Continuation of Part I

Through using trading and position rules described earlier we progress even further in our risk management by minimizing mistakes in our overall investment approach.  For example, if all previous approaches agree and we decide to establish an investment position in any given stock or the overall stock market, we would still have to look for the market to confirm our research.  If the market moves against our very well researched position, we have to follow our strict trading rules and liquidate our position as fast as possible. While such actions will lead to short-term losses, over the long-term such actions will minimize losses while greatly increasing your return opportunities in more profitable positions. 

Once again, by combining all of the factors above into what I call a “Timed Value” style of investing, one gains the ability to compound oversized gains over an extended period of time. All while minimizing risk. An allocation that should ensure in market beating performance if timing techniques used in this book are used in their proper format. It is also important to understand that properly exercised timing techniques can lead not only towards market beating performance, but to capital gains that are typically not available to traditional market participants. If fact, when the market structure is understood in full from the 3-Dimensional perspective, it can be timed with great precision, leading to astronomical returns and very little (if any) risk.  

To summarize the Timed Value approach discussed in this book…

1. Identify “Rocket Ships” value stocks through the use of fundamental analysis
2. Confirm your investment thesis through proper understanding of the Macro Economic environment.
3. Use 3-Dimensional analysis to time the stock market or the individual stocks with great precision.  
4. Use Cycle Analysis to confirm your timing work.
5. Follow strict trading rules to properly enter and exit financial instruments in question to minimize risk.

In conclusion, I have developed this unique investment approach after more than a decade long participation in financial markets and tens of thousands of hours studying various timing techniques. While the above might not work for everyone, it is the most powerful and the most risk averse approach to the investing that I know of.  While “Value” portion can be replaced with many other investment styles (growth, technical, etc..), the timing principles discussed in this book are indeed timeless and cutting edge. An analyst who dedicates his time to studying the market in 3-Dimensional environment should walk away with a much better understanding of how the markets truly work. An understanding that will eventually morph into an exact science allowing the said analyst to time the stock market with the precision most other market participants can only dream about.    

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Putting It All Together (Part 2) 

Throughout this book we have talked about a number of important investment concepts. We started out by looking at the traditional value investment approach and how to use it in order to minimize risk while maximizing returns. We followed on by looking at things like margin of safety, how to determine the intrinsic value of any stock like a pro, the different types of stocks out there and how to apply macroeconomic analysis in order to supplement fundamental analysis.  Basically, this section of the book allowed us to concentrate on the fundamental approach to investing and the best practices associated with it.  At the same time, we were able to identify a number of significant problems associated with value investing.

The most significant of them was the fact that value investing doesn’t give us the ability to properly time entry and exit points into the financial instruments we are investing in. Even if our fundamental research is proven to be correct, we might be months or even years away from a properly timed entry point.  Yet, timing is the most important element. Properly timed investments allow us to further reduce risk while maximizing our returns. Not only that, but properly timed investments can either confirm or challenge the validity of our fundamental analysis.

This understanding forced us to look at the various timing techniques and their associations with the stock market. Primarily, by introducing a completely new way to look at the stock market we were able to concentrate on the 3-Dimensional analysis as our primary tool to time the markets. As this book clearly illustrates, the stock market is not random, but is, indeed, highly structured. Once the structure is understood through the use of 3-Dimensional analysis, one can time the market with great precision.   

Further, an analyst working with the timing techniques described in this book should be able to identify with great accuracy not only what any given stock or the overall market will do, but exactly when it is going to happen. This was followed by the cycle analysis and an explanation of how cycle analysis truly works. Most analyst have had issues with using cycle analysis in the past because cycles tend to work over a certain period of time, only to break down and to never work again. This conundrum was clearly explained and it was shown how the cycle analysis can be used to mimic the stock market with great precision. Once the cycles are arranged in proper configuration an analyst can determine with great precision not only the price and time, but the velocity of the upcoming move as well. Once again, confirming price/time and minimizing risk in the process.

So, what is Timed Value?

