Good Evening, Anytime folks start anticipating a market turn they get anxious and want to be the first ones back in the market to make as much money as they can. Is that greed? If it is it will get you killed in the market. The messages are starting to roll in just like the always do when the market gets to this stage. So we talked about it yesterday and we’ll continue that discussion today. The market rose again today on a positive earnings report from Goldman Sachs. You can read about all that in the link below. Tonight we really need to focus on timing this turn if indeed it is a turn. We talked about how it may not go straight up like everyone thinks last night. Tonight we’ll talk about how to time the turn. Sure things are looking good and if you jumped back in or are thinking about doing so your probably right. The key word is probably. A probability while promising is a far cry from a surety. We aren’t day traders here. We aren’t gamblers. We are managing risk. We want to be in the market when the risk is as low as it can possibly be. Our goal in this group is and always has been to keep what we make. We believe that it’s not what you make that’s important but rather it’s what you keep. Capital preservation is our priority. In short, we believe that you if you keep more in the end you’ll make more. Losing is not something we take lightly and we consider making back money lost during a downturn a waste of time. So….back to the market turn. I follow a great investor by the name of James DePoore better know as the RevShark. I consider him one of the greatest traders of our time. I learned most of the basics that I know from him. He has an interesting story that is covered in his book ‘Invest Like a Shark’. You can purchase a copy at his web site which is SharkInvesting.com. It’s the book that pretty well started it off for me. Anyway, as I said I read his commentary this morning and low and behold it was on just this subject. So I decided to share it with you here tonight. Perhaps hearing it from one of the greatest investors of our day will help you. I agree with every word and it is exactly the style that I use and because I use this style you will never find me in the market first after a downturn. It’s just not what I do…. Here is his commentary. Enjoy!

The Secret to Timing Market Turns

When the market was trending downward in December, many traders were anxiously trying to catch a turning point. They knew that a big bounce was sure to occur and they didn’t want to miss it. They tried over and over to predict the bottom, and many were stopped out multiple times when their timing proved to be incorrect.

Currently, we are seeing the direct opposite of that sort of action. The market has been trending strongly upward for a couple of weeks now, and there are many traders that are convinced that a sizable pullback is going to occur soon. The bears keep getting stopped out as the indices go straight back up without regard to overbought conditions or overhead resistance.

If a trader can time one of these turns with a fair amount of precision the pay-off can be tremendous, but there is one mistake that they make over and over: they are too early.

The mistake of being too early occurs when there is too much focus on exact timing. If you try to pinpoint the precise moment the indices hit the lows or highs the most likely mistake is that you are too early and the trend continues.

If you are less focused on catching the exact turning point you can cut your risk substantially by making your move after a turn has occurred. It is far safer to arrive fashionably late at the party rather than to show up too early.

The benefits of jumping on a trend after it starts are obvious. You can control risks better by using recent higher or lows as stop points, and you don’t have to worry about making up unrealized losses if you started to make your move too early. It is also easier to be more aggressive if you aren’t already lugging a large position.

Most computer algorithms tend to work on this principle. Rather than go counter to the prevailing trend, they stick with it. The programmers know that they can change course in the blink of an eye, so there is no great benefit in trying to anticipate what the market might do. Just jump in when things change.

The main reason that so many traders try to call exact turning point is ego. It is a suboptimal strategy, but we have been influenced by the media to believe that there is great glory in being the expert that can predict these moves. A number of pundits have lived off the publicity of calling a “major turn” for many years. They never did it again, but that didn’t matter.

Never in the history of the market has anyone ever been able to consistently call major market turns with high precision over a long period of time.  Many are lucky at times and happen to hit the jackpot, but they confuse that good fortune with skill.

Once you admit that it is not possible to call market turns with precision and give up on seeking the glory of the “big call,” then strategy becomes easier. You don’t jump in and hope the market gods smile upon you.  Instead, you sit back and wait for the character of the market to shift.  You stalk entry points as you see clues that the price action is changing. You conserve your precious capital until you can act with greater confidence.

The best way to reduce risk is to embrace a trend only after it starts.  Focus on being late. Don’t let your hopes for a big score push you to keep fighting a trend that is going against you.

The secret to catching a turn is to focus on catching it only after it has already occurred.

And folks there you have it. That is what we do and why we do it. Believe me when I tell you that I’m anxious too. When I have a buy signal I will buy!!!!!!

The days trading left us with the following results: Our TSP allotment was steady in the G Fund. For comparison, the Dow added +0.59%, the Nasdaq +0.15% and the S&P 500 +0.22%.

The days action left us with the following signals: C-Neutral, S-Neutral, I-Neutral, F-Neutral. We are currently invested at 100/G. Our allocation is now +0.11% on the year not including the days returns. Here are the latest posted results:

God bless, Scott 

 

 ***Just a reminder that you can review the performance of our allocation at the Web Site TSPTALK.com in the autotracker section under the screen name KyFan1.

 

 

I produce and publish this blog as both a ministry and for the benefit of any Federal Government Employee. This is done to offer you some guidance as to how to approach your retirement more financially successful. When it is time for you to retire, I recommend you utilize the services of a Professional Money Manager, who works with a reputable investment firm. He understands the guidance you have already received and he can manage your savings assets utilizing a more advanced investment program into the future. 

 

If you would like to receive more information about this introduction, please feel free to contact me at  [email protected].