Simon Ward asked about "timerlines". They are trend lines or Gann time and price "squaring" lines or geometric "moving averages" . Those are all older ways of referring to proportional price movement over time.
The basic idea is that a trend move has an identity defined in part by its velocity. We hear more about market momentum, which is a derivative of velocity, but velocity may be more definitive.
Another aspect of geometric or arithmetic velocity is that it has a life even if it didn't result in continuation to a previous price extreme point.
So even if a meaningful trend line is broken, its continuation to a previous price extreme level identifies a time when the price move, or its correction, is complete.
I have no idea why this works, but many price analysts, investors and speculators have observed the phenomenon and used it. There are some empirical rules in constructing the right kind of charts, using the right price series, and/or computing lines arithmetically by proportional projection. These are criteria that Gann and many others struggled with. They are easy to learn once the basic concept of time and price proportionality is grasped.
Timerlines are not absolutes, but they do define times to watch for situational ends or beginnings of trends. If your own studies indicate an extreme is being reached AND you have a timerline for that period, you can have greater confidence in your investment decision in acting upon your work.
albeit slowly. Instead of partying or patting ourselves on the back, it's beginning to be time to look for the next buy. It may be in a month or two from now, or it may be tomorrow. No one will call us up and whisper the buy to us on the appointed day. There is a timeline for today or tomorrow on the chart. See if you can find it. Always click on the charts for larger pop-ups.
The sentiment oscillator (not shown) is in a zone consistent with being near a low. The maroon thick line is the time and price bisect of the July 7- August 3 range. These lines always have the power to support, as did the bright red one at the April low and many, many others in the blue series at MyCharts http://tinyurl.com/3hyjc and the archives here.
Despite seasonal charts and market lore on the subject, August has not been a particularly bad month for stocks since 1990 except for 2001, 1998, and 1993. August has also seen some key gold lows and agricultural lows, so it is wise not to write it off without due observation.
Today also saw over one million SP e-mini's trade during what a has been a very dull vacation period. The last day with a front month's contract trading over one million was July 7. The one before that was near the April low. Keeping our wits about us when everyone else is losing his is key to trading. If the market goes down it goes down, but don't be paralyzed or incredulous if it doesn't.
Doug Fabian's Successful Investing has sent out a flyer soliciting subscriptions to the mutual timing service which his father started 30 years ago. Doug dumps on the mutual fund industry and the funds, saying how bad they are compared to index ETF's, and announcing that he will no longer recommend mutual funds at all but ETFs instead.
Doug talks on about the high fees and costs and corrupt practices, and the fact that many if not most mutual funds trail the indexes they are supposed to better. And I agree with him that 90% of managed US mutual funds are a total waste of capital. They trail the indexes, can only be bought at the close of business, and generally have higher costs per dollar invested than ETFs. ETFs can be bought and sold anytime during the market.
But I looked at some of Fabian's fantastic ETF's compared to a famous old style mutual fund in the same sector. Namely I compared Vanguard's health care mutual fund (VGHCX) with the cream of the crop health care ETFs, all on a total return basis since 2000.
Vanguard's old time mutual fund (VGHCX)beat the socks off all the health care ETFs I could find who have been operating more than a few years. Also, according to MSN Money, VGHCX has a cost of 0.21%(!) per year, lower than the ETF's.
1. Yes, most mutual funds are worthless
2. ETF's are easier to manage (buy and sell) in a portfolio
3. If you want a good brain picking your stocks instead of a cap-weighted index committee, research the mutual funds and find the consistently index-beating low cost pickers of stocks. There are a few companies out there with a few funds that have consistently performed better than the indexes for decades with stable managements.
4. Doug Fabian *failed to mention* that mutual funds have been trying to restrict fund timers like Fabian since it makes their own portfolio management more difficult on a day to day basis. Timing mutual funds is what the Fabian family has always done via moving averages and perhaps other indicators.
Fabian is dumping on the mutual funds because they won't let him time on their funds. But Fabian doesn't even mention timing restrictions as a reason for deserting mutual funds for no brain index ETFs, only the faulty assertion that index ETF funds are better than mutual funds managed by thinking humans.
Recently I have seen a lot of books and articles telling the "little people" to forget trying to beat the market: "The market is corrupt, mutual funds are corrupt, and stocks are corrupt." We are supposed to stick with index mutual funds, most of which are still under water from 2000 ,while the smart boys do hedge funds.
Yale's David Swensen may be the most obnoxious of these latter day lords putting us in our place.
Swensen laughs at us for thinking we can do 16% compounded annually as he has done at Yale with his original $1 billion endowment. Instead we should pay 20% (less undoubtedly for David) per year to hedge fund entrepreneurs to leapfrog the yahoos and dopes.
Apart from the fact that most hedge funds do not prosper and make you rich, there are common everyday mutual funds for us proletarians with 12-16% or more annual returns over many years and at very low cost. With current internet web searches and mutual fund sites anyone with half a brain can indentify these funds and buy them through a broker for a pittance in transaction fees.
I've covered some of this approach before (check the archives), but I can see there is more to report. My first advice is not to rely on someone else to do it for you. Go back and read the basic Merriman ideas about portfolio diversification, and the virtue of persistence. Let that seep in for a while.
Look at the various types of funds which you need to own (Merriman), and then see which are the leaders and what they charge. A leader is not the one doing the best this month, but the ones doing the best since the market high in 2000 or since 1995 or 1929. Yes there are some! See who the honchos of these funds are and how long they have been there. Do your homework in depth for weeks or months. If you want to live decently when you're older, this is key. No one else is going to do it for you.
Use MSN. Use Google. Read a lot. Think a lot. Read my earlier stuff. I'll do more on this whole subject as it is extremely crucial unless you just won the PowerBall Lottery or turned out to be Warren Buffet's child. You can do this at any age, but the earlier the better.
It's still what I call options "extirpation" week, so the darvish dance can continue. But the trend change is out of the gate with today's action. The short term sentiment picture almost guarantees a bounce of some kind in the SP futures. The big issue for 17 August is whether the futures open up or down in Chicago. Down means that any rally must be sold. Up means it *could* bounce a day or so.
The images largely speak for themselves. Tops of some degree seem to be at hand.
Many stock indexes are at all time highs above the 2000 highs, especially those indexes of smaller capitalization stocks and even larger cap unweighted issues.
Nevertheless, many traders and market commentators continue to insist that 2003 to present is a bear market rally and that a sideways to down market is a given for the next 5-16 years. The deflationists among this grand majority of sidewinders believe that the "cleansing action" or "creative destruction" of 2000-2003 wasn't nearly complete ,and that a period of 19th century or 1930-33 deflation is mandatory. They cite debt levels, terrorism, US decline, and investment bubbles among their prime fundamental arguments.
The inflationist sidewinders bring up the 1966 to 1982 stock market as an example of what happens to markets during inflation. Their main arguments are high stock valuations and high oil prices in addition to many of the same fundamental arguments as the deflationists count on.
This subject is one I plan to address here at the blog in great detail over the next months.
However, for the moment I'll just point out that the current market situation, with probable smaller degree highs in both stocks and bonds, does not give the deflationist sidewinders much of a chance of success.