Charts and Commentary

By: Marty Chenard | Tue, Jan 2, 2007
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Important Update ... "Can the C-Factor produce 40%+ returns in 2007?"

The markets are closed today due to President Ford's funeral. Our regular updates will be posted tomorrow morning.

However, we do have something important to share with you today. Many of you know that I personally spend about 20 hours per month on new Research and Development on the markets.

We just finished an important Research Project that entailed Institutional activity in the market. Since over 50% of the trading volume is driven by Institutional actions, this represents a key, major driving force in the market.

The question we tried to answer in the Research Project was:

How can we analyze Institutional actions in such a way that it generates predictive data on the stocks that are among Institutional "core holdings"?

After months of research, we found a unique relationship between a key stock market factor and a unit of measurement on Institutional portfolio balancing activity. Since the relationship factor is a proprietary model, we will call it the Institutional C-Factor.

At this time, I won't go into a long explanation and instead, just show you the results of the study and how it should be able to make a significant impact on your investing in 2007.

First ... let's look at and discuss the Institutional C-Factor. For the first chart below, we took the top 75 stocks that Institutions owned in their "core holdings" as of December 29th. 2005. We then followed them through until the last trading day of 2006.

Out of the 75 stocks, 9 of the stocks dropped from their top 75 listing which left 66 remaining at the end of 2006. We then did a C-Factor calculation for each stock and then sorted the C-Factor by order of the C-Factor value for each stock.

An amazing distribution relationship popped out as seen on the chart below. What was astounding, was that the 66 showed an "exact distribution of half having a positive C-rating and half have a negative C-rating. The 33 positive C-Factors went from 1 to 49.3. The 33 negative C-Factors went from 0 to minus -36.9. Keep in mind that these are the top 66 stocks that Institutions own the most shares of, relative to the total dollar value of all their core holdings.

For this to have value to you as an investor, we needed to see a solid correlation between the C-Factor and the performance of the stock during the year. Since these were the top 66 stocks owned by Institutions, you would expect that they all performed well, but they didn't ... they performed in direct relationship to their C-Factor.

The best stock with a C-Factor of 49.3 had a profit of 66.6% and the worse stock with a C-Factor of minus -36.9 had a loss of -31.2%. More importantly, as you will see, for the group of stocks with a C-Factor of 20 or higher, the profit average for the group was 47.1%, and the loss for the whole "group" with negative C-Factors was only -0.98%. If someone paid no attention to the C-Factors and invested in all 66 Institutional stock choices in 2006, the return for the whole group was still a healthy 12.9%.

* Note: The chart below only shows the ticker symbols for the first and last two Institutional "core holding" stocks. I will disclose all of them to our paid subscribers this Thursday. See the next chart ...

Here is the breakdown of the stock returns relative the C-Factor ratings:

1. For the 10 stocks that had a C-Factor of 20 or higher, the profit average for the group was +47.1%.
2. For the 23 stocks that had a C-Factor between 19 and 1, the profit average for the group was +18.8%.
3. For the 33 stocks that had a C-Factor between 0 and -37, the profit average for the group was -0.98%.

Here is the is the importance of the study: C-Factor Stocks with an end of year rating over 20 produced exceptional returns. The advantage, is that up trending C-Factor stocks are supported with high Institutional buying and accumulation. As important, if a stock was in the Institutional "top 66" group, then even the worse negative C-Factor ratings only produced a downside risk/loss of less than 1% (0.98%) for the group with negative C-Factor Ratings. The message is to own no negative C-Factor rated Institutional stocks.

What was important for each of these stocks, was the TREND of the C-Factor during the year. Some of these top 66 stocks started with C-Factors that were low and their C-Factors continued to trend up to over a 20 rating producing exceptional returns. Some started with a C-Factor rating already over 40 and had their C-Factor ratings trend down which meant that they were going to produce poor returns.

What this means for our paid subscribers, is that an on going analysis rating of the top Institutional "core holding" stocks with a C-Factor rating should give investors a huge advantage in 2007.

I very much want to add this on going analysis as a weekly update on Thursdays so that every paid subscriber has a selection of top rated Institutional stocks that have low downside risk and high upside return potentials.

There is one difficulty in doing this. Time and resources. To do this, I will have to hire an assistant to compile the daily data, and then I will need to process the data individually for each stock on a manual basis to work with the Model processing calculations.

I am willing to do this, but an adjustment on our daily updates would have to be made to free up the time for this to be accomplished. Here is what I propose ... We continue to post our in-depth Daily updates with all the analyses and charts on Monday, Tuesday, Wednesday, and Friday. On Thursday's, we do not post our normal daily updates, and instead, post only the Institutional C-Factor analysis by 3 PM that day. There would be an exception ... if the markets are in a condition that might generate a Buy or Sell signal, then we will take the initiative and post our normal Daily Market Models on those Thursdays before the market opens.

A note to our Free Members: Today, and tomorrow, our paid subscribers will be voting on what "they want" ... to skip the regular paid subscriber updates on Thursdays and post the Institutional C-Factor Analysis, or keep things the same and not post it.

I suspect that they will all vote for the Institutional C-Factor Analysis ... but in either case, I will post an update on Wednesday telling you which way they voted. This way, you will know for sure whether this important, on-going study will be available to you should you decide to join us as a paid member in 2007.

Please Note: We do not issue Buy or Sell timing recommendations on these Free daily update pages. I hope you understand, that in fairness, our Buy/Sell recommendations and advanced market Models are only available to our paid subscribers on a password required basis. Membership information

 


 

Marty Chenard

Author: Marty Chenard

Marty Chenard
StockTiming.com
Asheville, NC 28805
Tel: 828-296-1200

Marty Chenard is an Advanced Stock Market Technical Analyst that has developed his own proprietary analytical tools and stock market models. As a result, he was out of the market two weeks before the 1987 Crash in the most recent Bear Market he faxed his Members in March 2000 telling them all to SELL. He is an advanced technical analyst and not an investment advisor, nor a securities broker.

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