This is Turov on Timing for Friday, October 21, 2011.
The SPX advanced 5.51 points yesterday to close at 1215.39. I’ll talk about yesterday’s recommendation in a moment.
Since initiation of the Turov on Timing service on September 30, 1993, our daily trader recommendations have gained 12567.53 cumulative SPX points, compared to a gain of 756.46 points in the index itself over the same period. That’s a ratio of 16.61 to one.
The super long term perspective for the stock market remains bearish (as it has been since January 2000 after having been bullish from December 1974 until then). When the current cyclical bull market ends (and at present, it is quite possible that it has already ended, the major doubt factors being the upcoming presidential election, the European debt crisis, and the Congressional budget battles), expect another nasty crash to perhaps finally bring an end to the long term bear market that began in 2000.
The Intermediate Term Model remains bullish.
I’ve railed against stop orders many times over the years. For example, in the August 7, 2000 Turov on Timing, I said the following: “As a general rule I don’t like stops. I realize that they’re necessary, but if you think about when they’re used, you’ll realize that you’re almost always on the other side of a specialist or a market maker when your trade is executed on a stop. A specialist is buying a stock on weakness, and he’s selling a stock on strength. By definition, when you place a stop order and it’s executed, you’re buying into strength, and you’re selling into weakness. You’re doing the exact opposite of what the most sophisticated market professionals are doing. Over the long-term, the amount that you save by not having big losing positions is actually more than offset by the amount you lose in whipsaws. Now, that having been said, the reality is you don’t have the long-term, you can’t average it out over a period of years, and you’re not doing the kind of volume with the kind of diversification that a specialist is doing, and therefore you must protect against huge losses. It’s almost the same thing as when you buy life insurance. Chances are, the life insurance company is going to make money from you, rather than your making money from the life insurance company, but the consequences of not letting the life insurance company have that vigorish is too great.”
My models yesterday were PERFECT! SUPERB! But TOT daily traders lost money. Why? Because we were stopped out.
Stops are not part of my models. My models simply give probabilities of the market advancing or declining and by what odds. In the early days of TOT, I never used stops. But the hue and cry from scared subscribers on a bad day convinced me that I had better recommend stops or I would lose subscribers. So I recommend stops. But I hate them, and I continue to believe that they cost more than they save.
On yesterday’s message, I said that the (SPX-based) daily model was bullish, but that the NASDAQ 100 model was bearish. So what happened yesterday? The SPX advanced .46% and the NASDAQ 100 declined .45%. It doesn’t get much better than that.
TOT daily traders went 300% long at SPX 1210 and were stopped out at SPX 1197.70. To use the vernacular, that sucks. But as long as subscribers want me to recommend stops, I will do so, and we will occasionally get whipsawed as we did yesterday.
[As a side note, ALL Turov Investment Group Inc. managed accounts for which going long an SPX-based mutual fund is permitted were long a leveraged SPX-based fund for the entire day.]
Yesterday, I also said, “it is almost a certainty that the daily model will be bearish on Friday, and there is a decent chance of a big gap down Friday morning [and] therefore, TOT daily traders are advised to go 200% short at the market on Thursday’s close and carry that position overnight and into Friday.” The daily model is indeed bearish today, and I am comfortable with the current position.
Thanks for the opportunity to be of service, and I will update again no later than 11 a.m.
Turov on Timing is Copyright © 2011 by Turov Investment Group Inc. All rights reserved. Turov on Timing is for personal use only. All caveats and advisories that appear in the monthly Turov on Timing apply equally to this email. Re-publication and distribution is strictly prohibited. No part may be reproduced without the permission of the Turov Investment Group Inc. All recommendations are based on the Standard & Poor’s cash index (SPX) which cannot be directly traded and Turov Investment Group Inc. makes no recommendation or suggestion to readers as to how SPX-based recommendations should be traded but rather leaves that to the discretion of each individual reader. The “official” price of the opening and closing SPX is as reported at www.bigcharts.com and may not be consistent with futures or ETF prices. All stop recommendations are based on that “official” price. Any recommendation that is to take place at a specific time is basis the “opening” on a one minute bar chart beginning at that time and ending one minute later. All times mentioned are Eastern. Questions related to this service should be directed to InvestmentAdvice@aol.com.