Stock Market Timing
Cabot uses three primary market timing indicators in all Cabot growth letters (Cabot Market Letter, Cabot Top Ten Report, Cabot China & Emerging Markets Report and Cabot Green Investor). In addition to these indicators, Cabot China & Emerging Markets Report uses the Cabot China-Timer and Cabot Green Investor uses the Cabot Green-Timer.
Cabot Trend Lines The Cabot Trend Lines are our unique way of determining the long-term trend of the stock market. As long as both the S&P 500 Index and the Merrill Lynch 100 Technology Index fluctuate above their respective trend lines, we consider the market to be bullish. If both indexes are below their trend lines, we are in a bear market.
Cabot TidesWe use five different market indexes to help us determine the overall intermediate-term direction of the stock market. They are: S&P 500, NYSE Composite, Nasdaq Composite, S&P 600 Small Cap and the Merrill Lynch Tech Index, an index that equally weights 100 of the leading technology stocks in the market. The market is considered to be advancing on an intermediate-term basis if at least three of these five indexes are advancing. And contrarily, the market is deemed to be declining if at least three of these five are declining.
Two-Second IndicatorThe Two-Second Indicator’s specialty is detecting market tops. When the number of daily new lows on the NYSE is greater than 40 while the major indexes are rising to new peaks, look out! It’s telling you that, internally, sellers are in control of most stocks, and the indexes are masking this weakness.
However, if new lows expand to greater than 40 after the indexes are five days or longer off their peaks, the Two-Second Indicator is simply telling you the market is entering a correction. This correction could be deep, and thus you should still practice caution. Finally, when new lows are less than 40 day after day, that’s a sign of a healthy, robust market – the buyers are firmly in control of most stocks.
Cabot China-TimerThe Cabot China-Timer is a trailing market indicator that uses the performance of the Halter USX China Index to gauge the trend of emerging market stocks. The China-Timer is considered to be positive when the Halter Index—which is composed of over 90 Chinese stocks that trade on major U.S. exchanges as American Depositary Receipts or ADRs—is above the lower of either the 25-day or 50-day moving average. When the Index falls below both its 25- and 50-day moving averages, the China-Timer turns negative and the Cabot China & Emerging Markets Report adopts a defensive stance. The China-Timer will not be considered as having turned positive until the level of the Halter Index once again moves above either the 25- or 50-day moving average, and that average is itself trending upward. While the Cabot China-Timer is based entirely on the movement of the Chinese ADR market, it is considered to be a proxy for the general level of risk tolerance in investors. If investors are leaving Chinese stocks, they will also be exiting Brazil, Russia, India and the other emerging markets.
Cabot Green-TimerCabot Green Investor uses the WinderHill Clean Energy Index as the proxy to tell us when it is time to buy. Basically, the Cabot Green-Timer is bullish when the index is above the lower of its two moving averages and that average is trending up. The WinderHill isn't a perfect index, however. For one thing, it excludes non-energy Green stocks, and is limited in that universe of stocks to about 40 issues (the universe of Green stocks we actively follow for Cabot Green Investor is close to 300). Plus, with any index, you get some good stocks but you also get some dogs. For that reason, we don't use the Green-Timer as a soothsayer on when to buy and sell, but rather as another item to consider in our quest for profits.
More on Cabot Market Timing Indicators:
The Value of Market Timing
The point of market timing is not losing money.
The Two-Second Indicator
The Two-Second Indicator is so named because that’s how long it takes to read: Just two seconds, every day.
Cabot Trend Lines and Cabot Tides...because the music is always changing
By keeping with the market’s trends, you guarantee you’ll never miss out on a major market upmove and never remain fully invested during a devastating bear market.
It's Market Timing, Not Time
Cabot Editor Paul Goodwin eschews the old maxim, "Time, not timing" and makes the case for timing the market.
Simplified Cabot Market Timer
This timer will help you figure out when to get back into the stock market.
On Market Bottoms
There can be lots of clues that a bottom-building process is taking place.
Using Investor Sentiment to Spot Market Turning Points
Here are a few sentiment-related measures that can be useful in spotting market turning points.
Market Bottoms are a Process, Not an Event
There is no strict rulebook as to how the market will form its bottom. But the past can provide a rough roadmap to the future.
An Easy Way to Time the Market
A trend-following market timing system is not as sexy as forecasting what will happen down the road but it will be far more profitable!
Wait for the Cabot Tides
Because Early is Not Always Better in the Stock Market
Cabot China-Timer
The Cabot China-Timer is a trailing market indicator that uses the performance of the Halter USX China Index to gauge the trend of emerging market stocks.
On Calling the Market Bottom
Here are some tips on how to get back into the stock market after a rough patch.
Cabot Trend Lines
The Cabot Trend Lines are our unique way of determining the long-term trend of the stock market.
Cabot Tides
We use five different market indexes to help us determine the overall intermediate-term direction of the stock market.
Blast-Off Indicators
The category of indicators generally give signals only every few years!
Sentiment and Market Timing Review of 2009
2009 is now in the books. It was a year of high drama, and demonstrated the importance of market timing and sentiment.