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Low-Threshold Buying -- Results

To date, there have been 13 completed low-threshold events since 1920. Twelve have been profitable, with average gains of 20% over 35-week holding periods. The one loss was 1.8%. The best gain was 68% over 28 weeks in 1933. The worst drawdown (largest unrealized loss before completion of transaction) was -7.5%.

The 14th event is unfolding now as this is written (August 8, 2002) with a vernier reading of -77 to date. 'Low-threshold' is -50, below which occur events that offer profitable transactions. Of these, the average vernier is -73, excluding 1929 which was a six sigma event. You can see these on the charts 1960-2002 and 1920-1960.

LOW-THRESHOLD BUYING--Table of Results

1920-2002

Buy

Sell

%

dur

%

Poss.

Buy Date

Sell Date

Price

Price

P/L

mos

DD

%Prof

4/30/26

10/8/26

144

153

6.8

5.3

-3.3

14.8

11/29/29

6/13/30

239

250

4.5

6.5

-3.3

23.1

3/10/33

9/22/33

59

99

68.3

6.5

-5.9

78.9

11/3/33

3/16/34

94

103

1.1

4.4

none

15.7

6/21/40

1/31/41

123

124

1.2

7.4

-1.1

11.4

10/4/46

4/18/47

170

167

-1.8

6.5

-3.7

8.2

11/8/57

2/13/59

434

588

35.5

15.2

-1.6

37.3

7/6/62

6/21/63

576

721

25.1

11.5

-1.2

26.2

9/27/74

8/1/75

622

827

32.9

10.2

-7.1

40.4

11/27/87

7/29/88

1910

2129

11.4

8.1

-7.5

12.2

10/26/90

6/28/91

2436

2907

19.3

8.1

none

24.3

10/2/98

6/25/99

7785

10553

35.5

8.8

none

41.7

10/5/01

4/26/02

9344

9911

6.1

6.7

-1.5

13.5


        Notes. The back-test results in this table are hypothetical. Prices are weekly closings. %P/L is the profit or loss on sale. dur mos is how long in months from purchase to sale date in each transaction. %DD (percent drawdown) is the unrealized lowest drop in prices before sale. Poss.%Prof is the highest price reached before selling--this suggests further research to see if more of the realized profits can be retained.
        The 'rules' are simple. Buy after vernier turns up the second week from its low below -50. Sell when the vernier drops below zero, having been positive.
        Statistics. The low-threshold theory was developed from 4,200 observations, abundantly enough for good statistical conclusions--despite my reservations about that science. But 14 tradeable events themselves are too small a sample upon which to impose any comprehensive statistical measurements. Nevertheless the factual useable win ratio is 92%, and the average profit/loss ratio is 11.7 (+20.6% vs -1.8%). This gives a Profit Factor of 140. That means you win $140 for every $1 you lose (whilst remembering my reservations).

        PF = (%Wins*avgProfit) / (%Losers*avgLoss)



Date of this article--August 12, 2002



(Additional research into other successful technigues with greater frequencies of occurrence and emphasis on profitable selling in all types of markets will be published at later dates. For the current update on the charts above, click here.)


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