Timing the Markets

By: Joseph Russo | Sat, Feb 9, 2013
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Proven Results

Although I might well be mistaken, I strongly suspect that every person with the slightest level of self-interest and reason, who has any surplus risk capital exposed to the paper asset markets whatsoever, would be quite eager to gain access to strategies proven successful over several market cycles and time horizons.

To be clear, I am speaking of specific methods of replicable engagement that have consistently beaten the benchmarks, and outperformed their respective underlying paper instruments vs. the typical buy & hold, or trading on emotion approaches, which sadly for most, are far too common. To my knowledge, no other service provides such a transparent and ongoing accounting of performance, good, bad, or ugly.

Today, I will illuminate the benefits of such by showing several examples of these strategies, which remain actively engaged in the markets. First, from a longer-term investment perspective, we will begin by looking at the comparative results of applying two levels of strategic engagement vs. the passive buy & hold approach. Thereafter, I will cite a few others most notable.


21-Year Performance Comparison Timing the S&P 500

Although the S&P performance chart below speaks clearly for itself, I will stress ONE major distinction achieved by employing this prudent and easy to replicate strategy. First and foremost, despite all of the excitement surrounding equity markets approaching historic highs, the reality is that equities have gone NOWHERE, making NO FORWARD PROGRESS in 14-years!

To digress, I began by stating that I might be mistaken about people's sensibilities in serving their best interests. Why you might ask? Nearly 3-years ago, back in March of 2010, I penned an article entitled, "Don't Be Fooled Again."

In a never-ending quest to assist people in avoiding the numerous pitfalls of trading and investing, I attempted to reach out to the common-folk, the little guys, self-directing their brokerage and retirement accounts, to provide them with a low cost tool to keep them on the right side of the market over the long-haul. As they say, you can lead a horse to water... Oh well, you know the rest...

At the time, I had created the (GRA) Guardian Revere Advisory, which focused exclusively on the S&P 500 over the long haul. Sadly, due to an insufficient level of participation, we no longer offer that low cost service. At the time, we were bullish the S&P however many remained skeptical, too bad.

Here was a typical subscriber inquiry, the precise type of individual we were seeking to assist:

Hi Joe,

"This is my story. I annuitized my nest egg back in November of '08 through Met Life, perhaps not the smartest thing to do, but I had previously lost a third of my nest egg. Within this annuity, I have the opportunity to make 12 moves a year from Nov. 6th to Nov. 6th each year--that is, six moves in, six moves out-- into their S&P fund --so I can increase the value of my account accordingly. I hope this explanation makes sense to you.

I would be happy with a 10% increase in my account each year. Met adds 6% on to each year's increase (excluding fees which I have found are exorbitant). This year (2010) has been really terrible...I never know exactly when to put money in or out and I'm down to only a few moves left for the year! I am not a trader or a sophisticated investor by any means...I have made myself familiar with many of the indicators of the stock market but I am still learning. I was looking at your Guardian Revere 500 Timing Advisory and it seems to be the tool I've been looking for. However, I have also been looking at other indicators I have found on the internet and they are all saying different things. This is why I am a tad skeptical!

I was writing to see if I could at least acquire a coupon code as a first time subscriber to see for myself if this would be worth it. If it were, it would seem to be a reasonable way to familiarize myself with your system. Thank you for your attention to this matter."

Two months into their subscription, the person above cancelled citing an Elliott wave video service that was overwhelmingly and rather convincingly bearish. This poor soul was scared into the wrong side of the market way too soon. Too bad, all I can say is "Don't Get Left behind Chasing Armageddon." The good news is that this long-term timing service is a stoic pillar within the Chart-Cast Pilot. Behold.

21-Year Performance Comparison Timing the S&P 500
21-Year Performance Comparison Timing the S&P 500

Click here to see a complete lifetime performance record for the entire Chart-Cast Pilot portfolio.


US Dollar - Long-Term (41-year) Investment Performance 1971-2012

In each of the graphs below, the chart on the left illustrates the baseline buy & hold performance of the underlying stock or index over the period observed. Trade in the yellow shaded area (below the -0- horizontal line) represents a condition of drawdown or loss during the period, while trade amidst the green shaded area represents positive equity or profit.

In viewing the underlying performance of the dollar on the left, it is clear that apart from the extreme peak occurring in the mid-1980's, that the US dollar has been steadily losing its value and purchasing power ever since.

In sharp contrast, the equity curve on the right represents the effects of the Chart Cast Pilot's trading strategy effectively positioning itself both long and short amid the exact same dollar-index data points, with a dramatically different and far more profitable result than the proverbial buy and hold. Such is the immense power of a proven trading strategy that is capable of timing the market with the effective use of long and short exposures.

