The recent bear market should have convinced investors that they have to monitor and take control of their investments. They learned that it’s not safe to turn their portfolio over to an expert and then rely that they won’t lose a big chunk of their life savings in a bear market. So what is their alternative? They can monitor their portfolio by simply applying a moving average to their investment vehicles. I recommend that they use an Exponential Moving Average (EMA). That’s because an EMA places more emphasis on what is happening now. With the free charting programs available today like https://www.BigCharts.com it is easy to set up an EMA for each of your stocks, mutual funds, or ETF’s you own.
The size of the EMA is very important. I recommend that it not exceed 40 days. I know that you hear recommendations to use 50 days or 200 days, but a lot of time can pass before you get a signal to buy or sell, and you can sustain large losses and miss large gains, waiting for a change in the trend. Investors can test with the size of the EMA very easily, and come up with the best number of days to meet their personal risk tolerance. It’s easy to do. Then when you have your EMA posted against your investment vehicle(s), you can monitor to see when a change in the trend occurs. I recommend that you use a 2 month-daily chart so that you can clearly see what is happening now. When the EMA line turns up consider it a Buy Signal and when the EMA turns down, that’s a Sell Signal. It’s so simple and yet so valuable.
I believe that most investors rely on predictions and forecasts of where the stock market and their individual investments will go in the future. That means that in order to be successful their predictions have to be accurate. I frankly do not believe that it is possible to predict the future course of the stock market. The market only gives us current information on what is happening today. Ask any person who makes predictions what the market will do tomorrow and they cant give you an answer.
Since the market only gives us information one day at a time, we have to react to that information and base our decisions on what is happening now. Yes, we can make decisions on what is happening today and we can decide if the trend of the market is changing direction based on the information that we are being given. We can identify changes in the trend of the stock market, but we can’t tell how long that change in trend will last. If the market is in an up-trend, the market can change whenever there are more sellers than buyers on a given day. And if that continues long enough, the trend will turn down.
So the trend is established by the daily market action and if that action is positive for a long enough time, the trend will be up, and vice-versa. As a market timer, my job is to use mathematics to determine when that change in trend occurs. It can be done without making predictions or forecasts.
I developed the RIX Index many years ago. The RIX is a mathematical formula that translates the market action every day into a number that represents the trend of the market for that day. Its a cumulative number, so if the market goes up it will go up. The RIX numbers will take the daily action and increase on up days and decrease on down days. I have a RIX Index for the NYSE and NASDAQ. In order to get a Buy Signal on the NYSE I need to see a +12.0 and to get a Sell Signal I need to see a -12.0. For the NASDAQ I need to see a +6.0 for a Buy and a -6.0 for a Sell. Its that simple. But more importantly, the RIX has identified changes in the trend of the stock market for over 40 years. It doesn’t tell me how long the trend will last, but it will keep me in the market for most of the big up moves and it will take me out of the market for most of the big declines. That’s as good as it can get when it comes to timing the stock market.
My mission is to help the average investor. I would like to share my 40 years of experience, timing the stock market, with anyone. I will send a free copy of my latest Newsletter to anyone who thinks that it might help. I talk to a lot of people about investing. Many of them are afraid to invest. I don’t think they recognize their fears, but the longer they talk the more I recognize the fears that are not obvious to them. I had a few of those conversations this week. One was from an existing subscriber and one was from a potential subscriber who has called me on several occasions. At the end of each of the calls from the potential subscriber he tells me that he understands the importance of my service , and that he is going to subscribe. But, he never does. The other conversation is with a current subscriber who did not get in the market even though he knows that the RIX has been on Buy Signals for almost all of the time since the March 9 lows.
What are the common threads in these conversations? Well the same ideas apply to most investors who can’t pull the trigger on up trends and down trends. When the markets hit their lows in early March, all we heard was that the markets were going much lower and we were going into a depression like the one that happened in the 1930’s. So that creates the fear that “if I get in now the market will go down, so I will wait so I don’t lose money”. It doesn’t matter to these people that the trend of the market turns up. They are afraid of losing money, so they stay on the sidelines.
Another fear happens when the trend of the market starts down. Many investors want to keep their recent profits. They are sure that the markets will go back to their recent highs so they stay too long because they are convinced that “if I sell now the market will turn around and go back up”. So they stay and stay until their losses get so big that they make the decision to ride it out. In bear markets, fortunes are lost waiting for the market to go back up.
