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Peter Brimelow
Sept. 30, 2010, 2:34 a.m. EDT · Recommend (2) · Post:
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In erratic market, boring works
First Take "º
The hidden tax from a yuan appreciation
By Peter Brimelow, MarketWatch
NEW YORK (MarketWatch) "” A famous bear, who hibernated very profitably through the Crash of 2008, seems about ready to concede that the market's next move will be up.
For some time, Peter Eliades' Stockmarket Cycles has been in the position, unusual for any other letter, of expecting a big move to happen "” but being frankly unsure of the direction. But it voted for down. ( See Aug. 9 column.)
Stockmarket Cycles doesn't just employ extraordinary complex cycle theories, but it also uses them to call turns, or junctures, in the market.
There's a lot of reason to suppose that trend-following, which means by definition that you miss highs and lows but comfortingly catch the middle of moves, is more effective on average, besides being easier on the nerves. ( See Mark Hulbert's column March 17.)
But one of the lessons we've learned from three decades of Hulbert Financial Digest monitoring is that literally every method can work in the right hands.
And there have been times when Stockmarket Cycles has had a very hot hand indeed. It was one of the very few letters to make significant money during the Crash of 2008. ( See Dec. 17, 2008, column.)
StockMarket Cycles was also doing really well earlier this year. And it was still holding on over the year to date through August: Its portfolios were up an average of 0.5% by Hulbert Financial Digest count compared to negative 3.9% for the dividend-reinvested Wilshire 5000 Total Stock Market Index.
But betting on that break through an unusually strong September has been very costly. HFD monthly monitoring won't be complete until the weekend, but I'm told that Stockmarket Cycles is down about 3.5%, a spread of some eight points below the market.
Still, dodging the Crash continues to do wonders for the letter's longer-term performance. Over the last three years, it's up 3.6% annualized versus negative 8.13% annualized for the total return Wilshire 5000.
Over the past ten years, Stockmarket Cycles is up an annualized 3.53% against a 1.07% annualized loss for the Wilshire.
Although I whine that Stockmarket Cycles' method is complex, editor Eliades was very straightforward in his letter published at the beginning of this month:
"Although it is our strong belief that if a turning point of importance is imminent in this time zone, it will almost surely be a market top, the more objective way of judging the turning point without prejudice will only come after Oct. 1. At that point we can look at the highest and lowest prices established from the week ending Aug. 6 through the week ending Oct. 1 and use those extreme prices as a measuring stick. Whichever extreme price is penetrated after Oct. 1 should tell us that the price at the opposite extreme should end up as a major turning point."
Stockmarket Cycles put its money where its mouth was "” for example, one of its two portfolios has been 200% short.
But it wrote last night: "We are starting to see things we should not be seeing if the market is facing an ultimately bearish resolution in terms of its intermediate to longer-term picture. "¦ Because the market has failed to turn down over the past few days, it also appears as if a nominal 10-week upside closing-price projection has been generated to higher levels of some significance. The Dow Jones Industrial Average /quotes/comstock/10w!i:dji/delayed (DJIA 10,835, -22.86, -0.21%) projection calls for a close between 11,113-11,280. The projection for the S&P 500 Index /quotes/comstock/21z!i1:in\x (SPX 1,145, -2.97, -0.26%) calls for a close between 1196.65-1202.46."
Of its short position, it wrote: "We face a very difficult decision at this point "¦with positive end-of-month seasonality arriving for at least a few days over the next few days and with higher projections outstanding, it is difficult to justify a continuing inverse position. ... We are going to wait for one more day and decide what we want to do before tomorrow's close."
Watch this space.
More profitably, Stockmarket Cycles has been projecting for some time that gold will reach $1,330 plus or minus $17.
Peter Brimelow has been an editor at Barron's, Fortune and Forbes and is the author of "The Wall Street Gurus: How You Can Profit From Investment Newsletters."
An increase in the value of the yuan would amount to a hidden tax on the American consumer.
8:02 p.m. Sept. 29, 2010 | Comments: 61
- dodotheclown777 | 2:02 a.m. Today2:02 a.m. Sept. 30, 2010
"Peter Brimelow: Famous bear seems about ready to give up, for now http://on.mktw.net/9AATjm" 2:27 a.m. EDT, Sept. 30, 2010 from MKTWBrimelow
"Peter Brimelow: In erratic market, boring works http://on.mktw.net/dftFl6" 4:44 a.m. EDT, Sept. 27, 2010 from MKTWBrimelow
"Peter Brimelow: Dines' Rare Earth Revolution rolls on http://on.mktw.net/ap8sNt" 3:27 a.m. EDT, Sept. 23, 2010 from MKTWBrimelow
"Peter Brimelow: Some gold bugs worried by Friday's flop http://on.mktw.net/dh16zN" 11:31 p.m. EDT, Sept. 19, 2010 from MKTWBrimelow
"Peter Brimelow: Exit Harry Schultz, pursued by a bear? http://on.mktw.net/cm1lkf" 10:05 a.m. EDT, Sept. 16, 2010 from MKTWBrimelow
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