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How I Made 2 Million in The Stock Market
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Arilson Carlos Barbosa
Forecast 2010 2010 A TIME FOR CHANGE… Larry Williams Forecast 2010 A TIME FOR HOPE 1 Amid gloom, doom and uncertaint
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Forecast 2010 2010 A TIME FOR CHANGE…
Larry Williams Forecast 2010
A TIME FOR HOPE
1
Amid gloom, doom and uncertainty… stock cycles forecast good times coming
vasive fear of a potential stock market crash, a horrible economy and perhaps civil unrest. What will come of all this? No one knows. But for sure, cycles and patterns from the past have spoken; here is their answer as to what we have to look forward to in 2010.
• An Amalgamation of all Long-Term Cycles into One Pattern
First let me draw your attention to the 5 major seasonal/cyclical events that will influence stocks in the coming year. They are, in no particular order:
True students of market action will want an in-depth understanding. That is so true because, as much as we desire it, forecasting the future is not an easy task. In the next 12 months unpredictable things will happen. Cycles phase in and out of their influence. I will be paying attention to the 5 future events mentioned here to see how the market acts, and reacts, at these time periods.
• The Obama or Presidential Cycle • The 4 and 8 Year Price Pattern • The Decennial Pattern • My “Natural Cycle” of Short-Term Action
Contents Market Forecasts Set Up Markets
2 44
Glossary
55
If you want to skip the understanding of all this just go to Page 10 where you will see the forecast.
After all, the ultimate decider of the truth is the market. I can forecast it pretty well; yet still we have to listen and watch as it does what it does. With that in mind, let me show you the major influences for stock prices in 2010. © Copyright 2009 Larry Williams. All rights reserved.
Introduction
As we enter 2010 we are faced with the per-
US Stock Market Forecast 2010
THE OBAMA FORECAST
2 Stocks
Readers of the 2009 report will recall that this road map of the future was arrived at by averaging all similar years of Presidential Powers. In this case I have synthesized all second years of all presidents’ terms in office since 1922. The future seems pretty clear; expect a sell off into mid/late February, a rally into
mid April, and then a decline into early October. This view may be biased however, as it is a snapshot in time of just the last 60 years. What if we look at stock prices from 1900 through 1950? Was there a Presidential cycle at work then, and if so how close is it to the current one? In other words, does this pattern have legs or is it a post World War II phenomena? The answer is in Chart 1, where I have looked at just similar years starting in 1900 thru 2008. The picture, below, is pretty much the same.
Chart 1: Dow Jones Industrial Average Forecast 2010
An important note needs to be inserted here; the Road Maps tell us much more about when markets will top and bottom than the trend.
I’ve been writing about this pattern (I don’t see it as a cycle) since 1970 when very few were aware of the influence… this baby has had legs. It is the simplest timing tool I know of; charts and computers are not required. Just begin in 1934 and look for a major
As you will see the projection has, at times, been spot on while other times a little early or late… but seldom has a great buying point not been at hand. This tells me that in September and October we need to pay close attention to our other tools for a buy confirmation. Charts do help show the impact of the pattern, so here they are for your study.
Chart 2: 4-Year Low to Low Pattern 1938 - 1952
Stocks
A Quick Look At The 4-Year Low To Low Count
Chart 2 shows the 4-Year Lows marked off, as well as my “4-Year Cycle” indicator that forecasts or projects out when the 4 year low should develop. The exact projection is for September 28. On a weekly basis let’s just call that the first week of October.
3
And, of course, the current market trend at the time of the turn dates help us understand what the implications of the forecast are.
market low every 4 years from that point forward.
Forecast 2010
In other words, just because the Presidential Forecast appears to show a down move most of the year, that should be taken as suggestive only; the turn dates are more important.
US Stock Market
US Stock Market Forecast 2010 4 Stocks
Chart 3: 4-Year Low to Low Pattern 1954-1966
Chart 4: 4-Year Low to Low Pattern 1967-1981
US Stock Market Forecast 2010 5 Stocks
Chart 5: 4-Year Low to Low Pattern 1981-1995
Chart 6: 4-Year Low to Low Pattern 1997-2011
US Stock Market Forecast 2010 6 Stocks
As a special bonus I am next showing in Chart 7 the 4 Year Pattern out to 2018… calling for lows in 2010, 2014, and 2018. You can give this to the grandchildren.
a remarkable job of alerting investors to important market rallies. The pattern calls for a low the first week of October in 2010 in sympathy with the Presidential Cycle. In actuality these two have a lot in common, yet often diverge thanks to the muses of the markets.
