This is Turov on Timing for Wednesday, August 16, 2006.
The SPX advanced 17.37 point yesterday to close at 1285.58. “Officially”, TOT daily traders took a 10 point loss on 3 units. However, it was very much the same but opposite situation as happened last Wednesday. Then, we had a gap opening that resulted in our “booking” a profit that barely was one. Yesterday, we booked a loss that barely was one: Here’s how I look at yesterday’s situation: Based on our benchmark SPX Index, we went short at SPX 1270 within the first minute of trading and were stopped out at SPX 1280 at 9:42 a.m., Eastern time. In contrast, the “real money” Spyders, the ETF units for the SPX, opened at 9:30 a.m. at 128.22. At 9:42 a.m., they “closed” that minute of trading at 128.26, an extremely negligible change. The differential in the futures was equally negligible. So for those who use my SPX recommendations as a basis for trading, you should have gotten in at 9:30 and a few seconds and out at 9:42, for essentially no loss. Indeed, it was the exact same situation but in the opposite direction as happened last Wednesday.
I did get a number of interesting emails. One subscriber wrote, “Really bad call today. We all make them.” While I appreciate your kindly empathy (I really do), it was not, in my opinion, a “really bad call”, for two reasons. The first is that virtually no real money should have been lost, for reasons described in the prior paragraph. The second reason has to do with the difference between the process of a recommendation and the results of a trade. They are very different. All the daily model EVER does is calculate probabilities in a news-neutral environment. News is never know (or it wouldn’t be called news!). Had the PPI numbers come out as bad as they were good, the market would have gotten killed. Then somebody would have emailed me and congratulated me on a “good call.” I would have emailed him (as I actually have done in similar situations in the past, numerous times) saying, “I’m glad you made money today, but it wasn’t a ‘good call.’ It was the luck of the news. In the long term, these lucky (both good and bad luck) news events will even out although in the short-run they will provide both serendipitous and anti-serendipitous results. How I see the daily model shining is on those days when the market does what the model forecast when it is CONTRARY to the logic of the news – and that happens far more than the reverse.
I received another email saying, “Did you not say ‘it is a mathematical impossibility for the market to be bullish on Tuesday, 8/15?’ What’s this huge rally all about?” I responded to the subscriber suggesting that he re-read my comment more carefully. What I said was, “it’s a mathematical impossibility for the daily model to be bullish on Tuesday.” And indeed the daily model was not bullish. The market was bullish, but in the absence of the news, the market had a statistical probability of declining. Do not confuse what a news-neutral model forecasts with what a news-active world creates. Overnight on September 10-11, 2000, TOT daily traders were on the sidelines. The news on September 11 was awful, as we all know. How could any model have forecast that. And if we had been short, I would have told people it was (marketwise only, of course) good luck, and if we had been long, I would have told people it was bad luck. And both statements would have been true.
One final comment: It is apparent that many readers still do not understand many of the above concepts and related issues. I consider it my fault that I have not explained it coherently enough, so in the September monthly issue, I will consolidate all of these concepts, and then I will repeat that page monthly so all new subscribers will have access to it every month.
And now back to the market.
Since initiation of the Turov on Timing service on September 30, 1993, our daily trader recommendations have gained 8962.04 cumulative SPX points, compared to a gain of 826.65 points in the index itself over the same period. That’s a ratio of 10.84 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.
Both the long and short term models remain neutral.
Because of what I call an “overriding cycle” (it is not a cycle in the conventional sense, but I don’t know what else to call it since it does run in waves, albeit irregular ones), and because these waves are so powerful that they always throw the model into a neutral mode, the daily model is indeed neutral today. By the way, as in all factors that go into the daily model, this too is not news related. So we will clearly stand aside today. FURTHERMORE, this cycle will last at least two days, and therefore the daily model is certain to be neutral again on Thursday. So, for that reason, there will be no Thursday Turov on Timing, and the next TOT will appear six hours before the start of Friday’s trading session.
Thanks for the opportunity to be of service, and I’ll email you again in 48 hours.
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.