A good trading or investment strategy will capture profits in both downtrends and uptrend's. Although every strategy will experience individual trading losses and monthly drawdowns, a rock solid and time-tested strategy will produce an equity graph that outperforms its underlying instrument as well as outperforming many other benchmarks in due course.

Click here to see a complete lifetime performance record for the entire Chart-Cast Pilot portfolio.


US Dollar - Short-Term Trading Performance 2007-2012 (6-years)

In each of the graphs below, the chart on the left illustrates the baseline buy & hold performance of the underlying stock or index over the period observed. Trade in the yellow shaded area (below the -0- horizontal line) represents a condition of drawdown or loss during the period, while trade amidst the green shaded area represents positive equity or profit.

In the summary below, note the volume of trades (10 per month) generated from short-term vs. medium and longer-term strategies. Furthermore, as evidenced by this strategy's 32.22% win rate, it is important to recognize that most successful trading and investment strategies withstand a substantially greater percentage of losing vs. winning trades.

Note that the equity graphs on the right depict the full extent and reality of "open-trade" drawdowns, which can be substantially greater than that which is actually experienced in the maximum "closed-trade" drawdowns listed in the performance summary below. The "Avg. Monthly Analysis" section of the summary illustrates each month's average performance over the observation period.

Note that although generally derived from the largest maximum drawdown, it is prudent to calculate the minimum account size required to trade a given strategy as double that amount to mitigate the probability of ruin. The average monthly return over the past six years for short-term accounts trading nearby dollar futures contracts was $473.25 per mo.

Click here to see a complete lifetime performance record for the entire Chart-Cast Pilot portfolio.


S&P 500 - Long-Term (52-year) Investment Performance 1960-2012

In each of the graphs below, the chart on the left illustrates the baseline buy & hold performance of the underlying stock or index over the period observed. Trade in the yellow shaded area (below the -0- horizontal line) represents a condition of drawdown or loss during the period, while trade amidst the green shaded area represents positive equity or profit.

In viewing the 52-year underlying performance of the S&P on the left, it is clear that following its irrational parabolic 6-year rocket-launch rise from 1994-2000; the benchmark has suffered from two cataclysmic bear markets. These two existential events, which in reality marked the unequivocal failure of the financial system, have created a lost decade and stagnation in which the market continues to struggle on the artificial life support of the power elites who cling to their coveted monopoly control of money and credit.

In sharp contrast, the equity curve on the right represents the effects of the Chart Cast Pilot's trading strategy effectively positioning itself both long and short amid the exact same S&P-500 data points. Our long-term investment performance illustrates a dramatically different and far more stable and progressive result than the Wild West rollercoaster ride produced by the proverbial buy and hold for the long-haul paradigm aggressively sold to the public.

Click here to see a complete lifetime performance record for the entire Chart-Cast Pilot portfolio.


S&P 500 - Short-Term Trading Performance 2007-2012 (6-years)

In each of the graphs below, the chart on the left illustrates the baseline buy & hold performance of the underlying stock or index over the period observed. Trade in the yellow shaded area (below the -0- horizontal line) represents a condition of drawdown or loss during the period, while trade amidst the green shaded area represents positive equity or profit.

In the summary below, note the volume of trades (14 per month) generated from short-term vs. medium and longer-term strategies. Furthermore, as evidenced by this strategy's 32.39% win rate, it is important to recognize that most successful trading and investment strategies withstand a substantially greater percentage of losing vs. winning trades.

Note that although generally derived from the largest maximum drawdown, it is prudent to calculate the minimum account size required to trade a given strategy as double that amount to mitigate the probability of ruin.

The average monthly return over the past six years for short-term accounts trading nearby S&P futures contracts was $629.38 per mo.

Click here to see a complete lifetime performance record for the entire Chart-Cast Pilot portfolio.


NETFLIX - Long-Term (11-year) Investment Performance 2002-2012

Netflix is the poster boy market (in ALL time horizons) exemplifying the sheer power of a truly diversified kick-ass trading and investment strategy. In each of the graphs below, the chart on the left illustrates the baseline buy & hold performance of the underlying stock or index over the period observed. The equity chart on the right represent the effects of the Chart Cast Pilot's trading strategy positioning itself both long and short amid the exact same data points. Trade in the yellow shaded area (below the -0- horizontal lines) represents a condition of drawdown or loss during the period, while trade within the green shaded area represents positive equity or profit.

Note that the equity graphs on the right depict the full extent and reality of "open-trade" drawdowns, which can be substantially greater than that which is actually experienced in the maximum "closed-trade" drawdowns listed in the performance summary below. The "Avg. Monthly Analysis" section of the summary illustrates each month's average performance over the observation period.

