in the cards?

Apple Computer has a huge following, not only among computer users, but investors too. Rallies are typically strong as traders pile into this stock when they feel new highs are imminent.

Apple has had two rallies with lower intra-day highs. The first reached $208.71 on Oct 21 and the second reached $208 on November 16. Draw a line through these highs and you have a declining trend resistance line.

The same can be applied to Apple’s lows with an intra-day low of $185.92 on November 3 followed by a higher intra-day low of $188.70 on December 8. Draw a line through these lows and you have a rising trend support line.

Typically when either of these lines is broken, the stock will tend to continue in the direction of the break.

Apple is headed for the declining trend resistance line which is at about $206 as of Wednesday’s December 23 close.

We are not the only folks who see this pattern. As we near the declining resistance line expect traders to start adding to positions in expectation of a year end rally to new highs.

The http://www.fibtimer.com Stock Strategy has a position in Apple Inc.

Powershares QQQ Trust (NASDAQ: QQQQ) Breaks Out

2009-12-22T16:27:28-05:00

December 23, 2009

Shares of the ETF Powershares QQQ Trust (NASDAQ: QQQQ) have broken out to new 2009 highs. Powershares QQQ rallied to the $44.60 level in mid-November and for five weeks they were unable to surpass these highs even after several attempts.

On the bullish side, each decline during this five week time-frame ended with higher lows. This created a wedge shape pattern that would likely have predictive results when broken.

On Monday, December 21, Powershares QQQ broke above the two month resistance line and closed at $44.96. On December 22, Powershares QQQ confirmed this breakout by again closing with a solid gain at $45.27.

This decisive close above $44.60, the horizontal resistance line, is a breakout for the Nasdaq 100 Q’s and forecasts a run to the next resistance level which is all the way up at $48.64, the 78.6% retracement level for the entire 2008-2009 bear market decline.

The Fibtimer.com (http://www.fibtimer.com) Stock Timing Strategy holds a position in the Powershares QQQ Trust.

Semiconductors HOLDRS (NYSE: SMH) Scores Big

2009-12-21T17:26:34-05:00

December 22, 2009

Shares for the Semiconductors HOLDRS ETF (NYSE: SMH) reached their pre-bear market highs in 2007, before declining from their $39 high, down to below $15 a share at their bear market lows. Their recovery in 2009 has now reached almost to the 50% retracement level.

Typically the 50% retracement acts as strong resistance and if decisively surpassed, acts as a springboard to the next resistance level at 61.8%.

For SMH, the 50% retracement is at $27.93. SMH gapped higher on Monday, December 21 to close at $27.62, just 1% shy of this level.

If SMH can close above $27.93 in coming days, look for a continued rally to $31.11, the 61.8% retracement level, some 12.6% higher.

The Fibtimer.com (http://www.fibtimer.com) ETF Timing Strategy holds a position in the Semiconductors HOLDRS.

Discipline and Market Timing

2009-12-18T14:51:54-05:00

Profitable market timers are disciplined.

They control their impulses and feelings, and this allows them to execute a timing strategy by never failing to make every buy and sell signal the strategy produces.

The disciplined market timer is decisive. Many buy and sell signals are made during times of market volatility and often contradict the majority opinion. Going against the prevailing sentiment is tough, but critical to success.

The undisciplined market timer, in contrast, wavers. He or she may stick with a timing strategy occasionally, while going a different way at other times.

Discipline is indeed a key ingredient to success, but not everyone has a high level of self discipline. It is worth recognizing where you stand on this trait, and if you lack discipline and self control, work to build it up.

Well Studied Personality Traits

Discipline and self control are well studied personality traits.

Some people are highly disciplined and very self controlled. They scrupulously follow rules, and are careful to control their impulses.

You know the type; they pay off their credit cards every month, are never late for an appointment, and carefully plan every detail of their lives.

Although these characteristics may be ideal for trading, there's a downside:

"...Do you have trouble sticking to a timing strategy? Do you hesitate when faced with a buy or sell signal and look for reasons to justify "not" taking the trade?"

Such people tend to have trouble taking risks. They prefer a sure thing, and no "single" buy or sell signal is rarely a sure thing.

Market timers have recognized the even larger risks in a "buy and hold" approach to investing, and have decided to take a more active approach to growing their savings.

They may not recklessly seek out risk, but they accept some risk as necessary.

How Is Your Discipline And Self Control?

However, market timers may not have the same degree of discipline and control as the rule followers described above. Perhaps that's why so many articles are written preaching the virtues of discipline and self control.

How is your discipline and self control? Do you have trouble sticking to a timing strategy? Do you hesitate when faced with a buy or sell signal and look for reasons to justify "not" taking the trade?

