Market Timing

Every man gets a narrower and narrower field of knowledge in which he must be an expert in order to compete with other people. The specialist knows more and more about less and less and finally knows everything about nothing 

Konrad Lorenz 1903-1989, Austrian Zoologist, Ethnologist

 We are gratified to know that the markets have followed our intermediate time frame expectations almost to the T. 

We are expecting a pull back in the short term time frames; this might or might not materialise as short term timing is the most unpredictable time frame to deal with; if it does transpire risk takers and futures players can buy calls on the Dow, QQQQ.s, OEX and SPX indices; futures players can go long Dow or SP 500 futures contracts.  Wait for at least a 600 point pull back from the current level.  Market update Oct 16, 2007 

This was sent out early on Oct 17^th. The Dow moved up traded as high as 14012 and thus if you subtract 600 points from this level you get 13412; the Dow traded as low as 13407 and thus it traded within our suggested entry range.  

 The only area that has been somewhat tricky to predict has been the very short term time frame and indeed this to be expected as markets are nothing but a manifestation of insanity in real time.  As we have stated before timing insanity is at best tricky and at worst a ludicrous to treacherous endeavour.  It’s for this reason we do not place too much emphasis on short term timing and for that matter long term market timing too. What we look for are signs of bottoming or topping action and when we see this we either bail out or start to look for new attractive entry points.  

Thus the market timing we do attempt here under the Market commentary section of the Market update should be viewed as bonus feature that we provide to option and futures players who want to go long or short via popular indices.  Our main goal is to just warn our subscribers when we feel the markets are due for a pull back or a run up; thus the ones that are nervous can then take some profits of the table and use the pull backs to re open the positions they previously closed out.  We also look forward to pull backs because in almost every case they are over done and they usually produce some very lovely buying opportunities.  One day we expect that one of these stated pull backs is going to be rather extreme in nature. When we feel we have reached that point we will most likely close out at least 83%to 90% of our positions and wait for the dust to settle before re opening them.   

At this point in time we don’t feel that we are close to a massive correction; however we do feel that another correction is in the works and if and when it transpires it will simply provide another buying opportunity.  The word crisis in Chinese is composed of two characters one represents danger and the other opportunity.  Our take on this is that a crisis is dangerous for those who are desperately seeking safety and very lucrative for those who with open and clear eyes examine the situation for what it really is. When one does this one discovers lot’s of lovely hidden gems just waiting to be picked up at incredibly low prices.  

One thing most players have to remember today is that the markets have become even more wicked and tricky than ever before and the reason for this is that individuals as a whole today are more wicked and treacherous than ever.  Bottom seekers have to wait even longer before a bottom formation starts to manifest itself and vice versa. So if you are sitting there desperately waiting for something to happen chances are that you will lose your patience and bail out before it occurs. The best thing to do is to understand that nothing goes up or down all the time and that eventually it will start to stabilise. Your job as an unbiased, objective observer is to sit and wait patiently for this situation to transpire. If you try to force something or push the markets into doing something the only one falling of the cliff will be you. The markets listen to no one, care about no one, respect no one and look to destroy everyone. The market is essentially a reflection of your deepest fears staring you right in the face and most people usually blink when this happens and or look the other way. How many times have you seen traders get desperate or lose their mind or rant and rave when a stock or an index is doing nothing but just moving sideways; the answer is countless times.  What have they gained other than increasing their blood pressure and over all stress? Now if they were to jump around it might be a good thing as they would be getting some exercise in the process of losing their minds; at least on a physical level they would be in shape.    

