BACKGROUND OF MY INDICATOR

Dow

Date:

Jones:

Over the years, I have observed that while no two Bull or Bear markets are ever exactly alike, there are certain ingredients that must be present for them to form. Years ago as a young flight instructor  in the Air Force I taught Meteorology for a time. In the study of thunderstorms, it was obvious that there were a combination of factors that had to come together, for them to form. It wasn't just moisture in the air or moisture aloft at higher altitudes that was required, but also a source of lift. Air needed to be lifted, either by passing over a mountain  range by summer heating of the ground below, or a cold frontal system moving in under the existing warmer air. That combination, with a little help from unstable air and Zeus, the ruler of the celestial realm, usually caused cumulus clouds which then developed into thunderstorms. And then the thunder and lightning began !

While every schoolchild realizes that the future is not knowable, nonetheless some things are predictable, like the weather! Believe it or not, I've seen the figure of 93% used as to the correctness of weather forecasts.

The purpose of my Stock Market Major Trend Timing Indicator is to identify changes in the trend of price movements on the major stock averages. It has been said many times in Dean Witter publications that "the genius  of investing is recognizing the direction of a trend - not catching the highs or lows". Neither the duration nor the extent of the move can be predicted in advance. None of the input that goes into my indicator is from forecasts, all is from existing printed public information.

I would like to give Dean Witter credit for believing in investment timing as evidenced in their 1975 booklet "Will COMPARE improve Your Sense of Timing?: "Dean Witter believes timing - knowing when to buy and when to sell - is one of the most important factors in any investment decision".

But Dean Witter was not the first to believe in timing. Over 50 years ago, in 1945, an advertisement by Merrill Lynch, Pierce, Fenner & Beane stated "With world-shaking events a commonplace many an investor seeks an investment guidepost, realizes now more than ever that when to buy ranks equally in importance with what to buy. Too, wise investors also know that no security today can be bought and forgotten, that successful investment practice requires keen judgment in timing sales as well as purchases".

As data became available on a more timely basis from the Federal Reserve Board and I was able to generate the necessary calculations on my own computer, I have streamlined, refined and made my Indicator more time responsive than its rudimentary start in 1969. While  the makeup of my Indicator is proprietary, nonetheless it is not subject to individual interpretation such as is The Dow Theory. My C.P.A. is privy to my Indicator's very specific construction and had no trouble certifying its signal dates without contradiction with my own interpretation.

ÞThe BOTTOM LINE: While the signal dates are similar for my Schannep Timing Indicator and those of The Dow Theory, as you will see under Market  Timing Advantage, they are constructed in totally different ways. My Indicator is constructed through mathematical calculations of  internal momentum and monetary atmosphere, whereas the Dow Theory is totally determined by the external chart patterns. In my humble opinion, these are the two premier stock market major trend timing indicators with documented and verified long term records which set the standard for market timing.  While we certainly would never abandon this excellent indicator, the recent couple of years of mediocre results have let to the development of our COMPOSITE Timing Indicator.  It is the synergistic combination of the two plus some other tried and true indicators. Synergy: "The interaction of two or more agents or forces so that their combined effect is greater than the sum of their individual effects".

*This amount becomes $5,871,884 by following specific advice contained in past Letters (Subscribers will find in the Archives Section).  I suggested how to "leg in" ahead of confirmed Buy signals, and how to "scale out" prior to confirmed Sells, resulting in real time results better than those shown here. These results reflect the dates and market levels in the CPA verification for my Timing Indicator.  

Further updates are available for Subscribers only under the results for the COMPOSITE Timing Indicator.

So how does it work out in the market?  The following shows the results for the S&P500 3 months, 6 months, 9 months and a year after BUY Signals with the average gains being +7.9%, +15.3%, +18.2% and +22.6% respectively. The average gain to the next SELL Signal has been 28.4%.

12/31/53

$10,000

280.90

01/25/54

$10,013

290.40

12/31/54

$14,507

404.39

12/30/55

$18,294

488.40

08/20/56

$19,627

511.24

12/31/56

$19,806

499.47

12/31/57

$20,300

435.69

05/05/58

$20,521

461.12

12/31/58

$26,564

583.65

11/12/59

$30,104

644.26

12/31/59

$30,225

679.36

12/30/60

$31,129

615.89

01/03/61

$31,138

610.25

12/29/61

$38,456

731.14

05/10/62

$34,438

647.23

11/14/62

$34,929

630.48

12/31/62

$36,339

652.10

12/31/63

$43,820

762.95

12/31/64

$52,000

874.13

12/31/65

$59,361

969.26

05/02/66

$57,688

931.95

12/27/66

$59,511

792.49

12/30/66

$59,047

785.69

12/29/67

$70,291

905.11

01/22/68

$67,846

871.71

04/11/68

$68,632

905.69

12/31/68

$73,255

943.75

03/07/69

$71,167

911.18

12/31/69

$75,056

800.36

08/24/70

$78,294

759.58

12/31/70

$87,645

838.92

12/31/71

$96,227

890.20

12/29/72

$113,748

1020.02

02/23/73

$107,597

959.89

10/22/73

$112,589

960.57

11/20/73

$99,415

844.90

12/31/73

$100,200

850.86

11/04/74

$106,141

657.23

12/31/74

$100,567

616.24

12/31/75

$145,221

852.41

12/31/76

$178,211

1004.65

10/31/77

$151,747

818.35

12/30/77

$153,042

831.17

04/17/78

$155,392

810.12

10/26/78

$162,320

821.12

12/29/78

$164,391

805.01

12/31/79

$176,424

838.74

06/11/80

$184,716

872.70

12/31/80

$210,603

963.99

08/31/81

$200,713

881.47

12/31/81

$209,391

875.00

08/23/82

$226,177

891.17

12/31/82

$270,374

1046.54

12/30/83

$339,605

1258.64

02/22/84

$308,288

1134.21

08/21/84

$324,153

1239.73

12/31/84

$322,992

1211.57

12/31/85

$428,786

1546.67

12/31/86

$544,312

1895.95

10/16/87

$661,249

2246.74

12/31/87

$669,444

1938.83

03/16/88

$677,585

2064.32

12/30/88

$733,079

2168.57

12/29/89

$965,278

2753.20

08/24/90

$912,034

2532.92

12/31/90

$935,316

2633.66

01/25/91

$939,428

2659.41

12/31/91

$1,150,359

3168.83

12/31/92

$1,235,290

3301.11

12/31/93

$1,441,884

3754.09

06/20/94

$1,455,689

3741.90

12/30/94

$1,493,601

3834.44

02/22/95

$1,506,584

3973.05

12/29/95

$1,977,940

5117.12

12/31/96

$2,543,923

6448.27

12/31/97

$3,173,719

7908.25

8/27/98

$3,313,045

8165.00

$3,328,617

8915.47

12/31/98

$3,437,130

9181.43

8/30/99

$4,123,525

12/3/99

$4,172,183

12/31/00

$4,054,419