However you look Chart 7: 4-Year Low to Low Pattern 2005-2019 at it, this Low-to-Low Every 4 Years Pattern has done
Chart 8: 8-Year Cycle Pattern 1990-2011
Don’t forget the mere fact this forecast a low also means it forecast a sell off starting about 4 months from the projected low.
US Stock Market Forecast 2010
Chart 8 of my Cycle Forecast for the 8-Year Cycle on a monthly chart of the Dow weaves in and out with the 4-Year Pattern. As you can see, lows in the indicator usually seem to inspire market rallies and of course dovetails with the October low.
His idea was that there is a 10-Year Cycle (perhaps based on the well known 11-Year Cycle in sunspots?). If that is true, all years ending in say 3, should have the same general pattern. Usually they do. So let’s take a look at the average of all years ending in ‘0’. The following chart is just that: 1900, 1910, 1920, 1930,1940,1950,1960,1970,1980,1990,
2000 averaged together. This is interesting! The ‘0’ years present a projection not too unlike the Presidential Pattern forecast as well as the 4-Year Pattern. All three suggest a sell off early in the year, a rally into April then a decline. But, the second half of the year is not so clear, suggesting a choppier market.
Chart 9: All Years Ending in 0 2010 Forecast Road Map
Stocks
Let’s next take a look at the Decennial Pattern first written about by Edgar Lawrence Smith in the 1920’s.
7
Decennial Pattern
US Stock Market Forecast 2010
Why it works; my belief is the power of the Decennial Pattern comes from the 11-Year Cycle in sunspots. Learn more here: http://solarscience.msfc.nasa.gov/SunspotCycle.shtml
8
Natural Cycle To Stock Price Activity
Stocks
This one is a bit different in that there are absolutely no cycles used to create these Road Maps, none at all. The forecast is the most unique thing I do because it looks at similar years from the past but not selected via pattern matches or cycles.
These Natural Cycle Road Maps (i.e. Forecasts) for 2008 and 2009 did a pretty good job of breaking the trail, leaving blaze marks for us as to where to expect the path to turn as shown immediately below in Chart 10. This technique called the first of the year slide, nailed the March low and subsequent rally… but failed to catch the rally from July onwards. Darn, this forecasting stuff is not easy, and I have no excuses for this failure; just respect for the call for the first 6 months of the year as well as past years’ forecasts. Bottom line is we should be aware of the turning points this approach gives us.
Chart 10: Dow Natural Cycle Forecast 2008-2010
The turning points shown fit quite well with the Road Maps seen so far.
9
Yet the years that create this cycle are not from the Decennial, 4-Year or Presidential Years. It is very interesting to me how they all have the same message for this coming year.
Forecast 2010
Chart 11 is a larger view of the 2010 forecast using this approach.
US Stock Market
Stocks
Chart 11: Dow Natural Cycle 2010 Forecast
US Stock Market Forecast 2010
And Now For The Forecast…
10 Stocks
Here it is. A synthesis of all that you have seen so far, presented on one chart, one road map of the future. There has been a very powerful 17- Week Cycle bouncing stock prices all over our charts for the last 3 years. So I have overlaid it on the yearly forecast to give us additional guidance in Chart 12.
Presidential Clout Mechanical S&P Trades for 2010 Seasonal factors do influence commodity prices; and Presidential politics, as you have seen, influence stock prices even more. There are several specific ways we can take advantage of political influences this year. The first trade I am going to share with you is not “new.” After all, I first wrote about end of the month stock market rallies in 1974. While that was a general observation, what I have done is flesh out the specific times of the month to take advantage of monthly seasonal influence. Let’s start with an equity graph and tabulations on just how well the strategy I am about to teach you has been.
