The Ultimate Market Timing System

The ultimate market timing system does not refer to the fact that we are the only ones that can time the market perfectly, no what we are talking about is an actual system that anyone who puts some effort and time should be able to develop we are talking about a model that we at the tactical investor have and will continue to use in the future.

What do we mean by the ultimate stock market timing system. Market timing has always been broken down into categories you have the fundamentalists who believe that fundamentals are key to everything. Fundamentals refer to a companies P.E ratio, earnings, are the earning growing, how much money is spent on R&D, are the new products in the pipeline, and so on.

Then you have the Technical Analysis  camp, they believe that one can see everything via charts, that the charts will reveal if the company has good prospects, if the earnings are increasing, if they have new products in the pipe line etc.

Both these players are somewhat right, if we had to chose between the two we would lean more towards Technical Analysis because we believe Technical Analysisis an art and not a science and it?s something that takes practice and time so its very rare that two people see exactly the same thing in a given chart. However the same two people could read the fundamentals on a given company and pretty much draw the same conclusion, the more that read this data the more they dilute its effect so in the end with this data easily available to millions, its value is almost insignificant.

But we do not believe that one should stop just with Technical Analysis and so we disagree with any camp that would suggest that either tool is the only one necessary to get an edge in the markets.

Mass psychology is very important, basically Mass psychology involves paying attention to sentiment and trying to close out positions where the sentiment is at or very close to reaching frenzy levels, it is a bit different from pure contrarian investing, though we believe the term contrarain investing  probably originated from the study and analysis of  Mass psychology .
 
In a nut shell mass psychology is taken a position in a sector long before it is even known, the requirements are not just that the sector should be hated but that it is almost unknown to the masses and yet there is an upward trend in that sector or stocks, a long term upward trend that has resulted from a huge base that has taken months or years to build, then the more conventional contrarian terms can be applied, i.e. that the sector or stock should be utterly detested by the masses and even huge negative campaigns mounted against that specific sector, in addition when you mention this sector or stock to your friends or family their response should be one of ridicule or laughter, further adding credibility to the fact that you are most likely doing the right thing.

Exit points are also slightly different, in contrarain investing the supposition is that one should immediately hit the exit doors once the sector or stocks become to well liked, however mass psychology takes this one step further, the sector has to be drawing frenzied attention and should be the talk of the town, even cab drivers and waiters should be recommending it. It is at this point you take out your ruler and pencil and long-term 5-10 years charts and draw a trend line, if the main up trend line is violated, close all your positions and move into cash.

The ultimate stock market timing system should therefore employ the following tools in its model.

Technical Analysis

Mass psychology  and contrarain investing 

And finally cycles either ESOTERIC CYCLES  or cycles as defined by Hurst.

This will give you a tool that will haven no equal and put you in a league of your own.