Schannep Timing Indicator

     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 U.S.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 !

    A combination of factors must come together at the same time to form either a Bull or Bear market.  First, a momentum must begin upward in the case of a Bull market, or downward in the case of a Bear.  Whether that movement is “just a jiggle” or is of adequate strength to build into a genuine Bull or Bear market is the critical factor.  Variation away from an existing trend can be measured, and when it reaches a certain threshold, can be judged to be likely to continue.  In addition to momentum, the second ingredient is a monetary atmosphere conducive to fueling a Bull Market, or to contributing to a Bear market.  Fortunately, that also can be determined to be favorable or unfavorable, adding to or detracting from the likelihood of the momentum developing further into a Bull or Bear market.

     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 (now Morgan Stanley) 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 65 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 buyToo, 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 (earlier posted results are from back-testing).  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. .

BOTTOM LINE:  While the signal dates are similar for my Schannep Timing Indicator and those of The Dow Theory, 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 endorse this excellent indicator on a stand alone basis, we also include it in our COMPOSITE Timing Indicator which is the synergistic combination of the Dow Theory and the Schannep Timing Indicator.  Synergy: “The interaction of two or more agents or forces so that their combined effect is greater than the sum of their individual effects”.

     The dates and market levels through 1998 are shown in the CPA verification for my Timing Indicator.  Since that time they have been published publicly.
                                               Chart courtesy Hulbert Interactive