We at TI have long decided that to try to time a specific bottom or top is like trying to hit the bull’s eye while being blind folded and standing 1 kilometre from the target. What we have always looked for is a bottoming process or a topping process; once we see this we look for the very important mass psychology factors to confirm that we are indeed close to a bottom or top. We either look for mass greed or mass fear and when we see this we take action. That’s how we were able to buy palladium initially in the 140-180 ranges, Silver bullion in the 4 dollar ranges, Gold in the 300 dollar ranges, Oil stocks when oil was trading well below 35 dollars a barrel, uranium stocks before the main move up started (here we jumped in and out of several 100% plus winners) and the list goes on. Using this same technique we warned our subscribers of the housing disaster as early as late 2003, the correction that took place a few months ago in the Stock markets, buying the Franc in the 81 ranges, issuing the statement several times in the past two years that the Canadian dollar would one day trade on par with the US Dollar and so on. Notice that most of the time we did not get in at the exact bottom or top but usually jumped in a bit too early and jumped out a bit too early but we would rather be in and out early than late and get killed in the process. Look at the chaps that refused to listen and held onto their real estate; today they would give anything to go back to 2004 and 2005 and be able to sell them at or close to the top.  Now these very same geniuses are going to have to wait maybe 9-11 years if not more before prices go back to what they used to be.  

Our main point here is that riches come to those who seek it and poverty to those who chase it. You don’t need to be rich to make money but you do need to have the mindset of the rich to do so. What do we mean by this?  Usually wealthy individuals are not desperate to make money; the reason being that they already have enough to live well on and so anything extra is a bonus.  The key factor though is that they are relaxed and not in a rush; that’s what needs to be learned by most novice traders. Do not rush, do not push for results, find an opportunity and let opportunity do the work for you while you read a few good books and take time to study yourself. Point and case when we first recommended palladium in the 140-180 ranges; it did nothing for a long time after we bought and then when it initially moved, it moved just a few dollars. However when it finally started to move it moved like a rocket and in less then one year it had gone from under 180 to over 420 dollars. Was it not better to simply buy and wait after the main investment criteria were fulfilled, that being that it had mounted a severe correction, was putting in a bottom formation and most importantly the masses were ignoring it? In fact almost no one was talking about it in late 2004 to early 2005.

One more note here; it’s far more important to have the mindset of the rich then simply riches for many individuals vault from poverty into riches and then jump back into poverty even faster. These individuals failed to acquire the right mind set. Finally is it really the money that makes you happy or the perception that you have money. Look at it this way if you were locked up in some place in a third world country with almost no money to spare and just barely enough food to eat on a daily basis; would you then not consider yourself rich if you were given a simple job, a car, house and a computer. Hum the funny thins is that most people already have this and much more; the sad part is that there are a lot of people in these 3^rd world countries who are struggling to survive on under a dollar a day.  Riches just like happiness are a state of mind. It’s in our capacity as humans to change our perceptions and in doing so immensely improve the state of our lives, yet most choose to drivel in sorrow and misery.

 Palladium still represents a wonderful buying opportunity and once again very recently we recommended buying it in the 330 dollar ranges and note once again it did nothing for awhile. In fact several times it traded well below our suggested entry prices but then look how fast it has moved in a few short weeks.  Remember the saying we have at TI; opportunity is forever knocking but most people forget to open the door in time and when they do open it they are usually waving good bye instead of saying hello.  Every disaster, ever painful situation always brings forth wonderful opportunities; most people fail to see it because they have been trained to focus on pain and misery and not on the resurrection or the creation of something new.  What is even sadder is that they focus on this pain and misery and do nothing to alleviate it; if you are going to focus on this area for heavens sake do something about it. At the very least try to help yourself or those that are close to you but instead most people sit there like donkey’s, wailing and hoping that someone else takes pity on them and tries to help them. In this way a lifetime is wasted in misery and pain and inadvertently trying to drag in as many other innocent bystanders as possible into this tragedy.

 Keep in mind the saying that “misery loves company” to which we added “and stupidity simply demands it”.  Why don’t we say happiness loves company or intelligence demands it because it’s not true? Individuals usually do not like winners they start to get jealous when someone talks about wining or they feel upset when someone is unusually happy. The reason is simple they are envious because they would like to be like this person but they do not know how, correction, they do know how but they don’t want to try.  Which brings us to another TI saying “life is not bad or good, life just is; it’s our perceptions that oscillate from bad to good”.

 Do not chastise yourself for past mistakes but learn from them and ask yourself why you did what you did and then write this down in your trading journal.  The tragic part about most peoples lives is that they can dedicate so much time preparing themselves for a specific career, so much time to study how to invest (and usually fail but that’s a different story), so much time to learn to operate computers, cars and other mechanical gadgets but they take so very little time to understand themselves; in fact it can be stated that most people live and die without really knowing who there are and what they want.