Chart 12: Dow 2010 Road Map Forecast
US Stock Market Forecast 2010 11
Chart 13: Equity Curve Presidential Clout Trade
Stocks
OVERALL RESULTS Presidential Clout Trade Total Net Profit: $259,783 Total Trades: 484 Average Trade: $537 Avg # of Bars in Trade: 2.58 Avg # of Trades per Year: 18.1 Max Closed-out Drawdown: -$11,075 Account Size Required: $32,101 Open Equity: $0 Current Streak: 5 Wins
Profit Factor ($Wins/$Losses): Winning Percentage: Payout Ratio (Avg Win/Loss): Z-Score (W/L Predictability): Percent in the Market: Max Intraday Drawdown: Return Pct: Kelly Ratio: Optimal f:
2.17 84.9% 0.39 0.4 18.0% -$14,783 809.3% 0.4584 0.76
WINNING TRADES Total Winners: Gross Profit: Average Win: Largest Win: Largest Drawdown in Win: Avg Drawdown in Win: Avg Run Up in Win: Avg Run Down in Win: Most Consec Wins: Avg # of Consec Wins: Avg # of Bars in Wins:
LOSING TRADES Total Losers: Gross Loss: Average Loss: Largest Loss: Largest Peak in Loss: Avg Peak in Loss: Avg Run Up in Loss: Avg Run Down in Loss: Most Consec Losses: Avg # of Consec Losses: Avg # of Bars in Losses:
73 -$221,473 -$3,034 -$7,920 $4,205 $582 $582 -$3,339 2 1.16 5.45
411 $481,255 $1,171 $12,230 -$3,920 -$561 $1,555 -$561 34 6.42 2.08
These are very good results for short-term trading, with 84% accuracy on over 485 trades. We have a large sample size. This is a quick “Pop” of a trade with an average hold of 2.58 days to net the $259,784 of profits and a high average profit per trade of $537.
What’s my secret to this strategy? It is simply this; I will buy on the best Trading Days Left in the Month (TDLM in my parlance). This is our attempt to catch the end of the month/ first of the month rally. The best set up days to buy the next day have been TDLM 2, 10,
US Stock Market
not a Genesis user, you are missing out on the simplest to use, yet most powerful, software in the business.
Forecast 2010
12, 19, 22, and 23. Again, we do not buy on these days but the next day. The performance of just these days is superb, yet it can be made a little better with two simple rules.
12
•Today’s 200 day moving average of closing prices is higher than it was 3 days ago.
Stocks
•The day that just closed is not an Outside Day with a higher close. Those are all the rules for the entry. The exit is a $3,500 stop or an exit on the First Profitable Open (FPO). Here is the code for fellow Genesis users. If you use software and are
IF Next Bar Trading Days Left In Month = 23 Or Next Bar Trading Days Left In Month = 22 Or Next Bar Trading Days Left In Month = 19 Or Next Bar Trading Days Left In Month = 12 Or Next Bar Trading Days Left In Month = 10 Or Next Bar Trading Days Left In Month = 2 And MovingAvg (Close , 200) > MovingAvg (Close , 200).3 And (Outside Bar And Close > Close.1) = False And Next Bar Day Is (“Friday”) = False
The year by year performance bears study and shows the power of the simple 200 day moving average trend rule. It is interesting to see that in many years there are no or very few trades; the market was in a down trend. When in an uptrend,
Presidential Clout Trade By Year Performance Year 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
Trades 26 3 17 25 21 11 22 13 17 20 25 7 23 27 32 31 24 20 0 0 17 24 21 25 23 0 10
Win Pct 92.31% 66.67% 94.12% 76.00% 85.71% 90.91% 100.00% 84.62% 82.35% 90.00% 88.00% 57.14% 86.96% 81.48% 81.25% 80.65% 75.00% 80.00% 0.00% 0.00% 94.12% 79.17% 95.24% 76.00% 91.30% 0.00% 90.00%
AvgTrade $216 -$1,278 $106 -$43 $79 $341 $433 -$55 $6 $51 $110 -$334 $425 $264 $710 $1,172 $555 $1,748 $0 $0 $1,039 $201 $1,226 $255 $2,358 $0 $845
C/L 1 1 1 1 1 1 0 2 2 1 1 2 2 2 1 2 2 1 0 0 1 2 1 2 1 0 1
Max Loss -$20 -$3,945 -$3,945 -$3,945 -$3,945 -$8 $0 -$3,945 -$3,945 -$3,945 -$3,945 -$3,945 -$33 -$3,945 -$5,083 -$4,745 -$7,920 -$3,945 $0 $0 -$3,945 -$5,095 -$3,945 -$4,420 -$3,945 $0 -$3,945
Profit $5,618 -$3,835 $1,798 -$1,063 $1,668 $3,755 $9,535 -$710 $110 $1,013 $2,738 -$2,340 $9,765 $7,123 $22,710 $36,330 $13,320 $34,950 $0 $0 $17,660 $4,820 $25,755 $6,375 $54,240 $0 $8,450
Net Profit $5,618 $1,783 $3,580 $2,518 $4,185 $7,940 $17,475 $16,765 $16,875 $17,888 $20,625 $18,285 $28,050 $35,173 $57,883 $94,213 $107,533 $142,483 $142,483 $142,483 $160,143 $164,963 $190,718 $197,093 $251,333 $251,333 $259,783
US Stock Market
the accuracy is astounding; over 90% in 1982, 2003, 2005, 2007, and 2009.
