Market TimingMarket Timing

CatchingCatchingTail WindsTail Winds

Presented by Herb Geissler, Managing Director of St.Clair GroupMay 2014

Basic Uses of Timing Basic Uses of Timing

1.1. Determine direction to select strategyDetermine direction to select strategy2.2. Pinpoint sound entry and exit pointsPinpoint sound entry and exit points3.3. Evaluate vigor to enhance with Evaluate vigor to enhance with

leverage (margin money or options)leverage (margin money or options)

Timing Is PersonalTiming Is Personal

Fear of draw-downs increases frequency of Fear of draw-downs increases frequency of trading and determines time horizontrading and determines time horizon Alexander Elder advocates “three time-screens”Alexander Elder advocates “three time-screens”

Tolerance of volatility determines Universe Tolerance of volatility determines Universe (index) to use(index) to use Large Caps have lower growth, returns & volatilityLarge Caps have lower growth, returns & volatility

Stock picking involves timing its’ sector, as Stock picking involves timing its’ sector, as well as timing the broad market well as timing the broad market ““Risk-on, risk-off” switches ‘tween defensive and Risk-on, risk-off” switches ‘tween defensive and

momentum picksmomentum picks Hedge funds accelerate sector rotation and volatilityHedge funds accelerate sector rotation and volatility

Different Time HorizonsDifferent Time Horizons

Go with Tidal FlowGo with Tidal Flow Two corrections every year = Two corrections every year =

intermediate trendintermediate trend Move with the WavesMove with the Waves

Forays within bull or bear legs Forays within bull or bear legs of corrections = of corrections = short-term short-term positionspositions

Ride the RipplesRide the Ripples Swing trading the Swing trading the quick movesquick moves, ,

as breezes shift and sectors as breezes shift and sectors rotaterotate

Method Matches HorizonMethod Matches Horizon

TidesTides Intermediate traders like 10 or 12 month Intermediate traders like 10 or 12 month

Moving Averages to signal major Moving Averages to signal major reversalsreversals

During Kuznets Bear Market, 4-mo MA is During Kuznets Bear Market, 4-mo MA is betterbetter

Position traders use the 20 or 50 day Position traders use the 20 or 50 day moving average for profit-taking and the moving average for profit-taking and the 200 day for keeping out of trouble200 day for keeping out of trouble

Monthly Moving Averages Monthly Moving Averages Catch the Major Turning Catch the Major Turning

PointsPoints12 mo MA

10 mo MA

4 month MA

Intermediate Trend Reversals

For position tradersFor position traders

MA50 Tracks Bull Trend; MA50 Tracks Bull Trend; MA200 Marks Bear TerritoryMA200 Marks Bear Territory

Method Matches HorizonMethod Matches Horizon

TidesTides

WavesWaves ““No Fear” when VIX is under 20No Fear” when VIX is under 20

““No Fear” when VIX is under 20No Fear” when VIX is under 20

MA20 of $NASI or $NYSIMA20 of $NASI or $NYSI keeps the wind to your back keeps the wind to your back

McClellan Summation McClellan Summation IndexIndex

MA10=heads-up

MA20=Pull trigger

Dual Moving AveragesDual Moving Averagesof Russell 2000of Russell 2000

50/50/0 Rules Keep Position Traders 50/50/0 Rules Keep Position Traders on the Right Side of the Marketon the Right Side of the Market

50/50/0 Rules For 50/50/0 Rules For Position Trading a StockPosition Trading a Stock

Shorting when EMA20>EMA10 is also profitable

Method Matches HorizonMethod Matches Horizon

TidesTides

WavesWaves ““No Fear” when VIX is under 20No Fear” when VIX is under 20 McClellan Summation Index is over McClellan Summation Index is over

MA20 MA20 Dual Moving Averages of key index are Dual Moving Averages of key index are

++ 50/50/0 Trading Rules for a stock or 50/50/0 Trading Rules for a stock or

ETFETF

Which Timer Is Best?Which Timer Is Best?(remember, it’s personal)(remember, it’s personal)

Rate of Return Rate of Return (during selected time frame)(during selected time frame)

Maximum and avg monthly Maximum and avg monthly drawdown drawdown

Success Rate Success Rate (% winners)(% winners) and Profit Ratio and Profit Ratio (avg win %/ avg loss %) (avg win %/ avg loss %) multiply to over 1.5 multiply to over 1.5 (similar (similar to Tharp’s Expectancy)to Tharp’s Expectancy)

Frequency of trading and data-Frequency of trading and data-postingposting

Key Take-AwaysKey Take-Aways

First and foremost, get to know thyselfFirst and foremost, get to know thyself

Dr Jekyll (intermediate traders)Dr Jekyll (intermediate traders) FED QE likely to sustain Bull market til FED QE likely to sustain Bull market til

AutumnAutumn Shift into defensive positions when indexes Shift into defensive positions when indexes

drop below 4-month moving averagedrop below 4-month moving average

Mr Hyde (position/swing traders)Mr Hyde (position/swing traders) Remain Long when $NYSI > MA20 and dual Remain Long when $NYSI > MA20 and dual

MAs are both positiveMAs are both positive Use 50/50/0 discipline for entering/exiting Use 50/50/0 discipline for entering/exiting

positions in stocks or ETFspositions in stocks or ETFs

Questions??Questions??

A panel of experienced investors will A panel of experienced investors will first give you a brief summary of their first give you a brief summary of their stylestyle

Then will respond to your questions Then will respond to your questions about market direction and timingabout market direction and timing