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Can You Time the Market?
A lot of investors state that it is impossible to time the market. I would totally disagree, and in fact, I would counter that if you don’t think you can time the market, then you shouldn’t be making investing decisions for yourself or on behalf of others.
Whether you use fundamentals or technicals or some other form of analysis, every market participant wants to buy low and sell high. What is the point then of all this noise that we are constantly bombarded with on the TV and in the blogosphere? Why would you even care about GDP, unemployment, sovereign debt, yields spreads, growth, retail sales, overbought, oversold, Hindenburg omen, etc if you weren’t trying to gain an edge to buy low and sell high?
Most investors, who state that you cannot time the market, tend to rely upon fundamental analysis. They will disparage market timing and other forms of analysis, like technical analysis — as in, “that stuff doesn’t work” — to bolster the argument that their form of analysis is superior. Rather than build the bullish or bearish case with their tools, let’s shoot down what the other guys are doing. But the fundamental tools are no better or worst than the technical tools, and this can be seen in the statements made by most analysts who use fundamental analysis to navigate the markets. They are so uncertain. We get analysts who will say, “I am buyer at these levels, but I am just dipping a toe in the water”. Or “the market is oversold, but I am not going in with both feet just yet.” There isn’t a lot of conviction — is there?
Why the lack of conviction amongst the analysts and pundits? Honestly, I think it stems from a lack of doing their homework. I am not saying they don’t do homework; I am saying they don’t do enough homework. Hey, you can recommend to do anything in the market at anytime, and if you have the ability to withstand significant loss of capital and wait an awfully long time, then you will eventually be right. Dow 36,000 sounds plausible but maybe not in my lifetime. And Dow 36000 is a perfect example. Since that “call” was made, the Dow has lost over 50% of its value although it has recovered nicely, and that 36000 number seems a long way off. We are right on track for Dow 36000!!
But the lack of conviction also stems from a great deal uncertainty in the market. You just never know. Therefore, I can clearly understand a measured approach to investing. But remove some of the uncertainty by creating an expectation for how a trade or investment should go. Ask yourself at what point you are going to throw in the towel and cut your losses if the trade should move against you. In essence, plan a trade and trade a plan. Rarely do you see folks state their expectations for a trade or investment. They may state price targets but rarely do you see them state how long it will take to achieve that price target and how much of a loss you might have to endure before prices start moving towards that price target. These are very important factors when gauging an investment.
In any case, the recommendation to buy or sell shouldn’t stop with “I am testing the waters and if I screw up, I have some fire power left over.” That works great some of the time, and there are those times when it doesn’t. Oops! 2008 comes to mind. Oh, but this isn’t 2008. That well may be, but are you 100% sure? But it really doesn’t matter if it is 2008 or not. As long as you have a plan and the conviction to execute that plan, then you should be able navigate a fairly hostile environment known as the market. If you don’t understand this, then you are likely to be burned.
So the next time you see an analyst “testing the waters” just ask yourself: “why aren’t they going all in?” It is likely they don’t have a plan.
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Because scaling in is for pussies... right
fucking witch doctor, tarrot card finance drives me nuts.
The statement, "timing the market" really has a wide range of meaning, defined by time itself and what point the market cycle is at. If I were asked, can you time the market? My answer would be the question: on what timeline? I can assure everyone here that on a daily basis, I cannot time the market. That said, depending on what point in a market cycle we're at, I can and do time the market on a monthly or basis or longer (sometimes years). Disclosure: shorting market using inverse S&P 500 ETF. Warning: this requires extreme patience, discipline and conviction.
For me, any attempt at timing this market is pointless.
Seeing the storm clouds gathering, over the last two years I progressivly moved everything into physical Au, Ag, CHF and CAD.
And here is where I will sit.
I will not reenter the market any time soon.
zen
It seems to me like the market has some similarities to a crooked card game. The government is an elephant in the room that can throw all of the fundamentals out the window without so much as a moment's notice.
I think it makes sense to do your best to predict where the market is headed but it's also wise to hedge your bets in case the government is cloning some black swans to release on a random schedule.
I think it's also true that even when does one's homework one needs to take into account that there are unseen variables in play, one more reason to diversify or hedge one's bets and not go all in on one or even a few plays. Even the best card players are going to have a bad day here and there, but given enough time they'll always come out on top over lesser players.
There is this one guy who has a big computer program that looks at corporate filings, and waits for certain patterns of filings that indicate good or bad news. His system works.
Another friend had an interest in a coal mine company. There was a flood in the mine, and the price fell. My frind found the phone number to the bottom of the mine and called it, asking the chief engineer how the flood was. Engineer answered,"We just fixed it. All set." My frind bet big and made a fortune.
