( The Gleason Report Performance of the TGR Timing Models with the Dow Stocks January 2015

Transcription

1 ( The Gleason Report Performance of the TGR Timing Models with the Dow Stocks January 2015 The Gleason Report (TGR) market timing system uses many years of data to create a customized timing signal for each stock and index. Many stocks are cyclical. Some stocks move with the national business cycle, energy prices, defense spending, currencies, or interest rates. The equity universe is dynamic and ever changing. A tracking index like the S&P500 or the Dow Jones Industrial Average moves up and down with the prices of its component stocks. Some stocks will lead an advance and others will follow and those roles are fluid over time. My timing models catch the change in trend quickly by determining when price and volume movements are outside the range of normal. When you consider that stocks have huge price swings during any one year this is no small accomplishment. My timing models construct a unique profile for each stock or tracking index. Each month I publish the buy and sell status for every stock in the S&P500 index. I also follow foreign indexes and some commodities like gold, copper and oil. Buying and selling based solely on my timing system produces returns that greatly exceed the returns from buy and hold. For many stocks my model will beat buy and hold by 2:1 or higher. For some commodities the performance is multiples of that. Some stocks my models can t predict. These stock may be highly speculative or have other factors that make them poor timing candidates. These are clearly identified by their lower trade success rates. In general, I advise trading stocks where my models have a +90% trade success rate over a long period of time; generally 15 to 25 years. This high confidence, successful subset includes about 300 of the stocks in the S&P500 thus giving investors many choices each month. For the +90% recommended stocks my timing systems are incredibly predictive of future price movements. This is easily provable. Just look at the timeline list of my buys and sells from six to twelve months ago. The sell stocks have usually declined precipitously and the buys have gone up more than the index average. The proof is in the results and you can verify it easily for yourself. Who should use my timing models? Anyone who wants to make money in stocks or whose job in the financial services industry demands a high level of performance success. Using my models a hedge fund can easily beat the S&P500 index. A troubled pension fund can turn things around. A long-short strategy can significantly improve performance above one s peers and the market averages. In addition, my index timing models warn of impending market downturns so money can move to cash or hedges can be placed. Again, just look at the buy and sell recommendations over the years and see how they ve performed. How to use my timing models. Each month look at the recommended buy and sell candidates. If you wish do your own fundamental analysis, select the issues where your research agrees with my recommendation. That s one way to do it but, in reality, not even necessary. You can just use my buy list to beat the S&P500 or Dow. Want more return? Short my sell candidates. Again, the evidence is right before your eyes. For those of you in the financial services industry, you know that performance based pay depends on your success. What is it worth to you to beat the market year after year? Beat everyone else in the office. Do you think your income will go up? I can t think of a better way to move a career ahead quickly. My timing models are incredibly successful for individual stocks but following the tracking index is critical for avoiding market crashes. When my model says to sell the S&P500 index you should get out of all stocks. Few will retain their previous gains. A sell signal doesn t mean the market will crash or go down. It means

2 it s very unlikely the stocks in that index will make money. You re better off in cash or allocate money to sectors where my model indicates a buy. Let me show you how this worked for the Dow stocks in the and 2008 crashes. I normally time the US markets with the S&P500 index. For illustration I ll use the Dow because 30 stocks is easier to present. These are raw returns with no stock selection based on the historical trade success rate. A Picture of Two Market Crashes (From the late 1990s to 2003 there were several additions and deletions to the Dow. For the deleted stocks I don t have any history. To make up for those I ll show the status in 2000 of the component stocks that existed in 2008 and will then carry that forward to 2015.) Keep in mind, my models cannot predict a market crash. They can identify a market that has stalled out; a condition which precedes a decline or a crash. Let s look at the Dow for signs of how market crashes evolve. The market crash was unlike the 2008 crash. The 2000 slow motion crash was hard to detect looking at individual stocks. In 2000 my timing models for the individual Dow stocks were moving in and out; bobbing and weaving while the market slowly deteriorated. In June 2000 my model flagged the Dow tracking index DIA as a sell. That meant the behemoths of the entire Dow were now in danger. The sell signals were already piling up before June. MCD, NKE, BAC, VZ DD, HD, AA, JPM had all been sold in early But BA, TRV, UTX, UNH, PFE, T, MO, JNJ had all recently been bought. Confusing. But the tide had shifted and the TGR timing model said to get out in June. The 2000 Market Crash CAT Caterpillar, Inc. B Nov-00 GS Goldman Sachs Gro S Nov-00 DIS Walt Disney Compa S Nov-00 IBM International Bus S Oct-00 INTC Intel Corporation S Oct-00 WMT Wal-Mart Stores, S Oct-00 PG Procter & Gamble B Sep-00 KO Coca-Cola Company B Jul-00 MRK Merck & Company, B Jul-00 MMM 3M Company Common B Jul-00 DIA SPDR Dow Jones Indust S Jun-00 JPM JP Morgan Chase & S Jun-00 JNJ Johnson & Johnson B Jun-00 MO Altria Group, Inc B Jun-00 T AT&T Inc. B May-00 AA Alcoa Inc. Common S May-00 PFE Pfizer, Inc. Comm B May-00 HD Home Depot, Inc. S May-00 DD E.I. du Pont de N S Apr-00 UNH UnitedHealth Grou B Feb-00 VZ Verizon Communica S Feb-00 BAC Bank of America C S Feb-00 NKE Nike, Inc. Common S Jan-00 MCD McDonald's Corpor S Jan-00 Let s look at what followed in the chart below. From 2000 to 2002 there were steep plunges and big rebounds but the trend was down. By mid 2002 almost all the Dow stocks had their previous gains erased. For those invested at the time it was nerve wracking.