Do you long for more discipline and self control when it comes to your timing?

It's not necessarily the case that a disciplined market timer is disciplined in all aspects of his or her life, but it helps. The life strategies we use everyday may bleed over into our investing life.

If you find yourself second guessing timing strategies that you are following, try to remember that the key to timing success is making "all" of the trades.

It is necessary to recognize that timing success is achieved by taking not just those trades which you agree with, but also by taking the tough trades. The ones which may even seem foolish at the time.

There is no way to know "ahead" of time which buy or sell signal will be the one that is the beginning of the next big trend. The one you do not take, is usually the one that makes all the profits.

The Hare and the Tortoise

Timing success is similar to the story of "The Hare and the Tortoise." The hare may be fast, but the tortoise won the race because it never slowed, never stopped, but just kept moving forward.

"...the only way you will achieve market timing success is to stick to the strategy at all times. That means in good times, as well as hard times."

The hare was fast, but lacking in discipline. He also bragged about his success to everyone he saw. But he did not stay the course, and took a nap (missed trade?) at the wrong time.

Discipline is easy when you are profitable. Discipline is not so easy when you are not.

Yet the only way you will achieve market timing success is to stick to the strategy at all times. That means in good times, as well as hard times.

Successful timing strategies are designed to keep timers in the right positions (long, short or in cash) the majority of the time, so that they can outperform buy and hold investors, and also avoid taking large losses during market corrections.

They are not designed for instant profits. Some few day traders may achieve that, but like the Tortoise, timers are looking to win over time.

Remember... if you find yourself wavering about taking a trade... once you are behind on a buy or sell signal, it is very hard to get back in.

And lastly, the trade you do not take is inevitably the trade that makes all the profits!

What Happened to the Rally?

2009-12-17T18:00:58-05:00

December 18, 2009

Both the S&P 500 Index (SPX) and it’s tracking ETF the S&P Deposit Receipts (NYSE: SPY) have been unable to surpass important resistance for five weeks.

Rallies depend on many factors and momentum is one of them. When the major indexes are unable to push above important resistance, in this case the 50% retracement of the entire 2008-2009 bear market decline, short sellers and profit takers will eventually step in and take those markets down.

Resistance has now held since mid-November and this is during a normally bullish time of the year. For the SPX, the 50% retracement level is at 1119.31 and for the SPY it is at 112.31

Next week is usually considered the most bullish week of the year with holiday spirits taking the markets higher. If we do not see these levels broken during that week, we will be looking for declines and considerably lower lows ahead.

The http://www.fibtimer.com ETF Strategy has a position in the S&P 500 SPYDRs.

Correction Over for Streettracks Gold (NYSE: GLD)?

2009-12-16T17:49:39-05:00

December 17, 2009

On December 3 we wrote; “Streettracks Gold (NYSE: GLD) closed at $119.10 on Wednesday, December 2, only a fraction below the ($119.98) resistance level and the target for the current rally. Streettracks Gold is now rising on momentum alone. This is dangerous territory.”

Since that date Streettracks Gold has sold off and lost some 10% at its correction lows. On Wednesday December 16, Streettracks Gold rallied and closed at $111.59.

Is the correction over?

The declines closed below the 50% retracement level for the steep October 28 to December 3 rally and almost reached the 61.8% retracement level. This is right where we would be looking for strong support and a reversal and renewal of the advance.

Higher highs are likely with initial short term resistance at $114.13 and then $115.40. If Streettracks Gold clears these levels it should make a run for its prior highs.

On the downside, should Streettracks Gold close below its correction lows at $108.72; we could see a test of the October lows at $100.65.

The Fibtimer.com (http://www.fibtimer.com) ETF Timing Strategy holds a position in Streettracks Gold.

Powershares QQQ Trust (NASDAQ: QQQQ) Hits a Wall

2009-12-15T16:56:50-05:00

December 16, 2009

Shares of the ETF Powershares QQQ Trust (NASDAQ: QQQQ) rallied to the $44.60 level in mid-November. After a month, they have been unable to surpass these highs even after several attempts.

The bullish side is that there have been two minor corrections during this time-frame and the second correction ended at a higher low. This creates a wedge shape pattern that likely has predictive results when broken.

A lower low than the rising trend support line created by drawing a line through the November 27 and December 9 lows would forecast lower lows for the next several days to weeks.

A decisive close above $44.60, the horizontal resistance line, would be a breakout for the Nasdaq 100 Q’s and forecast a run to the next resistance level which is all the way up at $48.64, the 78.6% retracement level for the entire 2008-2009 bear market decline.

There is minor resistance at $45.78 which should be surpassed if the Nasdaq 100 Q’s can break out. Two weeks ago we looked at this level as a possible critical resistance but as time goes by and the Nasdaq 100 Q’s hold near their highs, we see a breakout as likely to blow past this number and continue higher.

