Timing the market

Most of Wall Street says it is impossible to time the market and don't bother to try. In some ways this is correct. It is difficult to time the market, and most people who do so, especially casually, will wind up losing money (or not making as much) by doing so. However, whenever we invest in any asset class we are making a choice or series of choices, and those choices are made in particular moments in time. If no one was "timing" the market, who was selling USA stocks for an entire year in 2015 at the highs? Clearly, someone who didn't want to be owning them in 2016. 

I believe it is possible to make informed investment (and trading) decisions about positioning using:

1. Technical factors - Hence this site, where from its inception at the end of September I have shown over the last 4 months a method that is doing a lot better than most. Long USA early October; short oil and short FXI, EEM, etc various points in November; reducing and then completely cutting USA longs early January, possible to short or at least fully hedge; TLT long and GLD long both in January. Not bad eh? (Any hedge funds interested in collaborating? I *have* done this sort of thing for a fund professionally for years you know. But some things end due to other reasons.) 

2. Fundamentals - Yes, I know fundamentals move the market. The kind of analysis I like to do requires a Bloomberg which I don't have right now. If anyone wants to provide I'm happy to accept :) Perhaps more on my fundamental ideas in another post.

3. Sentiment - I did a detailed sentiment study here on 2/4. This is admittedly a bit more "fuzzy" than the technicals (especially pivots, simply above or below without any question) and the fundamentals, where there are all kinds of price modeling techniques. That said, relative highs and lows in sentiment studies are often near turns in the market. This is possible to combine with pivots for superior results. But it does take some time to do this. And alone, sentiment does not give buy or sell signals nearly as reliably as pivots. 

4. Timing - OK, I'll admit, I've put a lot of thought into this project. Let's start with a basic version I had coming into this year with the NYA monthly chart. 

I just didn't think a market that had been up 6 years in total and a 1 year topping process would be done with a correction in a few months. Base case 1 year process to match the other moves would take us to weaker first half 2016. Now, I didn't expect that sharp a drop in the first days of the year, but who did? At minimum I thought the market was in a digestion phase and would not go higher until consolidating for a year. But pivots said to shift convincingly bearish on 1/6-7 so far remain very bearish. Also,  considering  the presidential factor of last years of second term president being shaky for markets (2000, 2008) and stage was set. Then add in FOMC, oil, China, etc. 

But here for those reading I will mention another proprietary timing model. It had a 1/19 turn in January (didn't discuss at the time), and anyway pivots made the rebound clear on 1/20, but for a date to have coming into the month that is not too bad. The next window is 2/11-15, but this isn't as strong a turn as 1/19. Maybe, if ES holds the FebS1 at 1908, we will get some kind of bounce; or a flush to next level Q1S2 at 1776 also possible. But remember, it is below all pivots and same proprietary timing model is expecting even more volatility in March.

So, timing model call - possible low area here 2/11-15, but with USA stocks below all pivots this is not the time to buy. It might be worth a partial exit on TLT or GLD, or partial short cover on recent adds from 2/2 (when USA indexes fell back under all pivots). Again, to repeat: proprietary timing says more volatility on the way in March regardless of any bounce we may or may not have here. But if a lot of FebS1s hold in this 2/11-15 window, or if ES flushes down to Q1S2 1776 and holds there, watch for a bounce.