  People are born happy and usually die miserably as they have forgotten all the very basic tenets of what true happiness is all about.  Remember the times as child and young adult when you could laugh at almost anything and life was to some extent a joy. Now look at where most people are; they are sloughing away to pay for things they don’t really need, to drive huge SUV’s or very expensive cars they don’t really need but buy just to compete with their neighbours, to go for those so called expensive vacations where all they do is sit in a prison that is called a resort. Just because it has some sand and unlimited food and alcohol does not mean it’s not a prison; you have physically and mentally restricted your movements and the worst part is that you have done this on a voluntary basis.  How can staying in such a prison truly be a vacation; once again the masses have found away to lock themselves up somewhere out of their own will. If you truly want to have a vacation your path should be free as far as the eye can see from every possible direction; a vacation is not a place where you lock yourself up but open yourself up, a vacation is where you take your mind away also and not just your body and to do this you have to give it something new, something to look forward too, perhaps like going to a strange country and just simply taking in the new sights and mingling in with the natives.  

 A word to the wise here; if you truly want to become a better trader/investor then you need to take a real vacation at least once a year and real vacations usually costs 10 times less than a fake vacation. A real vacation is just going out somewhere that is open, some where that is new, staying away completely from resorts and also making sure you spend as little time in the hotel as possible. You should only use the hotel to shower and for a good nights sleep. For the most part you should be out and about, interacting with the people, taking in the new sights, savouring the new food and understanding how these strangers behave and trying to put yourself into their shoes. If you do this not only will you have a true vacation but you will immediately open you mind to new possibilities and that is what investing is all about, the opening of the mind to new possibilities.  

Back to that moment in time when as a child or young adult you truly had moments that were wonderful; go back to these moments and ask yourself what made them wonderful and you will find that in most cases it was simple things that money could never buy. Perhaps it was a lovely picnic or a drive down in the country side on a nice sunny day with a loved one or even just alone, or trying some new tasty dish, spending time with good friends and so on.  Now notice that as older adult if and when you have one of these moments of happiness how touched you are by them, how incredibly good you feel when it happens and when its over you long for it again but you never try to dig down to ask yourself what was it that brought it about in the first place. The answer is very simple; when you stop acting, stop pretending and just allow yourself to be who you really are without the disguises, the masks, the pretences and so forth you put yourself into a position where a ray of light can finally break through the gloom. It’s not hard to have a good time it’s just hard to see that it’s so easy to do so. This brings us to another TI saying; “life’s simplicity is what makes it so complex” stop trying to learn how to live a better live and just start to. Tomorrow begins today for tomorrow never really comes and was not today the tomorrow you worried so desperately about yesterday. Would it not have been better if today could have been the tomorrow you smiled about and looked forward to yesterday?  We could speak at length on this topic and probably fill a book with all the points we could make on it; sadly we do not have the time to undertake such a massive endeavour on such short notice.  The main thing to remember is that happiness is a state of mind and as my late father Solon Palha used to say “happiness is a mind in peace and hell a mind in pieces”. 

 We will deal with this concept again in futures issues and expand on it.  In the next update we will also attempt spend more time on dealing with the concept of mass psychology for its one area we truly love and it does not feel like work when we discus this subject.  One brief point to make here is that the field of psychology has been labelled as the new science; this is a terrible distortion of the truth. Psychology is one of the oldest sciences out there; its just that for a long time it existed under different names the primary one being philosophy.  

As they say history repeats itself over and over again and the past is actually a window into the future.  One good book that should be compulsory reading for all traders is a book titled “Michel de Montaigne – The complete essays”. You can pick this up for as little as 10 dollars from Amazon. This Gentleman was born in the 1500’s and his writings display an incredible amount of insight into the inner workings of the mass mindset.   

Vague and mysterious forms of speech, and abuse of language, have so long passed for mysteries of science; and hard or misapplied words with little or no meaning have, by prescription, such a right to be mistaken for deep learning and height of speculation, that it will not be easy to persuade either those who speak or those who hear them, that they are but the covers of ignorance and hindrance of true knowledge. 

John Locke 1632-1704, British Philosopher