Results

 
%
 
 
Dow
Signal
SignalInvestedDate:Jones:Type
12/31/1953$10,000 280.9
BUY1001/25/1954$10,007 290.41
12/31/1954$14,535 404.39
12/30/1955$18,268 488.4
SELL08/20/1956$19,643 511.242
12/31/1956$19,844 499.47
12/31/1957$20,469 435.69
BUY1005/5/1958$20,570 461.121
12/31/1958$26,695 583.65
SELL011/12/1959$30,233 644.262
12/31/1959$30,399 679.36
12/30/1960$31,249 615.89
BUY1001/3/1961$31,254 610.251
12/29/1961$38,542 731.14
SELL05/10/1962$34,537 647.232
B-1/2506/22/1962$34,645 539.193
B-1/210011/14/1962$38,054 630.481
12/31/1962$39,543 652.1
12/31/1963$47,738 762.95
12/31/1964$56,441 874.13
12/31/1965$64,604 969.26
SELL05/2/1966$62,759 931.952
BUY10012/27/1966$64,738 792.491
12/30/1966$64,202 785.69
12/29/1967$76,488 905.11
SELL01/22/1968$73,822 871.712
BUY1004/11/1968$74,598 905.691
12/31/1968$79,549 943.75
SELL03/7/1969$77,265 911.182
12/31/1969$81,392 800.36
B-1/2505/25/1970$83,523 641.363
B-1/21008/24/1970$92,369 759.581
12/31/1970$103,406 838.92
12/31/1971$113,552 890.2
12/29/1972$134,212 1020.02
SELL02/23/1973$126,947 959.892
BUY10010/22/1973$132,674 960.571
SELL011/20/1973$117,100 844.92
12/31/1973$118,030 850.86
B-1/2508/23/1974$123,743 686.83
B-1/6679/30/1974$117,416 607.874
B-1/310011/4/1974$124,487 657.231
12/31/1974$117,802 616.24
12/31/1975$170,350 852.41
12/31/1976$208,345 1004.65
SELL010/31/1977$176,539 818.352
12/30/1977$178,231 831.17
BUY1004/17/1978$181,399 810.121
SELL010/26/1978$188,927 821.122
12/29/1978$191,586 805.01
12/31/1979$210,056 838.74
BUY1006/11/1980$219,905 872.71
12/31/1980$250,203 963.99
SELL08/31/1981$237,398 881.472
12/31/1981$246,455 875
BUY1008/23/1982$263,848 891.171
12/31/1982$316,446 1046.54
12/30/1983$397,768 1258.64
SELL02/22/1984$360,874 1134.212
BUY1008/21/1984$377,158 1239.731
12/31/1984$374,779 1211.57
12/31/1985$499,180 1546.67
12/31/1986$633,436 1895.95
SELL010/16/1987$767,375 2246.742
B-1/25010/19/1987$767,727 1738.743
B-1/66712/3/1987$780,438 1776.534
12/31/1987$830,584 1938.83
B-1/31002/29/1988$874,288 2071.625
12/30/1988$942,488 2168.57
12/29/1989$1,238,093 2753.2
SELL08/23/1990$1,145,671 2483.426
B-1/2508/23/1990$1,145,671 2483.423
12/31/1990$1,202,385 2633.66
B-1/21001/25/1991$1,211,992 2659.411
12/31/1991$1,486,125 3168.83
12/31/1992$1,593,367 3301.11
12/31/1993$1,863,012 3754.09
SELL06/20/1994$1,879,362 3741.92
12/30/1994$1,925,452 3834.44
BUY1002/22/1995$1,940,770 3973.051
12/29/1995$2,549,201 5117.12
12/31/1996$3,279,367 6448.27
12/31/1997$4,089,237 7908.25
SELL08/27/1998$4,267,859 8165.992
B-1/2508/31/1998$4,270,024 7539.073
B-1/210011/5/1998$4,684,040 8915.471
12/31/1998$4,836,715 9181.43
SELL08/30/1999$5,808,786 10914.132
BUY10012/3/1999$5,879,692 11286.181
12/31/1999$5,996,332 11497.12
12/29/2000$5,710,472 10786.85
SELL03/16/2001$5,219,449 9823.416
B-1/2509/20/2001$5,311,224 8376.213
B-1/210011/19/2001$5,836,782 9976.465
12/31/2001$5,876,378 10021.5
SELL07/3/2002$5,359,079 9054.972
B-1/2507/19/2002$5,362,886 8019.263
B-1/66710/9/2002$5,139,242 7286.274
B-1/310011/5/2002$5,801,713 8678.271
12/31/2002$5,596,370 8341.63
12/31/2003$7,164,752 10453.92
SELL08/5/2004$6,909,645 9963.032
BUY10011/22/2004$6,944,564 10489.421
12/31/2004$7,154,835 10783.01
12/30/2005$7,278,349 10717.5
SELL07/12/2006$7,566,520 11013.182
BUY10010/12/2006$7,655,807 11947.71
12/29/2006$8,022,255 12463.15
12/31/2007$8,720,058 13264.82
SELL01/15/2008$8,225,804 12501.112
B-1/25010/7/2008$8,320,771 9447.113
B-1/66711/12/2008$7,820,244 8282.664
12/31/2008$8,153,369 8776.39
B-1/31001/2/2009$8,313,960 9034.695
SELL02/19/2009$6,909,990 7465.956
B-1/2502/23/2009$6,910,143 7114.783
B-1/21003/26/2009$7,316,275 7924.561
12/31/2009$9,863,127 10428.05
12/31/2010$11,249,882 11577.51
S-1/2508/10/2011$10,585,623 10719.946
B-1/210010/27/2011$11,355,786 12208.551
12/30/2011$11,420,863 12217.56
12/31/2012$12,590,359 13104.14
12/31/2013$16,318,45816576.66

NOTE: The current status is available to Subscribers Only.

The above results equate to a 13.12% compound annual increase since 12/31/53 (60 years). Buy & Hold grew at 10.69%.   The computations necessary to determine this indicator were not available on a real time basis before 1968 and there was no way to make investments in the total stock market in accordance with these signals until the first S&P tracking Index Fund came along in 1976.  In addition, the ‘rules’ were not spelled out until the publication of my book in 2008, therefore this record is largely real-time since 1968 with rule changes backtested.  Following the rules explicitly would have resulted in the record shown.

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