3 In 2002 the market was still whipsawing stock prices. In July 2003 my timing model said via DIA to get back into the Dow. Of course that meant some stocks had already gone to buy status earlier in the year. The cautious investor would wait for the all-clear before investing. Look at how my models were buying the big Dow stocks in the first half of The 2003 Market Recovery IBM International Bus B Sep-03 DD E.I. du Pont de N B Jul-03 BA Boeing Company (T B Jul-03 AA Alcoa Inc. Common B Jul-03 XOM Exxon Mobil Corpo B Jul-03 AXP American Express B Jul-03 DIA SPDR Dow Jones Indus B Jul-03 CVX Chevron Corporati B Jun-03 MCD McDonald's Corpor B Jun-03 KO Coca-Cola Company B Jun-03 JPM JP Morgan Chase & B Jun-03 NKE Nike, Inc. Common B May-03 WMT Wal-Mart Stores, B May-03 HD Home Depot, Inc. B May-03 GS Goldman Sachs Gro B May-03 PFE Pfizer, Inc. Comm B May-03 CSCO Cisco Systems, In B May-03 DIS Walt Disney Compa B May-03 TRV The Travelers Com B Apr-03 INTC Intel Corporation B Apr-03 PG Procter & Gamble B Apr-03 GE General Electric B Apr-03

4 UNH UnitedHealth Grou B Mar-03 BAC Bank of America C B Jan-03 CAT Caterpillar, Inc. B Dec-02 HPQ Hewlett-Packard C B Dec-02 UTX United Technologi B Nov-02 T AT&T Inc. B Nov-02 MSFT Microsoft Corpora B Nov-02 The 2008 Crash In 2008 there was little warning of a crash. The financial news channels were ebullient about the stock market. The TGR timing model wasn t fooled. The sell signals were piling up among individual stocks. In February 2008 the model said to get out. Three months later in May the market crashed dropping 40%. In this case there was little doubt a broad decline was coming. The TGR models were unloading Dow stocks since late UTX United Technologi S Nov-08 CVX Chevron Corporati S Oct-08 T AT&T Inc. S Sep-08 IBM International Bus S Sep-08 XOM Exxon Mobil Corpo S Sep-08 TRV The Travelers Com S Aug-08 CAT Caterpillar, Inc. S Jun-08 HPQ Hewlett-Packard C S May-08 KO Coca-Cola Company S May-08 MSFT Microsoft Corpora S Apr-08 MRK Merck & Company, S Mar-08 UNH UnitedHealth Grou S Feb-08 AXP American Express S Feb-08 DIA SPDR Dow Jones Indus S Feb-08 CSCO Cisco Systems, In S Feb-08 GE General Electric S Feb-08 DD E.I. du Pont de N S Feb-08 INTC Intel Corporation S Feb-08 VZ Verizon Communica S Feb-08 AA Alcoa Inc. Common S Jan-08 GS Goldman Sachs Gro S Jan-08 BA Boeing Company (T S Jan-08 MMM 3M Company Common S Jan-08 DIS Walt Disney Compa S Dec-07 PFE Pfizer, Inc. Comm S Sep-07 JPM JP Morgan Chase & S Sep-07 BAC Bank of America C S Apr-07 HD Home Depot, Inc. S Apr-07 The 2009 buyback was amazing. The Dow stocks were bought in the first half of The TGR model gave the all-clear in September. The 2009 Recovery UNH UnitedHealth Grou B Dec-09 AA Alcoa Inc. Common B Oct-09 AXP American Express B Oct-09 MRK Merck & Company, B Sep-09 DIA SPDR Dow Jones Indus B Sep-09