It is exactly what it sounds like. Three powerful investment strategies, all wrapped into one. Fundamental analysis, 3-dimensional analysis and the cycle analysis. Combining all three into one allows us to predict the stock market (or individual stocks) with great precision in both price and time. This further reduces risk while maximizing the returns. For instance, working with fundamental analysis and macroeconomic understanding we would be able to identify “Rocket Ships” stocks that are set for rapid and significant advance. We would then use 3-Dimensional analysis and cycle work in order to confirm our fundamental analysis and timing. If everything aligns and the price movement confirms, it is ideal to start building a trading or an investment position.

To be continued….

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Putting It All Together

 

Continuation of part 5….

PRIMARY CYCLES WORKING IN THE STOCK MARKET

(Please note that it took me a considerable amount of time to work out the cycles and their appropriate allocation. After reading this section, I would highly encourage you to perform your own cycle analysis to confirm the cycles below. Doing so will give you a better level of understanding and reassurance.)

Market Cycle #1: 5-Year Cycle. This cycle represents the primary trend in the stock market. In fact, this cycle had been mentioned earlier in this book when it was indicated that this particular cycle represents major long-term movements in the stock market. For example, 1982 to 1987, 1994 to 2000 and 2002 to 2007 are ALL represented by this exact five year cycle. Typically this cycle moves 5-years up and then 5 years down.

Internally, this cycle moves in the following fashion. Five years up and five years down. During the bull market the cycle moves 2 years up-1 year down-2 years up and during the bear market 2 years down-1 year up – 2 years down.  Because this cycle represents the primary trend in the stock market, an analyst who is working with this cycle would have to multiply the composite created by the cycles below by the five year cycle in order to create an accurate representation of the stock market.

Market Cycle#2: 52-Months Cycle. This cycle moves bottom to bottom every 52 months. Meaning the bull phase is represented by the first 26 months and the bear phase is represented by the following 26 months.

Market Cycle#3: 27-Months Cycle. This cycle moves bottom to bottom every 27 months. Meaning the bull phase is represented by the first 13.5 months and the bear phase is represented by the following 13.5 months.  

Market Cycle#4: 18-Month Cycle. This cycle moves bottom to bottom every 18 months. Meaning the bull phase is represented by the first 9 months and the bear phase is represented by the following 9 months.

Market Cycle#5: 13-Month Cycle. This cycle moves bottom to bottom every 13 months. Meaning the bull phase is represented by the first 6.5 months and the bear phase is represented by the following 6.5 months.

The cycles above represent the longer term moves in the market. However, as mentioned before cycle analysis can be applied to any time frame. An analyst working with shorter time frames (daily/hourly) would just have to narrow down the window of analysis in order to figure out the short term cycles and their relevant application to the stock market. When done, these shorter term cycles must be added into the composite above.  Doing so will produce a very accurate composite on both the long-term and the short-term time frames.

To be continued……

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Timing The Market & Advanced Cycle Analysis (Part 6)

Continuation of part 4

Let us study a sample market composite to gauge full understanding.  

This chart requires a little bit of explanation in terms of being able to mimic the actual stock market.

1. The chart above represents a sample  market composite over a 5 year period of time.
2. Please note 5 separate cycles located under the green line. Each line of different color represents a different cycle working over that period of time. Note that these cycles vary in amplitude, and most importantly, in spacing. While some cycles are moving up, others are moving down.
3. As these cycles move over time they interact with each other by either diluting each other or by amplifying energy in any particular direction.  For instance, major bull moves on the green line occur when most cycles are pointing up.
4. As you can see from the chart, all of these cycles started at different points in time.
5. The Green Line is the composite cycle of all cycles coming together. It is the summation of all of the moves, either up and down. By combining cycles in such a fashion we come close to mimicking the actual stock market move over that period of time.
6. The chart above is one step removed from getting the exact composite. That is done by multiplying the composite above (green line) by the main trend at the time. When we do that  properly, we end up with an extremely accurate representation of the stock market.

For instance, an analyst working with this composite would know not only the structure of the upcoming market, but the exact turning points and the length/velocity of any upcoming move. When done with precision, the final output of the composite above should mirror the actual market movements with scary accuracy. Of course, the same type of analysis can be applied to individual stocks. Before we can put together an actual real life composite, it is important that we first take a look and study all of the major individual cycles.  

To be continued…..

