Mark Hulbert of Marketwatch: The Transports have been the stronger of the two benchmarks, and it is widely considered to be a leading economic indicator. Read the article HERE.
Q. Will future results be the same?
That’s easy: NO. You know the bit about past performance cannot guarantee future results. I would expect, however, that my Timing Indicator, the Dow Theory, and our COMPOSITE Indicator would have similar results as in the past against “Buy & Hold” over the long term in the future. While the future is unknowable, nonetheless some things are predictable: I predict my Indicator, the Dow Theory, and the COMPOSITE Indicator will add value to your investment results AND reduce your risk. I invite you to join in for the interesting years ahead.
Q. What else do you sell besides “timing”? Mutual Funds, managed accounts, what?
Absolutely nothing else. And we definitely will not sell your name to anyone. My book Dow Theory for the 21st Century is available at bookstores worldwide but I do not sell it directly, but I do receive a royalty on sales. You subscribe for $200 a year, and you get timing that could add hundreds of thousands, if not a million dollars, in increased value to your own stock or mutual fund portfolio over your working lifetime. Over the last 59 years, studies showed the traditional Dow Theory had a $3 million dollar advantage (twice the value) over Buy and Hold, based on a starting amount of $10,000 invested. The Schannep Timing Indicator had a $9 million advantage and the COMPOSITE Timing Indicator had a $15 million dollar advantage! Don’t you think it’s time to Subscribe?
Q. If The Dow Theory and the Schannep Timing Indicator are the two best major trend timing indicators that exist, why not combine their signals?
You mean buy only when both have BUY signals, and sell only when both say SELL? – Not a bad idea. Certainly you could be very comfortable knowing that both Indicators were in synch with what you are doing. Such a technique does beat Buy & Hold over the long term, but not by as large a margin as either The Dow Theory or the Schannep Timing Indicator. The reason being, you are waiting for the last one to give its signal as confirmation, and usually that later signal is not as good as the earlier one. The advantage is you eliminate the individual signals which were not confirmed by the other. The best of all worlds, however, is a Combined Indicator which uses both, but in a different manner than suggested above, and such a COMPOSITE Timing Indicator IS available to our Subscribers, and the results are truly startling:
• We’ve calculated that the compound annual increase for Buy & Hold was 10.7% since 12/31/53 (60 years),
• the original Dow Theory was 11.8%,
• the Schannep Timing Indicator was 13.1%,
and the COMPOSITE was 13.7%.
• We’ve estimated the results using the rules for the Dow Theory for the 21st Century would have been 13.9%.
Q. Which is better, The Dow Theory or the Schannep Timing Indicator?
We follow them both because they are the two premier major trend timing indicators with documented superior long term records. There are times when The Dow Theory beats the Schannep Timing Indicator, and other times when the opposite is true. During a time when Buy & Hold, with dividends included, lost money during 10 different years, The Dow Theory had 8 down years and the Schannep Timing Indicator had 7. While their signal dates are within 10 trading days of one another on 9 occasions, each had 2 or 3 totally different Buy and Sell or Sell and Buy back which were not signaled by the other. The compound annual increase for our Indicators are shown in the answer above.
Q. If your Timing Indicator becomes well known and popular, will it either affect the market or, more importantly, cease to work?
The market could react to its signals if enough people knew about them and acted upon them. I have never advertised my signals and will not start now, but even if others did “move the market” with their actions, it should only be minimal and short-lived. It is, after all, a very big stock market – room for all. My Indicator should not cease to work, because the momentum part of it would already be behind it in the case of a recent signal, and I hardly think the Federal Reserve Board is going to alter their monetary practices in order to trip us up.
Q. I hear you only need to miss certain critical days, or weeks or months, and market timing “goes to pot”.
That’s right. Since 1950 there were 31 months in which the market rose 7% or more. Obviously, one would want to be invested during those months. My Indicator has been in a BUY mode during all or part of 27 (87%) of those months. During the same timeframe, there were 16 months which lost 7% or more, and of course one would want to miss as much of those as possible. Once again, my Indicator was in a SELL mode for all or part of 15 (93.8%) of those months. No indicator can be 100% right. The only way to capture 100% of the best days, weeks, and months would be to be invested 100% of the time, but then you would also be in on all of the worst days, weeks, and months!
Q. Is there a way to anticipate your signal and further improve your record?
Generally, anticipating a Signal is not recommended. Selling too soon in a Bull market can leave many an investor out long before the top, missing the last several thousand points. While my Indicator is not structured to sell before or at the top, on average it is within 10% after the top. Selling is the hardest thing to call, but between The Dow Theory and the Schannep Timing Indicator, we have been able to Sell before Bear markets became official. Volume, consumer confidence and the yield curve often peak before the stock market does, as in 1999 and again in 2007, and can be a ‘heads-up’ to an impending Sell. With BUY Signals, there actually are other “pre-BUY” conditions that we point out when they occur, and are described for subscribers.
Q. How will I know when you get a Signal and how does your Indicator work during Bear markets?
If you invest $200 in market timing by subscribing to our service for a year, you will be advised by e-mail whenever a Signal occurs. Monthly letters and periodic Special Reports will keep you informed on the likelihood of the markets outlook. You will have immediate access to the most current status of The Dow Theory, the Schannep Timing Indicator, and the COMPOSITE Indicator on this web site when you click on the "Sign Up Today!" button. At the top of each Letter you will see 'signal lights' (Red, Yellow, or Green) for each of our Indicators. It is under SELL Signals that outperformance versus Buy & Hold can occur, and that was the case in 11 of 16 SELLs since 1953. Every Bear market since then has been signaled by my Indicator. SELL Signals have avoided, on average, over 55% of Bear Market losses. Of twelve calendar years since 1953 that the Standard & Poor’s 500 Index has lost on the year, my Indicator was in a SELL mode for 64% of the time.