Another fear occurs when the market continues up. Those who did not get in are afraid to get in because they are sure that if they get in, the market will turn down and they will lose money. So they wait for a pullback, that may not come. If the big pullback does come, these same people will become afraid again and will not get in even though they are given a second chance. Fear controls their decisions, so they can’t make a move. They eventually join the “Buy and Hold Crowd” and ride out all market up and down moves. They become “Sitting Bulls”.
If investors base their investment decisions on emotions and fears, they will probably be unsuccessful. When investors decide in advance where they think the market, or their investment vehicle, is going to go they will tend to look for indicators to support that decision. They have a strong need to be correct even while their financial world is collapsing.
So emotions and predictions will not produce a successful investment strategy. Neither will get-rich schemes. The true course to success is developing an approach that yields consistent returns. I say that is achieved by spreading investments over many stocks like ETF’s or mutual funds. The object then becomes to ride those investments up in major up moves and then keeping the gains by getting out early before major declines. If you can do that, unemotionally, and if you let the “Power Of Compounding” take over, you will be a very successful investor, and you will become wealthy if you have enough time to let it happen. Every young person today should be able to become a millionaire, by applying this simple strategy.
Yes, the key to investment success is becoming a “Mechanical Investor”. If you can act on changes in the trend of the market without questioning the strategy, your unemotional decisions will make you a successful investor, and you will sleep well.
I provide the tool you need to become a Mechanical Investor. It’s up to you to recognize the value of the RIX Strategy and to use it as your investment decision maker. I have been using the RIX for over 40 years with great success, and yes, I am a Certified Mechanical Investor (CMI). If you have been with me for more than one year, so are you.
For several months I have been saying that the 2009 Stock Market is acting like a Mirror Image of the 2003 Market. It’s very interesting that investors and “market experts” are saying and doing the same things they did in 2003. In hindsight we can see that the March lows in both those years created “Buying Opportunities Of A Lifetime”. The problem is that when the markets get cheap, it is after major declines and the average investor is too frightened to get in.
From 2000 to 2003 the stock market went into a crash because of the “Tech Bubble”. Investors lost tons of money and when the market started up in March 2003, they were frightened and many did not get back in the market. Also, they had to listen to the “experts” who told them that the market was going to go back and penetrate the November 2002 lows, there was going to be another leg down, we were going into a Depression, and the sky was going to fall. That was enough to keep the frightened average investor out of the market.
Then the unbelievable occurred. The market started up in March 2003 and continued up for an entire year, with only one two-week pullback in early August 2003. My RIX Index issued a Buy Signal to my subscribers in on 3-23-03 and it kept us in the market until 3-22-04 except for two weeks from 8-4-03 to 8-19-03.
But what were the “experts” saying during that year? First they said “Sell in May and go away”. Investors who acted on that advice missed what was about to happen. The market kept going up until there was a minor correction from 8-3-03 to
8-19-03 and the RIX gave us a Buy Signal on 8-18-03 so we got back in. We didn’t know it at the time, but that was the only opportunity to buy into the market, for those who missed the 3-23-03 Buy Signal. A month goes by and the “experts” tell us that September and October are historically the two worst months for the market. But the market went through those months like they weren’t there. Investors who listened to that advice and got out again found themselves on the wrong side of the up move. When we got to October the “experts” started to tell us that the market was overbought. What do you think investors do when they are told that the market is overbought? Right, they sell. For the rest of the time from October to March 2004 we kept hearing that the market was “way overbought”. But the market didn’t listen and it kept going up and we finally got a NYSE RIX Sell Signal on 3-22-04. People who listened to the RIX and ignored the “experts” made a lot of money that year.
So why do I say that 2009 is a “Mirror Image of 2003″? Think about it. The 2009 market bottomed out on 3-9-09. The NYSE RIX issued a Buy Signal on 3-17-09. What were the “experts” saying then. The “experts” who told us that the market was going to go back and penetrate the previous lows, there was going to be another leg down, we were going into a Depression, and the sky was going to fall. They said this was only a “Bear Market Rally”. That was enough to keep the frightened average investor out of the market. Again we were told to “Sell In May And Go Away”. But the market kept going up. Investors who missed the up move got their only chance between mid-June and Mid-July 2009. There was a minor pullback and the NYSE RIX took us out on 6-22-09 and put us back in on 7-15-09. We got a one week whipsaw Buy on 7-1-09 and Sell on 7-7-09 which didn’t amount to anything. But we are still on that 7-15-09 Buy Signal and we have seen a significant up move since then. I am again hearing about how bad the months of September and October are for the market, but it is 9-18-09 and the market continues to be in a strong up move. Yes, I am starting to hear people saying that this market is overbought. But what do they know? Will the “Mirror Image” continue? I don’t know, but I think you will have to agree that this market has been amazing and it has fooled a lot of people who stayed on the sidelines and many more who got into the market and sold out too soon.