Other than that, most stock prices are a martingale, even though the price movement is fractal, not markov (totally random and memoryless) so any strategy has the same expectation.
There is a fifty year cycle where the p/e gets very high or very low. Talk about slow trading, move in and out of a stock every fifty years....
I don't understand why market-timing is a necessity to invest on your own behalf. What if your goal is not to "beat the market"? Can't you stay fully invested in a diversified portfolio or low-cost index funds? Do those people need to entrust their savings to an advisor (yet another form of investing)?
1. define your goal...you don't have to "beat" anything...just try and meet your goal
2. no...you cannot stay "fully invested" there are people out there who don't give a shit about you and are counting on you staying "fully invested"
3. advisors are assholes...believe it or not there is some order to markets if you look hard enough...(hint) it's math...
Also referred to as "enough hard work to kick your ass into the ditch". Thus, most people can only complain about the market.
Over the past week you would have needed to know that after a 600 point slide there would be a 400 point uptick the next day. You would have also needed to stay up all night to figure out when the futures turned after showing the next day would be worse than the last up until that point. You have to be willing to lose everything on a bet that has the same odds as a roulette wheel in vegas.
For a while buy the dips has worked out nicely because some phantom force is keeping the stock market up. However the upward momentum in most stocks has been priced in. I mean you can make the argument that the next ten years of growth are already baked into LULU stock. How much bigger can this bubble grow before it pops? P/Es of 500 or more?
It took Under Armour a decade to hit $1 billion and they are in a few thousand doors and have almost a $4 billion market cap. LULU only has 120 stores and has probably on millionth the total inventory of Under Armour out in the marketplace but somehow LULU has almost an $8 billion market cap. Also because LULU only sells to themselves they can play all kinds of creative accounting tricks to overstate their sales. CAN SOMEONE EXPLAIN HOW LULU CAN JUSTIFY AN $8 BILLION MARKET CAP??? Or for that matter Apple and its ridiculous cap.
I hate the fact that I use logic, makes life a real bitch.
Yes
I didn't read your article, just the headline.
lol
Only with a stopwatch.
it's a sweater!
I'm not a professional, so I tend to sell too early and buy back in too late, but I don't have inside information or an army of super-computers and quants to help me out either.
Tyler, this site is a great benefit for us folks who have been in the business world for a long time but still need some schooling in investments and monetary matters.
Those will certainly broaden your knowledge, but for success in trading or investing (besides the sure fire method of possessing insider knowledge) you need to be steeped in probability theory, Craps, and gambling.
The best advice I ever got as a neophyte was to go out and buy or sell a stock or bond that is a sure loser. Lose a little bit of money and see how that feels to you. Then do it again with more at stake.
If you can tolerate losing money, and not lose a lot of sleep over it, you will learn more that way than anything you could learn from a 4 years course in Investing and monetary matters.
Why? Because what you need to learn above all is your tolerance for loss. You really need to learn more about yourself, in other words. Once you have that then you might be able to withstand the volatility of financial markets. Endurance is what will pay off, and the ability to double down when time is ripe for it, which, if you've made judicious bets should leave you with sufficient money and credit to do so.
The game taught me the game. And it didn’t spare me the rod while teaching. - Jesse Livermore
THanks for the quote. I had never heard of him before and his story is quite interesting!
he was the best imho...
.
Retailers have no business in the market. Period. Even with a $2M+ portfolio, a violent market swing can do significant damage.
Plus, why the hell do people focus so much on stocks? IMO bonds are superior. No market risk if you hold until maturity. Everything has credit risk, including stocks, so there's no way to avoid it.
If you had invested in the S&P the last decade and reinvested all dividends, you may have eeked out a 40% gain. Bonds, with interest reinvested and no principal loss, your gain would have been 200% and possibly more.
Erosion of principal in the stock market is truly devastating. I bet most people still haven't recovered from 2008-2009.
The robots had a busy week....blowout volumes. Volatility was a great money maker.
News on the bucket shops :
http://www.bloomberg.com/news/2011-08-11/high-frequency-firms-tripled-trading-as-s-p-500-plunged-13-wedbush-says.html
hello...we may be going down after all...
or not....
Timing this pig is simple. Just do the opposite of me.
This is disappointingly general, vague and non-specific. Anything else?
+
It's so funny to watch the financial channels and hear all the talk on this subject, I mean they say things like: "Buy Apple on the dip!"