Bullish On America Trade
Here is that code.
Unbeknownst to most traders is the very impressive record of stock prices to rally prior to the first Tuesday in November shown next. Of course we know that as the day we usually vote for the President and Congressional representatives.
Buy Before All Elections Performance Year 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
Trades 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1
Win Pct 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 0.00% 100.00% 100.00%
AvgTrade $330 $30 $318 $143 $130 $955 $630 $780 $455 $980 $80 $305 $1,693 $1,155 $630 $580 $1,830 $1,830 $1,080 $3,330 $3,880 $1,480 $3,355 $255 $1,830 -$3,945 $80 $4,405
C/L 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 1 0 0
Max Loss $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 -$3,945 $0 $0
Profit $330 $30 $318 $143 $130 $955 $630 $780 $455 $980 $80 $305 $1,693 $1,155 $630 $580 $1,830 $1,830 $1,080 $3,330 $3,880 $1,480 $3,355 $255 $1,830 -$3,945 $80 $4,405
Net Profit $330 $360 $678 $820 $950 $1,905 $2,535 $3,315 $3,770 $4,750 $4,830 $5,135 $6,828 $7,983 $8,613 $9,193 $11,023 $12,853 $13,933 $17,263 $21,143 $22,623 $25,978 $26,233 $28,063 $24,118 $24,198 $28,603
Stocks
IF MovingAvg (Close , 200) > MovingAvg (Close , 200).3 And Trading DayOfYear = 20 Or Trading DayOfYear = 63 Or Trading DayOfYear = 99 Or Trading DayOfYear = 212 Or Trading DayOfYear = 219 Or Trading DayOfYear = 232 Or Trading DayOfYear = 235 Or Trading DayOfYear = 254 Buy Tomorrow on the Opening
13
The strongest “Political Clout” trade is one you have never heard about. So I want to explain it as well as show some examples.
Forecast 2010
If you can be more selective in your trading and only take buy signals on the specific Trading Day of the Year (TDOY) with the following code you would have had 120 trades since 1982 with 119 winners, using the same stop and FPO exit as discussed above.
US Stock Market Forecast 2010
Here is the code for this trade: IF November And WeekOfMonth = 1 And Monday Buy at Next Bar Open
14 Stocks
It seems to me that both sides of the political spectrum get optimistic just before the elections because they think: “My guy/gal is going to win and things will get better.” So, they bet their bullishness in the stock market. You don’t think so? Then explain the tabulation of trades buying on Page 13. This is an impressive record but let’s delve a little deeper into our politics. In 2010 we will have what are known as “Mid-Term” elections for Congressional positions. As you can see below there has been an even more marked pattern for prices to rally four days out, than for just the first Tuesdays in all Novembers.
We have to be a little careful of the data as you can see from the next clip. Until 1966 it used to be that Election Tuesday was a holiday for Wall Street. The red line or Seasonal pattern is constructed for the Dow from 1918 forward. Stocks were closed in the fall
Chart 14: Mid-Term Elections
US Stock Market Forecast 2010 15 Stocks
Chart 15: Enlarged View of Mid-Term Rally 1982-2009 of 1914, so there was no data for that time period. Using data from 1982, when the S&P began trading, it has been best to buy on the opening of the next to last trading day in October and wait at least one day for the FPO. That strategy produced the Mid-Year Election
results below for traders. Next is the Seasonal Forecast Pattern for 2010 which tells us to start looking for a buy signal on October 20th and a forced entry on the 28th. (Note the red line is a forecast of what should happen in 2010. It is not a repetitive Seasonal indicator).
