Expert Advice: Chat with Jack Schannep

J.D.S.-   First, I'd like to Welcome and Thank each of you for checking in to this first-ever chat
room visit with my Schannep Timing Indicator & TheDowTheory Market Timing Newsletter
subscribers. I'd also like to thank Trace Johnson and his crew at Zacks.com "Profit from the Pros" for setting up today's get-together.   Apparently  world events are competing for investors attention, but let's proceed with our small but interested group.
     Next, I'd like to give a quick overview of my Letter and then get to answering your questions.  I am interested in the major trend of the overall U.S. market, that is to say the major market as measured by the Dow Jones Industrials, the Standard & Poors 500 Index and the New York Stock Exchange Index. That does not exclude the NASDAQ because stocks from it are included in the Dow Jones and the S&P500, but it certainly is not my focus. The last I looked the NYSE had 7 times the market capitalization of the NASDAQ.  It is an old saying that "A rising tide lifts all boats", which implies that most stocks will follow the lead of the major market. I will not get into discussing individual stocks (boats) other than the leading index shares, Diamonds (DIA) and Spiders (SPY) whose price performance mirrors the major market.
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       Q.       Where do I find out about Diamonds and Spiders?
       JDS-  See the Special Report "After When, then What and How Much" accessible from
the Subscribers area.  Basically they are stock exchange traded index funds that track the
performance of the Dow Jones or Standard & Poors 500 Index.
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J.D.S.-  You should know that in my opinion (and by my definition) the major trend of the
market is up, we are in a Bull market.  By 'owning the market' (DIA and SPY) your investment results should parallel and approximately equal the gains, or losses, of the overall market.  The
bull market started at the previous bear markets low point on September 21st, 2001 at 8235
on the Dow Jones which has risen 29% since then, along with a 21% gain on each of the S&P500 and the NYSE. The Transportation average rose 50%, and the NASDAQ 44% from the lows to the recent highs.
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     Q.      How long and how high will the bull market go?
     JDS-  Neither the Schannep Timing Indicator nor the Dow Theory predict that.  They both
determine the direction of the trend only.  History (found under 'Bull & Bear' in the free section
of the website) would indicate an average of 35 months (median 26 months) and a +75 to
+123% advance although I would not expect that much advance for this one.  I have been expecting 'new highs' for the market which implies around 12,000 later this year or early next.
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J.D.S.-  The Dow Theory gave a Buy signal last November 8th at 9587.  See Letter that date under 'Recent Letters' on the Subscribers page of my website.  The essence of the Dow Theory written 101 years ago by Charles Dow: "A person watching the tide coming in and who wishes
to know the exact spot which marks the high tide, sets a stick in the sand at the points reached
by the incoming waves until the stick reaches a position where the waves do not come up to it, and finally recede enough to show that the tide has turned. This method holds good in watching and determining the flood tide of the stock market." If you think of the Dow Jones Industrial Average as being the measure of the tide on one part of the beach, and the Dow Jones Transportation Average as a measure on another part of the beach, both used to determine that the tide is indeed coming in or going out all along the seashore, rather than rogue waves in one place or the other, you will understand what Dow was getting at. Confirmation by both is an integral part of the Dow Theory.
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      Q.      How do you compare to other Dow theorists?
      JDS-  Over the last several years I have documentation that with the Dow Jones up  some
+1881 points, my signals captured over +3488 points. The other two well-known Dow Theory
Market Letter writers lost -3273 and -3871 points. The recent edition of the definitive work
"Technical Analysis of Stock Trends" by Edward, Magee & Bassetti uses my interpretation to
update their records from 1956 forward. Another author has described my work as 'interprets
Dow Theory as it was intended'. And our friends at Zacks.com go so far as to call me the
'Dow Theory Guru' - I think that's a compliment!?
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      Q.      Who the heck was Dow?
     JDS-   Charles Dow and his friend Edward Jones were business reporters in the late 19th
century who started what became The Wall Street Journal. He became the first editor and
developed the stock indices which are now known as The Dow Jones Industrial and Transportation Averages. He obviously developed what others named the Dow Theory, but
died without ever writing a book on it or even a complete editorial relating to it.   His successor
William Peter Hamilton wrote extensively about 'Dow's Theory' and Robert Rhea further formalized the theory in his 1932 book "The Dow Theory".
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J.D.S.-   There WAS a recession and it IS over.  See Current Letter, also yesterday's column
by Anirvan Banerji of the Economic Cycle Research Institute (ECRI) entitled "That Recession Was Real" who believes the recovery began around December or January (can be found at www.businesscycle.com). Our 'Capacity Utilization' index points to January, see Special
Report "About Recessions" accessible from the Subscribers page.
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     Q.      The market is going down these last three weeks. Does that concern you?
     JDS- I'd rather it didn't but druthers don't count in the stock market.  It was J.P.Morgan
who said "Stocks tend to fluctuate", and my definition of a fluctuation is actually anything up to 9%.  I know that is a lot of points (over 900)  but still with the run up from the lows of 2400
you have to expect some setbacks.  The Bull market is assumed to remain in effect until proven otherwise. As stockbrokers love to say: this is a buying opportunity.

       Q.       What is the record of your indicators?
       JDS-   The Dow Theory has been profitable from the buy to its next sell signal 25 of the
last 32 times in the 20th century for a 78% profitability ratio.  The Schannep Timing Indicator was profitable 16 of 18 for a 89% profitability ratio. Had the COMPOSITE been in existence over the same timeframe it would have been profitable 14 out of 17 for an 82% profitability
ratio.

       Q.     What if this is one of those rare times when your indicators are wrong and the Bear market is reinstated?  When will you know you are wrong and more importantly, when will we know?
       JDS-  If this Bull market ended at the March 19th high of 10,635 it will be the first time of
the 23 bull markets over the last century that one will have lasted less than 6 months. Only 3
ended in the first year, but of course it could happen. With the things that happen in the world today, anything can happen.  We would know from the Dow Theory if the Industrial and Transports failed to surpass their March highs and changed to a 'lower highs, lower lows' pattern.   The Schannep Timing Indicator would change to negative momentum from its current trend.  And you would know as soon as I know!
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J.D.S.-   Once again, Thanks for coming and thanks for subscribing to my Letter, and thanks to Zacks.com for bringing us together today.  I sincerely hope that my Letter will help you attain personal financial success, while giving you peace of mind that you have Timing on Your Side.
Best regards to all and goodbye for now.   Jack

                         * * Reprinted with the permission of  Zacks * *