In a hyper active environment created by mainstream media, financial media like CNBC, WSJ, and Bloomberg, snake oil salesmen and high frquency traders, markets each gyration is a temptation to act.
I am asked by many as to when the signal will turn green. Some have very short term trading horizon and hence days on which they make few dollars and find market going up , they question the logic of market timing. Some have volatility based system and do well in such time frames ( which also means they would be unprofitable during low volatility phases, which means most of the time in a year), and hence brag volatility is good.
Market timing systems are just mechanical systems, they have no emotions. If you look at the Investor's Business Daily market timing system, it is based on number of 1% plus days in 4-7 days. Now when that phenomenon happened sometime mid August lot of people had a emotional reaction. Many imputed motives to IBD calling end of the correction. They were just displaying their emotions and lack of perspective. All that the IBD system does is mathematically it looks at cluster of days. It has no control over when those days will happen.
Same way the Market Monitor is just maths, there is nothing that is going to change because someone wished for another reality.
William O'Neil had a very simple and basic advise in his book " 24 Essential Lessons for Investment Success" :
From your experience , what would you say are the essential steps to successful investing?
If you are an individual investor, whether new or experienced, and you want to make money and perform well investing in common stocks, there are just three key steps you must learn and follow:
- First you have to develop buying selection rules that let you pick the best stocks.
- Second you must have rules to take profit and avoid losses.
- and third you need specific method to tell you when the general market averages are topping and headed down, and when they've finally hit bottom and turned in to new uptrend. That's all you need.