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Market Timing

Sunday, October 14 2018

Sometimes it is better to be patient instead of hurrying up to make mistakes !!!
- our MIPS3 model is the #1 Ranked timing model on over the last 10 years, and 
  has produced performance that is 10 times better than other models that have traded 10 times 
  more often than MIPS.

The stock market took quite a hit last week, but the market is NOT in a bad condition.  Yet!
- most of the drop last week was motivated by news that interest rates are rising,
- in general, that can be really bad news,
- but, in my opinion, this "bad news" is not nearly as bad as traders thought in the first place.

This is a typical move when the market is overbought and traders with good profits in-hand are more concerned on keeping their current profits than making more. Like Warren Buffet says, do these three thing below over and over:
  1) Make money,
  2) Keep it, and
  3) Repeat steps (1) and (2).

What this type of news usually causes is a quick "V-Bottom", where jittery traders sell quickly to protect profits (without concern for more gains), and where the validity of the reason for the drop in the first place "filters out" (i.e., becomes forgotten about).  When this becomes obvious, the traders that sold originally starting buying back at the same rate and at the same prices where they sold.  A bad timing model can get in big trouble trading a V-Bottom incorrectly (long position all the way down, short position back up).  PLEASE REMEMBER, IT IS MUCH BETTER NOT TO TRADE THAN TO TRADE AND GET WHIPSAWED !!!

A good timing model will protect you from getting whipsawed by not trading when it should not be doing so.  Usually, a good model with no trades on little dips is doing what it was designed to do.  NOTE: A timing model that stays long in little dips is FULLY aware that it is still producing new Long signals every day, and it is NOT one bit confused or unaware that it is staying long.  A good model that stays Long is usually doing so because the model is producing a new Long signal every day, and NOT because it is just "keeping" the old Long signal.


Another reason why MIPS can stay long in situations like this is because our models have built-in "Relativity Algorithms". Basically, this means that a quick 6% drop in a market that has had big gains in the past several months/years (like 40-60%) would not be seen by MIPS to be nearly as troublesome as a market with a 6% drop in a market with gains of only 8-12%.

Of course, you can see that with your own eyeballs.  See the two graphs below, where one compares the recent "Dip" to DIA performance over a short period of time (Graph #1) and the other over a longer period of time (Graph #2).  The way this makes you "feel" in the real world is the way Relativity "feels" in the MIPS models.

#1 Short-Term
Last week's drop compared to the last several months' performance

#2 Long-Term
Last week's drop compared to the last several years' performance

All said, I am NOT trying to say that there is no way that last week's drop could not escalate and end up being much worse in the short-term.  No matter what, however, I do not believe that this is the start of a "real" stock market crash (like, down 45-55%) as long as corporate America keeps producing good profits.

Under no conditions do I think that my intuition can beat the MIPS signals, so as always, just follow MIPS...

Good tradiing...

Paul Distefano, PhD
MIPS Timing Systems, LLC
Houston, TX
408-234-8348  (Cell) <==

Posted by: Dr. G. Paul Distefano AT 10:09 pm   |  Permalink   |  Email

MIPS Timing Systems
P.O. Box 925214
Houston, TX  77292

An affordable and efficient stock market timing tool. Contact MIPS
281-251-MIPS (6477)