Saturday, April 15, 2006

A Time To Buy

In the history of my AllAllan blog, I have yet to venture into the space-time continuum known as market timing. Naturally there was good reason to stay away from that disaster-in-drag, mainly, I hadn't a clue. That has changed somewhat, with the discoveries set out in Paradigm and reported here.

If you will review the Paradigm Blog and the signals listed on that page. this will make a whole lot more sense. Those signals represent a monthly or intermediate analysis of cyclical forces. Note that every Spring there is a Buy Signal, as there is a Sell Signal every Summer, a Buy Signal every Fall and another Sell Signal every Winter.

When I ran the analysis in the QQQQ, going back six years, these signals have been 86% accurate, with the winners swamping the losers, 16% for the average winner versus 1.7% for the average loser.

With that as an introduction and hoping that this motivates some of you to look a little deeper into the work of Robert Taylor
the markets are now in what we can call the Spring Buy Window. I would also add that the price action and sentiment of the markets and its participants, sucks. Ask yourself, when does that happen, at highs or at lows?

The third leg of this timing analysis is taxes. I sold stock this past month to pay my taxes, and if I was doing it, so were a lot of others. The other side of that coin is that at the same time people are selling to pay taxes, they are also funding retirement accounts to reduce the sting of those taxes. So there is a flow of funds going into the equity markets, maybe a massive flow, which may account in part for the Spring rallies we see in those Paradigm Signals.

For the first (and maybe the last) time ever, AllAllan is issuing a Buy signal. There is no shortage of stocks that we have talked about in the past four months that are primed to participate in any ensuing market rally. Personally, in addition to buying some more of our stocks, I will be buying some deep-in-the-money index calls, probably the SPY and QQQQ's with at least three months before expiration.

One more comment about these signals: Of the four seasonal signals, the Spring Buy is the weakest, averaging about 6% versus an overall average of 16% basis the QQQQ signals. Still, knowing that there is an 86% expectation that the markets will be about 6% higher in the next few months is worth something........isn't it?

A

9 comments:

alldez said...

Thanks for your work Allan. Regarding your comment about index calls: I have read numerous times it is better (more bang for your buck) to buy slightly OTM calls if you expect a decent to sizable move in the underlying - the reasoning being that an option's value accelerates the most as it moves from OTM to ITM. Can you please explain your choice of deep ITM call options.
AllDez

Ronny said...

Allan,I try to be open minded,but these timing systems never work out in real time trading.If Taylor had actual brokerage statements showing how he traded these signals with actual money, I would be impressed.
Jack Schwager has tested just about every system out there and has not found one that he would trade for himself.
Ron

Allan said...

Buying OTM options changes the risk:reward parameters to unaccecptable levels for me. Going OTM means the underlying index has to move up, say 2%, just for me to breakeven. A flat or 1% to -1% lose wipes out the entire bet. Going deep-in-the-money, a flat or small move costs me only say 10%, whereas a typical, or average move returns 100%. In other words, if the signal is wrong or only slightly right, OTM's wipe me out and I am unwilling to assume that risk.

Allan said...

Ron, if this timing system does work out in real time trading, there is only one way to find out about it, try it. The minimal cost of testing it pales in comparision to the rewards that are offered if it works. I assure you I am as skeptical about market timing as the next guy, but I too am also open-minded about such things.

As for brokerage statements, I ran a successful neural net buisness for a couple a years back in the nineties. We published our brokerage statements online to prove our succcess. Not only was it a pain in the ass, but when the CFTC found out about it they fined us $10K because it violated some rule of theirs. So I can understand why someone choses not to provide brokerage statements to strangers on the net. (If that is the case with Taylor, I've never asked, nor do I care).

I already did the due diligence with a paper backtest: Pass. Next examination is real time signals: Ongoing.
Somewhere along the line I will knowif it works. Should I report my findings back here? Maybe, depends now nice you folks are to me.

A

curt504 said...

Hay Allan, I can honestly say that I truly appreciate your comments, helps and this blog. Just hint whether you prefer roses or chocolate and just where on Kiawa tokens of appreciation can be sent? Luv ya man!

Send hints to: csmith@javadepot.com

Thanks to all who play this fun game and a peaceful Easter,

curt

curt504 said...

Allan, The fix is in the works.

BTW, what about PTSC. I just day traded VRDM for a quick 25% (3 hrs) and thing buying a ton of PTSC is the way to go.

JMHO that NVAX will drift back down to $4.80 (resistance) before it heads back to $8++. Any thoughts?

tnx curt

Allan said...

what about PTSC

Bought some today for a trade, average price 68.5 cents, looking for at least mid 70's on it today or tomorrow....got there right after I bought it, but I was too busy with the new Blog ("A TIme To Sell) to take profits. My readers come first......

A

pippin said...

http://biz.yahoo.com/bw/060418/20060417005957.html?.v=1

this should improve NNVC today

pippin said...

well, maybe this will instead:

http://biz.yahoo.com/bw/060419/20060418006242.html?.v=1