Ok, at what, $378 a share? 100 shares is $37,800, plus commission, and if it goes up $50 you'll pocket a handsome $5,000. How many viewers have $40k to sink into a single trade, even with margin, outside of possibly their 401k that matures sometime in 2025 on average?
Or how about Sprint at $3? 100 shares here is $300. What do you hope to accomplish, a 50% move to $4.50? $150 less commission?
The point is you don't need to time the market because you have no business investing in it by yourself, you need to give it to a professional who can lump it with the money of a bunch of other former retail investors and forget about it until you actually need the money or they contact you to tell you it's all gone.
seriously?
Oh fiddle- de-dee.
What fund do you manage? And shill here for?
well...guess ill add to my shorts...this market is insulting my intelligence
lmao, what a pointless fucking piece
haha totally agree with you, MAN, this article is a joke.
hahahahahahaha totally man like fer sure...hahahaha...totally
If you need some NFL betting advice, I know this guy on TV from New Jersey that's 75% accurate and only charges $100 per pick. Let me know if you're tired of losing and ready to be a WINNER! You get a free 3 game parlay advice after your first $1,000 in commissions.
the best bet would have been that there would be foosball this year to distract the sheeple, no?
The Technical Take,Does have a good point.
That statement "you can`t time the market" always used to/still bothers me also.
Timing the market is what it is all about ! so I,do agree if the broker/ dealer/analyst cannot do it they are not very professional in my opinion.
Same as a construction site. You have guys that have tools and guys that do not have tools.the guys with tools usually are faster and get the job done in a more professional manner with less problems.You also have guys that have tools but the tools are smarter than they are.
the helpers are all standing around doing nothing but text messaging all day and one lone guy in his trade is covering for one sitting in the truck with the ac on idling next to you while you are in the 106+ heat. you also are covering for the other guy riding around in his truck all day with the air on.So you the lone gun that is doing all the production is using his tools and the special ones when needed and four seperate jobs in different locations are still getting done.
Blueprints,submittals,spec book all are needed to do the job Right the First time,does not mean there may not be a few corrections or adjustments.Not just looking at the box but way outside of it also. Correctly,efficiently,on time with barely any waste..Go to a job without tools ,it does not get done
Thats also how you keep your job when others are told to hit the highway.
And you go to Zerohedge for an edge in the financial world and consider it one more tool of research of many to be used and appreciated when you are doing that kind of work.
Both work for me
.Cheers
There are also the guys that are tools. Time to go tune into Tool Academy.
right...brokers aren't mining the gold...they're selling the pickaxe...
and going home with more than 99% of the speculators
LOL, where is the covered wagon with the snake oil advertisement on the side?
Awesome indeed. That strategy would've served u well this week. Though going forward, I believe we will see many more down days than up.
agree, but when will the down days start?
...close 1178? ... clearly marked on the chart ...hmmm
http://www.scribd.com/doc/61796774/Sp500-Update-6AUG11
...not a bad prediction last week
WTF is the TechnicalTake's position on the market, Buy, Hold or Sell? What a bunch of bullshit.
After correctly predicting (i.e. lucky guessing) a rally in July off of the June lows, based almost solely on the Rydex bullbear fund buying by the public, the Technicaltake blogs have been entirely non-committal since. For the past 4 weeks, these blogs have talked about news events and fundamentals, precisely the factors that they criticized the retail investors for using. They never made any definable market call at or near the top. So, STFU, techtake.
I believe that the public wants to be led, to be instructed, to be told what to do. They want reassurance. They will always move en masse, a mob, a herd, a group, because people want the safety of human company. They are afraid to stand alone because they want to be safely included within the herd, not to be the lone calf standing on the desolate, dangerous, wolf-patrolled prairie of contrary opinion.
- Jesse Livermore
Hey Skeptic Clown:
Here is the track record:
http://www.thetechnicaltake.com/2011/08/03/arl-advisers-letter-to-invest...
http://www.thetechnicaltake.com/2011/08/01/model-mania-part-2/
http://www.thetechnicaltake.com/2011/08/01/model-mania-part-1/
http://www.thetechnicaltake.com/2011/08/03/key-levels-spy-qqq-xlf/
http://www.thetechnicaltake.com/2011/08/07/dollars-downtrend-still-intac...
http://www.thetechnicaltake.com/2011/08/08/i-get-paid-bubkus/
To each his own; good luck
He'll tell you ever single day what you should have done yesterday. He's damn near 100% accurate too.
Not being 100% accurate on that basis is somewhat disturbing, don't you think.
I plan on buying bottom of the -500 point daily drops, and selling the next days +500 point rallies. Awesome plan I think!
Damn, I thought I invented that. Do me a favor, don't tell anybody else.