A horrid day for the home team as the SPX advanced 24.69 points yesterday to close at 2104.15. TOT daily traders had a 1% loss on 3 units. All TOT daily traders and all managed accounts are currently in cash.
Since initiation of the Turov on Timing service on September 30, 1993, our daily trader recommendations have gained 15807.72 cumulative SPX points, compared to a gain of 1645.22 points in the index itself over the same period. That’s a ratio of 9.61 to one. (Please note that any day in which the daily model fails to outperform the SPX by at least a ratio of +9.61 to one, since that’s the ratio of outperformance already achieved, that ratio will decline.)
(The commentary in this paragraph last updated October 12, 2015) The super long term perspective (i.e., it’s a prediction, not a forecast!) for the stock market remains bearish (as it has been since January 2000 after having been bullish for over 25 years, from December 1974 until then). The cyclical bull market that began a few years ago may have already ended, but that’s unclear at present. For a long time, I have written that I expect “to see a bear market of 35% to 50% magnitude” but I do not have enough evidence to say that a decline of that magnitude has already begun. Regardless, I expect that our new 2016-elected President will have some very serious problems during his or her single term in office.
(The commentary in this paragraph last updated October 27, 2015.) The Intermediate Term Model remains bearish although that position is on shaky ground.
Yesterday’s gain was the largest first-trading-day-of November advance in the 21st century – by far. While most investors know that the first day of the month is historically strong, the vast majority of the gains occur during the months of February, April, May, and July, while January and September are still pretty good. Historically, the first trading days of October, November and December advance less than the average random day.
TOT performance over the past several weeks has been just about the worst ever. Why? My answer may sound absurd at first, but I’ll explain in more detail in a moment. The answer is “bad luck.” All my trading decisions are based on probabilities of both direction and magnitude. Absolutely no emotions are involved. Let’s look at “luck” in terms of a coin flip (heads = H, and tails = T). The odds of flipping a fair coin ten times and getting HHHHHTTTTT or HTHTHTHTHT are identical. If H were a winning stock market trade and T a losing one, then in the first case, you had a streak of good luck five times in a row and then followed by a streak of bad luck five times in a row. In the second case, luck balanced out. But the order in which “luck” occurred was random. My market forecasts are a lot more than luck but luck is a factor, defined as random exogenous events. Good luck and bad luck balance out over the long term, but over the short term, they are random. Over the long term, I expect that my market forecasts (which are far more than luck alone) will be right slightly more than they are wrong (in the coin flip analogy, about 550 heads per 1000 flips), and I expect that the magnitude of the gains will be greater than the magnitude of the losses. Randomly, we will have streaks of gains and streaks of losses, and periods where gains and losses are interspersed. Recently, the streak has been awful. But I have reviewed my analysis of probabilities thoroughly, and there is nothing fundamentally wrong with them. It is emotionally deeply upsetting to have losing streaks – but they occur in all human endeavors. In 1960, future baseball Hall of Famer, Mickey Mantle went zero for 20 (i.e., no hits in 20 consecutive at bats). In 1965, future Hall of Famer, Willie Mays went zero for 24 (but still won the Most Valuable Player award). In 1983, future Hall of Famer, Reggie Jackson, went zero for 35. And from the end of 1954 through the beginning of 1955, future Hall of Famer, Roy Campanella, went zero for 24. Other great players had similar slumps: Schmidt, Fisk & Biggio each had slumps of 0-for-30, Joe Morgan had slumps of 0-for-31 and 0-for-35, Jimmy Wynn, Jason Giambi & Jeter had 0-for-32 slumps, Cal Ripken had a slump of 0-for-33, Jose Canseco had a slump of 0-for-40, and Luis Aparicio had a slump of 0-for-44. We have also had a nasty slump – and based on what I know of both my methodology and of statistics, I am confident that “this too shall pass.” But I know it’s painful as hell while it is happening.
The directional component of the daily model is bullish today, but the risk component is very high. We will stand aside.
Thanks for the opportunity to be of service, and I’ll email you again in about 20 hours.
Turov on Timing is Copyright © 2015 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 including the fact that past performance is not a guarantee of future performance. 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.