The average monthly return over the past 11-years for long-term investment accounts trading NFLX was $7,760.73 per mo.

Click here to see a complete lifetime performance record for the entire Chart-Cast Pilot portfolio.


NETFLIX - Medium-Term Trading Performance 2007-2012 (6-years)

Netflix is the poster boy market (in ALL time horizons) exemplifying the sheer power of a truly diversified kick-ass trading and investment strategy. In each of the graphs below, the chart on the left illustrates the baseline buy & hold performance of the underlying stock or index over the period observed. The equity chart on the right represent the effects of the Chart Cast Pilot's trading strategy positioning itself both long and short amid the exact same data points. Trade in the yellow shaded area (below the -0- horizontal lines) represents a condition of drawdown or loss during the period, while trade within the green shaded area represents positive equity or profit.

Note that the equity graphs on the right depict the full extent and reality of "open-trade" drawdowns, which can be substantially greater than that which is actually experienced in the maximum "closed-trade" drawdowns listed in the performance summary below. The "Avg. Monthly Analysis" section of the summary illustrates each month's average performance over the observation period.

The average monthly return over the past six years for mid-level accounts trading NFLX was $4,017.02 per mo.

Click here to see a complete lifetime performance record for the entire Chart-Cast Pilot portfolio.


NETFLIX - Short-Term Trading Performance 2007-2012 (6-years)

Netflix is the poster boy market (in ALL time horizons) exemplifying the sheer power of a truly diversified kick-ass trading and investment strategy. In each of the graphs below, the chart on the left illustrates the baseline buy & hold performance of the underlying stock or index over the period observed. The equity chart on the right represent the effects of the Chart Cast Pilot's trading strategy positioning itself both long and short amid the exact same data points. Trade in the yellow shaded area (below the -0- horizontal lines) represents a condition of drawdown or loss during the period, while trade within the green shaded area represents positive equity or profit.

Note that the equity graphs on the right depict the full extent and reality of "open-trade" drawdowns, which can be substantially greater than that which is actually experienced in the maximum "closed-trade" drawdowns listed in the performance summary below. The "Avg. Monthly Analysis" section of the summary illustrates each month's average performance over the observation period.

Note that although generally derived from the largest maximum drawdown, it is prudent to calculate the minimum account size required to trade a given strategy as double that amount to mitigate the probability of ruin.

The average monthly return over the past six years for short-term accounts trading NFLX was $3,761.28 per mo.

Click here to see a complete lifetime performance record for the entire Chart-Cast Pilot portfolio.

 


 

Joseph Russo

Author: Joseph Russo

Joseph Russo
Chief Editor and Technical Analyst
Elliott Wave Technology

Joseph Russo

Since the dot.com bubble, 911, and the 2002 market crash, Elliott Wave Technology's mission remains the delivery of valuable solutions-based services that empower clients to execute successful trading and investment decisions in all market environments.

Joe Russo is an entrepreneurial publisher and market analyst providing digital online media solutions designed to assist traders and investors in prudently and profitably navigating their exposure to the financial markets.

Since the official launch of his Elliott Wave Technology website in 2005, he has established an outstanding record of accomplishment, including but not limited to, ...

  • In 2005, he elicited a major long-term wealth producing nugget of guidance in suggesting strongly that members give serious consideration to apportioning 10%-20% of their net worth toward the physical acquisition of Gold (@ $400.) and Silver (@ $6.00).

  • In 2006, the (MTA) Market Technicians Association featured his article "Scaling Perceptions amid the Global Equity Boom" in their industry newsletter, "Technically Speaking."

  • On May 6 of 2007, five months prior to the market top in 2007, though still bullish at that time, he publicly warned long-term investors not to be fooled again, in "Bullish Like There's No Tomorrow."

  • On March 10 of 2008, with another 48% of downside remaining to the bottom of the great bear market of 2008-2009, in "V-for Vendetta," using the Wilshire 5000 as proxy, he publicly laid out the case for the depth and amplitude of the unfolding bear market, which marked terminal to a rather nice long-run in equity values.

  • Working extensively with EasyLanguage® programmer George Pruitt in 2010 and 2011, the author of "Building Winning Trading Systems with TradeStation," he assisted in the development of several proprietary trading systems.

  • On February 11, 2011, he publicly made available his call for a key bottom in the long bond at 117 '3/32. Within a year and half from his call, the long bond rallied in excess of 30% to new all time highs in July of 2012.

  • For the benefit of members and his general readership, he responded to widespread levels of economic and financial uncertainty in the development of Prudent Measures in 2012.

  • He publicly warned of a major top in Apple on October 26, 2012 in the very early stages of a 40% decline from its all time high.

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