Take some time and take a look at a chart of the S&P500 ($spx) or the Dow ($indu) for the period from March 2003 to the present. I think you will see that there have been two “Buying Opportunities of a Lifetime” in March 2003 and March 2009. I think charts tell us all we need to know about an Index or a stock. Fundamental analysis is a lagging indicator, but might be helpful to identify stocks that you want to see on a chart. Charts do not tell us what emotions or thoughts contribute to the movement of stocks or indexes, but those emotions and thoughts are definitely reflected in the chart.
I have written 3 articles in the last few weeks. All have been included in my Newsletters. The first was entitled, “The Market Is What It Is” and focused on the fact that the market does what it wants to do and can’t be predicted. I wrote the second article last week that focused on the emotions and fears of the average investor. I didn’t give it a title, so I will now, “Most Investors Buy High and Sell Low”. And of course, today’s article is, “The 2009 Market is a Mirror Image of the 2003 Market”
I am going to see if these articles can be included on my Web Page and my Money Show Web Page. I will also submit them for publication on one or more of the sites that I write for. Hope these articles have given you some food for thought. But, as always, if you stick with the RIX Signals you will know when the trend of the market changes direction, and you won’t have to listen to the “experts” who try to fill your mind with junk. You know, like the kid in the commercial who when given a cardboard truck says, “This is a piece of junk. I want the red truck”.
I am sure you realize that what goes into the RIX Index is proprietary. I will tell you this. Each day I mathematically calculate a number that represents the trend of the market for that day. The metric is cumulative so you will be able to see the trend developing. I do this for the NYSE and the NASDAQ. As a subscriber, I will be sending you a Newsletter every Friday, which shows you the readings for every day in that week. On Wednesday I will send you a Mid-week Report that shows the readings for the first 3 days of the week. When I issue a Buy or Sell Signal I will send you an e-mail on THAT DAY. There is no guessing or predicting. For the NYSE I need to see a +12.0 to get a Buy Signal and -12.0 to get a Sell Signal. For the Nasdaq it’s +6.0 and -6.0.
When I issue a Buy Signal on the NYSE, for example, the metric can go as high as it wants. I’ve seen it go as high as +50.0 in a very powerful sustained up market. It can then go down to -11.9 and I still will not consider it a Sell Signal until it hits -12.0. This is very important because we have seen it get very close to Sell Signal levels and then rebound. So it acts as a filter to avoid frequent unnecessary signals. The RIX Index is constantly attempting to move toward equilibrium of 0.0. So if we are above zero and the market has a series of days where the market goes nowhere, the RIX will move gradually move toward zero and the reverse is true if we are below zero.
For the past 40 years I have averaged 3 round trips a year, so it identifies Intermediate Trends. You can view my historical results here. Note the number of Signals each year and particularly note the number of days in and out of the market. If you are familiar with any good or bad years, you will see that the RIX keeps us in up markets, and more importantly, keeps us out of major drops in the market. Trend Following does not get any better than this.
You might want to read my good friend Michael Covel’s book “Trend Following” New Expanded Version. Going with the trend will give you a decided ADVANTAGE. As you read my Newsletters and become familiar with my approach you will realize that there is not a better timing service out there. Timer Digest ranks me in their Top Ten Timers List and Business Week calls me “The Zen of Market Timing”. Tobin Smith says, “Jim Rohrbach is the best market timer in the country”.
Thank you for your interest in my service and I know you will enjoy my precise Signals and I am sure you will be the only guy on your block who really knows the trend of the stock market.
You can subscribe online by clicking here or call me Toll Free on 877-658-9070.
The concept of market timing may be taboo in certain circles, but as the Great Recession showed, investors need to be able to bet with the major trends, says Jim Rohrbach. [Watch the Video]
Most investors would benefit from a mathematical model that takes the emotion out of deciding when to sell, explains Jim Rohrbach, founder of Investment Models. [Watch the Video]
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