5 CVX Chevron Corporati B Sep-09 JNJ Johnson & Johnson B Aug-09 CSCO Cisco Systems, In B Aug-09 MCD McDonald's Corpor B Aug-09 DIS Walt Disney Compa B Aug-09 GE General Electric B Aug-09 PFE Pfizer, Inc. Comm B Jul-09 BAC Bank of America C B Jul-09 JPM JP Morgan Chase & B Jul-09 HPQ Hewlett-Packard C B Jul-09 DD E.I. du Pont de N B Jul-09 NKE Nike, Inc. Common B Jul-09 TRV The Travelers Com B Jul-09 INTC Intel Corporation B Jun-09 GS Goldman Sachs Gro B Jun-09 PG Procter & Gamble B Jun-09 BA Boeing Company (T B Jun-09 KO Coca-Cola Company B May-09 CAT Caterpillar, Inc. B May-09 UTX United Technologi B May-09 T AT&T Inc. B May-09 MO Altria Group, Inc B May-09 MSFT Microsoft Corpora B Apr-09 HD Home Depot, Inc. B Apr-09 MMM 3M Company Common B Apr-09 IBM International Bus B Feb-09 Where are we now in January 2015? Stock market prices are greatly affected by the market liquidity provided by government capital flows. In other words, a nation s budget deficits and spending programs pump a lot of money into the economy. Likewise, a reduction in capital flows has a negative impact on stock prices. Since 2008 the government has made stock market appreciation the focus of its recovery efforts. Trillions of deficit dollars have been spent. The bankers, congressmen and insiders knew what was planned and got in early. The rest of us had to guess what they were up to. It appears to me that there is now an eight year stock market cycle. Does the government bring down the stock market at certain times in the election cycle? Do they let the market drop to clear the slate for the incoming president? Is the market manipulated for political reasons so the new president can t be blamed? The crash occurred at the changeover from Clinton to Bush after the November 2000 election. The 2008 crash started six months before Obama s election. My timing model called it in early The US budget deficit has been reduced significantly in QE ended in late This indicates that liquidity is being pulled from the economy. We need to watch the big Dow stocks to see if the timing models start selling. If enough of them sell then the Dow tracking index will soon signal an exit. Let s take a look at the TGR Timing Model of the Dow since the market recovery began in Let s also see what is the Dow is telling us here in January The list below shows the last buy or sell action from 2009 through December 31, For the five years of 2009 through 2013 these Dow stocks returned an average of 14.2% per year using buy and hold. If you had used the TGR model to time your buys and sells your return would be an average annual five year return of

6 18.3%. That s not a misprint. 18.3% per year and you were invested 25% less time. So, a 28% higher return (18.3/14.2) with 25% less risk. If you had simply bought DIA when TGR recommended you d be up 18.8% per year through 12/31/2013. This is how a hedge fund, mutual fund or financial adviser can beat the market and outperform all their peers. Buy stocks if you must. Buy the index if you can DOW Stocks Buy/Sell History of the TGR Timing Models Last B/S Action Buy/Sell 2-Jan-15 Ticker Company Name Action Date Price Price Gain/Loss CVX Chevron Corporati S Dec % PFE Pfizer, Inc. Comm B Dec % IBM International Bus S Nov % UTX United Technologi B Oct % GE General Electric B Oct % VZ Verizon Communica B Aug % MCD McDonald's Corpor S Aug % CAT Caterpillar, Inc. S Jul % HD Home Depot, Inc. B Jun % KO Coca-Cola Company B Apr % T AT&T Inc. B Nov % AA Alcoa Inc. Common B Nov % INTC Intel Corporation B Apr % HPQ Hewlett-Packard C B Mar % NKE Nike, Inc. Common B Mar % MSFT Microsoft Corpora B Feb % BAC Bank of America C B Nov % UNH UnitedHealth Grou B Oct % GS Goldman Sachs Gro B Oct % DD E.I. du Pont de N B Apr % JPM JP Morgan Chase & B Apr % DIS Walt Disney Compa B Feb % CSCO Cisco Systems, In B Dec % BA Boeing Company (T B Dec % WMT Wal-Mart Stores, B Dec % MMM 3M Company Common B Nov % MRK Merck & Company, B Jun % XOM Exxon Mobil Corpo B Dec % JNJ Johnson & Johnson B Oct % PG Procter & Gamble B Oct % AXP American Express B Oct % DIA SPDR Dow Jones In B Sep % TRV The Travelers Com B Jul % MO Altria Group, Inc B May % What is the Dow telling us now? Since July of 2014 four stocks have gone to sell status. It looks to me like the Dow has peaked but the jury is still out until the tracking index DIA becomes a sell. Time to be cautious. Tom Gleason, January 2,