This is Turov on Timing for Tuesday, December 26, 2006.
The SPX declined 7.54 points Friday to close at 1410.76. TOT daily traders went 200% long at SPX 1424.30 Thursday and were stopped out at SPX 1414 Friday.
Since initiation of the Turov on Timing service on September 30, 1993, our daily trader recommendations have gained 8811.50 cumulative SPX points, compared to a gain of 951.83 points in the index itself over the same period. That’s a ratio of 9.26 to one.
The super long term perspective for the stock market remains bearish (as it has been since January 2000), and it’s unlikely anything will change that for several years.
Regarding both the long and short term models: For quite some time, it has been obvious that these two models were worse than useless, and I have been unable to figure out why they have worked so poorly during the bull market of the past few years. They clearly have had a bearish bias, and yet there was never any intention to give them any bias, and I never could determine why such an unintentional bias nevertheless permeated them. So several months ago, I began the huge undertaking of evaluating all components of both models MANUALLY, rather than via computer. The disadvantage of manual evaluation is that it is massively time-consuming. The advantage is that information doesn’t get hidden within formulas the way it does with computer analysis. And with manual evaluations (the way all analysis had to be done before the computer age), one makes occasional surprising discoveries, those wonderful “aha’s”. In any event, I completed that work over the past week, checked everything over the weekend, and finally understand the basis for the unintentional bearish bias and have concluded that both the long and short term models are unsalvageable in their current forms – and I am scrapping both of them. In their place, I have created a new “intermediate term” model. This model corrects all the bias of the older models, and if my back-testing is any guide, is a very good predictor of the market potential looking out about 1-2 months. So effective immediately, the long and short term models are no more. The intermediate term model, which if it had existed, would have been bullish for most of the last half of 2006, is bullish (albeit currently only modestly so), and therefore, the probable direction of the market over the next 1-2 months is up.
It should also come as no earthshaking news that the daily model, which has been superb over the 13+ year history of TOT, has been horrid over the past few months. My work in evaluating the long and short term models and in developing the intermediate term model has shown me why this has been so. As I have explained in the past, some factors that impact the longer term direction of the market also affect the daily direction – monetary indicators especially. Other factors that impact the longer term have little effect on daily direction. My work on the long and short term models pointed out “translation” errors from the longer term models into the daily model, which were then not being correctly weighted in the computation of the daily model. This has been corrected, and I expect to see very significant improvement in the daily model as a result of these corrections.
The daily model is modestly bullish today, but I want to hold off for awhile on any specific recommendation. An intraday update is a possibility, depending on how the market acts once trading begins.
Thanks for the opportunity to be of service, and I’ll email you again in 24 hours – or sooner if circumstances warrant.
Turov on Timing is Copyright © 2006 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.