Market Timing

Bryan Johnson
Moon Run Report,LLC

In April 2000, there was a selloff in the market and I heard on one of the Pittsburgh radio stations some commentator say, “Don’t sell your stocks, the market can’t be timed.”
 
Well, that turned out to be a perfect time to sell stocks.  I have heard many cases for why mutual funds do not pursue market timing.  They would rather put money into advertising than to hire a technician to educate them.  Unfortunately, the rules for market timing are not universal, and internet sites are full of systems that I would not touch.
 
My timers are usually between 40% and 60% accurate.  Higher returns may be too optimistic, as reality sets in and the timer will be ineffective.
 
I am quite skeptical of timers that use particular chart formations.  I would rather see a back-test on an optimizing tool that can give statistics of how well the timer performs over, say, the last 10 years and at least 30 trades.
 
Also, I do not trust charts as a means for selecting stocks.  I have witnessed many claims, but it’s a rare bird that can master the charts and be profitable.  There are some people around that can do it, but I would rather see a list of stocks generated by buy rules and a ranking system with a combination method of both technical and fundamental analysis.
 
The loss of time spent trying to learn someone else’s system, when trying to understand all of the if’s, and’s, or but’s, is a major cause of failure.  It’s best to find out what works for you rather than try to force fit someone else’s logic.  Hybrid systems could be used; borrowing ideas from select systems may work best.
 
There are studies that claim if the top 10 up days were eliminated that one would have missed all the profit for the last so and so number of years.  Market timers claim that if the worst 10 days had been avoided, then the performance would have been enhanced by such and such amount.
 
My understanding why mutual funds do not do market timing is because they figure that every now and then there will be a bad year, so why not let the market do its thing and a bear market will be trounced by higher prices later on.  Market timers also will have a bad year now and then, so what’s the problem?
 
My efforts are to bring both market timing and stock selection together on this website to produce above average results.  I feel there is merit to back-testing, and superior earnings plus the quality of the company and some price comparison method can give good results.