Q. Why should I start using your stock market major trend timing indicator NOW?
As with any investment program, the sooner one starts, the better the results should be over time. The stock market was in a very unusual period over the final 18 years of the 20th century in that Bull markets prevailed for 97% of the time, with Bear markets only occupying 3% of the time. That has changed in this new Millennium. Historically, during the 20th century, the time for Bull markets has been 67% and 33% for Bear markets. I think you should expect that the market will revert to the norm in the 21st century and as of 2014, it has been much closer at 72% in Bull markets and 28% in Bear markets. When Bull markets end, they are, of course, followed by Bear markets, and after that…a new Bull Market. NOW is when you need to know what our indicators are saying.
Q. How soon can I expect major trend timing to have an impact on my investment results?
First of all, any expectations about the stock market and a timing advantage should be viewed in a longer term perspective. It depends on the phase of the market at the time you start and the accuracy of the signals. During a Bull market timing cannot outperform “the market” when an index fund is used as the investment vehicle, only a more aggressive mutual fund or stock portfolio might. During a Bear market, it may be possible to outperform the market immediately by being in money market funds, short term Treasuries, or the like until a BUY Signal at a lower level is indicated. A complete stock market cycle should usually be enough time for timing to exert its advantage. 75% of the time, The Dow Theory has beaten a Buy & Hold strategy within a 6 ½ year timeframe. The Schannep Timing Indicator has beaten Buy & Hold within a 4 year timeframe 75% of the time. Both have beaten Buy & Hold over 29 of the 36 ten year periods from 1953 through 1998. The more time allowed, the greater the advantage should be.
Q. Will my individual stock portfolio be impacted by your Schannep Timing Indicator?
It has been said that “a rising tide lifts all ships” which, of course, means that a Bull market will cause all stocks to go up. If my Indicator gives a BUY Signal the chances are very good (7 of 8 chance) that the market will rise (an average of +25% to the next SELL signal) and that will usually cause most stocks to rise. My Indicator is geared to the market as a whole, not specific individual stocks. A broad stock portfolio that emulates the market as a whole would be expected to move in accord with my Timing Indicator Signals.
Q. What’s the best way to utilize market timing?
My Indicator and The Dow Theory are applicable to the major New York Stock Exchange market indices. Therefore, an index fund focused on that market like “Spiders” (SPY’s track the Standard & Poors 500 Stock Index), “Diamonds” (DIA’s track the Dow Jones Industrial Stock Average), or the NYSE iShares (NYC’s track the NYSE Composite) are most appropriate for those times when being ‘in the market’ is called for. An equal position in each will assure results midway between the three indices. Money market funds, Treasury bills, or the like, are appropriate for those times when one is “out of the market”, thus preserving principal and earning a positive rate of return.
Q. Isn’t “market timing” a ‘dirty word? Aren’t the mutual funds in trouble over it?
The practice of ‘market timing’ as it relates to mutual funds is taking unfair advantage of price and time differences by buying at ‘yesterday’s‘ price when one has ‘today’s‘ news. It is unethical and should be illegal, and is totally different than major-trend, major-market timing that we are utilizing. By attempting to be mostly IN the market during Bull markets, and mostly OUT during Bear markets, we have attempted successfully to outperform a Buy & Hold strategy.
Q. Why do reputable, well known market experts say that “timing is a loser’s game”? Merrill Lynch ran a full page ad saying “Timing is nothing”, what do you say to that?
The cards ARE stacked against market timing beating Buy & Hold. The only way to beat Buy & Hold is to Buy at a lower level than the previous Sell, and that is usually accomplished in a Bear market, and Bear markets only constitute 1/3 of the time of typical Bull and Bear market cycles. But it can, and has, been done. I totally agree with the premise if they are talking about short term market timing. But if they are referring to major trend market timing, I can only assume that they are not able personally, or as a research department, to time the market, and do not think anyone else can. Finally, I’d suggest they check out this web site and see the documented evidence to the contrary.
Q. Why Doesn't The Dow Theory Get More Respect on Wall Street?
Most money managers and Wall Street prognosticators have their ‘own’ favorite ‘systems’ or indicators that they like to think outperform the rest. In actual fact, very few of them do, but none of them admit it. The Dow Theory does outperform the market and has a published record to prove it. That record, however, depends on the interpretation being “the way it was intended” (as my interpretation has been described). The problem is that the interpretation by a couple of other well known ‘experts’ on the Dow Theory has been poor. For instance, “Dow Theory Letters” and “Dow Theory Forecasts” lost money based on their timing, according to Hulbert Financial Digest (Hulbert Interactive).
My interpretation, as shown in “Technical Analysis of Stock Trends” by Edwards, Magee & Bassetti, and brought up to date in the Schannep Timing Indicator & TheDowTheory.com Newsletters has resulted in a gain exceeding Buy and Hold results verified by Hulbert Interactive. The documentation for these results can also be found at “The Dow Theorist’s Sweepstakes". Sooner or later The Dow Theory will once again get the respect to which it is entitled, which is one of the reasons I wrote my book: Dow Theory for the 21st Century – Technical Indicators for Improving Your Investment Results.
There has been renewed interest in the Dow Theory since Jack Schannep presented his research to the Market Technicians Association that showed Dow Theory produced an excess return of 1.5% per year (from 1953 thru 2011) versus a buy and hold strategy. His presentation attracted a whole new generation of Dow Theory enthusiasts. Read the article HERE.