The Fibtimer.com (http://www.fibtimer.com) Stock Timing Strategy holds a position in the Powershares QQQ Trust.

Support and Resistance for Apple Inc (NASDAQ: AAPL)

2009-12-14T17:45:29-05:00

December 15, 2009

Shares of Apple Inc (NASDAQ: AAPL) have created a pennant formation since reaching new 2009 highs back on October 21.

Pennants are created when rallies reach ever lower highs (October 21 and November 16) and declines reach ever higher lows (November 3 and December 8). By drawing a line through these highs and lows, and extending them out into the future, they eventually connect.

This creates an ever tightening trading range as the declining resistance line and rising support line draw closer together.

Typically, when stock prices break out of a pennant pattern, either to the upside or downside, prices continue in the direction of the break.

A close above $206, or below $189, should indicate near term direction of prices for Apple. And these upper and lower levels are drawing closer every trading day.

The http://www.fibtimer.com Stock Strategy has a position in Apple Inc.

When Your Money Is On The Line... Market Timing And Emotions

2009-12-11T09:40:53-05:00

The winning market timer is cold, calculating, and unemotional.

Sound a bit unreal? Maybe it is, but the reality is that it is important to control your emotions, rather than let them interfere with your trading decisions.

We have written many, many times about fear and greed and how they are the true motives behind market behavior. Fear and greed may control the masses, but if they are allowed to control you, you become one of the millions who can't understand why they cannot make a profit when, supposedly, everyone else is.

There are also other emotions, such as anger and disappointment, that can influence your decisions. Emotions may interfere with discipline and sound decision-making.

But, they are not "all-powerful". You CAN master and control them.

Fight Or Flight

It is reasonable to be fearful when your money is on the line.

That is why winning market timers protect themselves by trading with a detailed market timing strategy. Timing strategies are NOT affected by the emotions of the masses, and they are also designed to manage risk.

When you KNOW your strategy works over time and also is designed to minimize risk, you can execute the buy and sell signals effortlessly and with less fear. You do not fret over the inevitable losing trade.

"The moment you deviate from the strategy, you become one of the masses."

Instead you are excited about the next trade. You KNOW that next big winning trend is coming. Whether it begins tomorrow or in several months you trade with the knowledge that when it begins, "you" will be one of the winners who capitalize on it!

This is why trading with a specific timing strategy is critical. The moment you deviate from the strategy, you become one of the masses. But if you stay with the plan, you USE those same masses to your advantage.

Anger And Disappointment

Anger and disappointment are two additional emotions that powerfully influence trading decisions.

Both emotions concern expectations about our market timing performance and how we expect the market to behave.

We become angry when things don't go our way. Because we want to win, we hope that the market will behave in a manner consistent with our timing strategy.

When we feel that fate, or some unidentified external forces (i.e. news events) have created a situation that thwarts our plans, we become angry.

When we think we ruined our own plans because of our incompetence, we feel disappointed.

Regardless, there's a natural inclination to want to control our destiny, and when it comes to market timing, we want to control the market.

We may want to impose our will onto the market.

The market, however, can not be controlled. One must accept what the market has to offer. You cannot make the market do what you want it to do.

Acceptance Is Key

If you accept that you are powerless over market action, you will be less angry or disappointed. If you anticipate and truly accept the fact that the market can, and often will, go against your timing strategy, and that it isn't personal, you will not be fazed by it when it happens.

You will just accept it, and move on.

If, on the other hand, you expect the market to move in your favor, you will feel angry and disappointed, which often leads to feelings of revenge or despair.

These emotions can be paralyzing. It is better to accept the market for what it is. Accept the results you achieve, good or bad, and just move on to the next trade. A good timing strategy is not profitable on every trade. No strategy is.

"Those who leave never achieve. All they do is chase the promises of supposed market experts who will take their money, but seldom give them the profitable results they desire."

But if you quit because you are angry or disappointed, think how you will feel when the next trade is the start of the next big and profitable trend!

Emotions are a natural part of trading. The markets don't always meet our expectations. If you accept this fact, you will be able to minimize the influence of emotions.

You will then follow your timing strategy and over time, will achieve the results you desire.

Those Who Leave Never Achieve

Those who leave never achieve. All they do is chase the promises of supposed market experts who will take their money, but seldom ("never" is a more accurate word) give them the profitable results they desire. There are hundreds of them out there making promises so ridiculous we are embarrassed to even print them.

FibTimer does not post inflated timing results like so many of our competitors do. We have years of trading behind us as well as years of posted real-time trading history. All subscribers have full access to all trades and trading history.

Stick with the plan and you will succeed.