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Timing The Market & Advanced Cycle Analysis 

Continuation of part 3

The problem with traditional cycle analysis is threefold. First, the use of 2-Dimensional price/time stock market charts to track the cycles. This book makes it clear that the stock market is a much more complex phenomena that moves in at least a 3-Dimensional environment. As such, when the stock market cycle analyst begin to use traditional cycle analysis on a two dimensional chart, they are nearly measuring the shadow of the overall cycle and not the cycle itself.

Second, the cycles are not static, they are dynamic.  They are constantly rotating, adjusting and realigning themselves within the structure of the market.  While it might sound complicated, it is not. It simply means that while the overall cycles remain intact, they constantly change their starting position to realign with the 3-Dimensional structure of the market. As various points of force occur in the market place, these cycles tend to realign themselves to confines of the lattice structure developing in the stock market at the time.

Finally, there are multiple cycles working in the stock market at any given time, ranging from hourly cycles to cycles lasting decades. An analyst performing cycle analysis must be aware of this fact and know which cycle is the predominant one during the period of study.  Doing so would allow the analyst to setup a proper index composite that should mimic and predict the market in great detail. An illustration is a must to cement all 3 points.

Let’s take a look at the  2000 top, 2003 bottom and 2007 top.  Let’s assume that during this time there were 10 different and major stock market cycles moving at the same time, and when combined, represent all major ups and downs of the market. The dates above are the major inflection points in the market. They represent the lattice completion points in the 3-Dimensional environment.  That is precisely the points where the cycles realigned themselves in order to form the new cycle composite.

When the market hit the 2000 top, most cycles that worked prior to that period had stopped working. Instead the cycles realigned themselves at the 2000 top to build a completely new cycle composite going forward. These cycles represented the market between 2000 top and 2003 bottom. Further, these cycles realigned themselves again at the 2003 bottom and 2007 top. That is the primary reason behind why these cycles work for a period of time and then break down to never work again.  Once the inflection points and the cycles are understood, an analyst simply realigns such cycles in a predictable fashion in order to time and predict the market with great precision.

Let’s study a sample market composite to gauge full understanding.  

To be continued……

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Timing The Stock Market (Part 4)

Continuation of part 2

Now, before we jump headlong into cycle analysis, we must first look at and address three primary cycle issues.

Issue #1: Why do cycles exist in the stock market?

To begin with, everything in nature is cyclical. If we wish to get very technical and look at the fundamental particles we will learn that everything in nature is energy. That energy itself is in the constant state of cyclical movement where the primary difference between various elements and matter is the rate of vibration or oscillation (which in itself is a cycle).

Since everything in nature is cyclical and the stock market itself represents a natural growth spiral, we can safely assume that the stock market is cyclical as well. Yet, it is a little bit more intricate than that. It is not necessarily the stock market that moves in cyclical fashion, but the human psychology that underlines the stock market.  If you study mass human psychology you will soon learn that men go on repeating the same mistakes over and over again. Not only are they incapable of learning from history, but they tend to repeat exactly the same mistakes that their parents and their grandparents had made. .  

When it comes to the stock market and mass human psychology it is very easy to see how people pool their emotions (or mass delusions) together to justify what the stock market is doing. For instance, 2000 and 2007 stock market tops present us with a perfect opportunity to illustrate just that. In both cases it was clearly visible that market participants are suffering from a mass delusion. With the tech stocks selling beyond any reasonable valuation in early 2000 and with the credit/housing market feeding a massive speculative bubble throughout the entire economy in 2007.    

From bottom to growth, from growth to excess, from excess to a decline/collapse. Rinse and repeat. Each one of these cycles servers their purpose, from start to finish. They always had and they always will, for one simple reason. You cannot change the human nature of greed, hope, fear and panic. It will always be within us. The tricky part is identifying these cycles, how long they will last and more importantly, where do they start and end. This section clearly illustrates how to do just that.

Issue #2: Why do some cycles work perfectly fine over a certain period of time only to break down and never work again?  

As mentioned earlier, this issue has caused major headaches for most cycle analyst since the day their craft was born.  At times analysts are able to de-trend various cycles out of the market that, at first glance, work perfectly fine.  In fact, they might work so well that an analyst might get too comfortable with it. The trouble starts when these cycles brake down and stop working. Eventually they all do. Most analyst have been trying to figure out why that happens, thus far without any luck.

To be continued……

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Timing The Stock Market (Part 3)