Mid-Term Election Trade Results YEAR 1982
TRADES 1
WIN PCT 100.00%
AVGTRADE $305
C/L 0
MAX LOSS $0
PROFIT $305
NET PROFIT $305
1986
1
100.00%
$80
0
$0
$80
$385
1990
1
100.00%
$930
0
$0
$930
$1,315
1994
1
100.00%
$2,143
0
$0
$2,143
$3,458
1998
1
100.00%
$7,330
0
$0
$7,330
$10,788
2002
1
100.00%
$2,455
0
$0
$2,455
$13,243
2006
1
100.00%
$955
0
$0
$955
$14,198
US Stock Market
Chart 16: Dow Mid-Term Election Forecast
Forecast 2010 16 Stocks
Buy Before All Mid-Term Elections Year By Year Performance YEAR 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
TRADES 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1
WIN PCT 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 0.00% 100.00% 0.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 0.00% 100.00%
AVGTRADE $830 $30 $143 $68 $293 $1,580 $630 $180 $80 $930 $868 $243 $1,693 $655 $1,155 -$3,945 $1,455 -$6,545 $3,955 $4,205 $3,580 $255 $205 $255 $1,380 $9,880 -$6,420 $2,505
C/L 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 1 0 1 0 0 0 0 0 0 0 0 1 0
MAX LOSS $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 -$3,945 $0 -$6,545 $0 $0 $0 $0 $0 $0 $0 $0 -$6,420 $0
PROFIT $830 $30 $143 $68 $293 $1,580 $630 $180 $80 $930 $868 $243 $1,693 $655 $1,155 -$3,945 $1,455 -$6,545 $3,955 $4,205 $3,580 $255 $205 $255 $1,380 $9,880 -$6,420 $2,505
NET PROFIT $830 $860 $1,003 $1,070 $1,363 $2,943 $3,573 $3,753 $3,833 $4,763 $5,630 $5,873 $7,565 $8,220 $9,375 $5,430 $6,885 $340 $4,295 $8,500 $12,080 $12,335 $12,540 $12,795 $14,175 $24,055 $17,635 $20,140
With that let’s take a look at what’s in store for Europe, or at least Germany, in 2010.
Stocks
Nonetheless, it is possible to forecast these markets based on the Natural Cycle mentioned already because it does not need 50 or 100 years to ferret out price cycles.
While some will tell you the markets are all about time, I disagree. Unknown incidences will occur at any time in the future that upset the general cyclical or Road Map Forecasts. However, by and large, our experiences with the Road Maps are that they do offer us a great representation of what will happen in the future.
17
Now comes the hard part of this forecast... working with markets around the world where we don
Author / Uploaded
Arilson Carlos Barbosa
Forecast 2010 2010 A TIME FOR CHANGE… Larry Williams Forecast 2010 A TIME FOR HOPE 1 Amid gloom, doom and uncertaint
Views 2,068
Downloads 371
File size 8MB
Report DMCA / Copyright
Citation preview
Forecast 2010 2010 A TIME FOR CHANGE…
Larry Williams Forecast 2010
A TIME FOR HOPE
1
Amid gloom, doom and uncertainty… stock cycles forecast good times coming
vasive fear of a potential stock market crash, a horrible economy and perhaps civil unrest. What will come of all this? No one knows. But for sure, cycles and patterns from the past have spoken; here is their answer as to what we have to look forward to in 2010.
• An Amalgamation of all Long-Term Cycles into One Pattern
First let me draw your attention to the 5 major seasonal/cyclical events that will influence stocks in the coming year. They are, in no particular order:
True students of market action will want an in-depth understanding. That is so true because, as much as we desire it, forecasting the future is not an easy task. In the next 12 months unpredictable things will happen. Cycles phase in and out of their influence. I will be paying attention to the 5 future events mentioned here to see how the market acts, and reacts, at these time periods.
• The Obama or Presidential Cycle • The 4 and 8 Year Price Pattern • The Decennial Pattern • My “Natural Cycle” of Short-Term Action
Contents Market Forecasts Set Up Markets
2 44
Glossary
55
If you want to skip the understanding of all this just go to Page 10 where you will see the forecast.
After all, the ultimate decider of the truth is the market. I can forecast it pretty well; yet still we have to listen and watch as it does what it does. With that in mind, let me show you the major influences for stock prices in 2010. © Copyright 2009 Larry Williams. All rights reserved.
Introduction
As we enter 2010 we are faced with the per-
US Stock Market Forecast 2010
THE OBAMA FORECAST
2 Stocks
Readers of the 2009 report will recall that this road map of the future was arrived at by averaging all similar years of Presidential Powers. In this case I have synthesized all second years of all presidents’ terms in office since 1922. The future seems pretty clear; expect a sell off into mid/late February, a rally into
mid April, and then a decline into early October. This view may be biased however, as it is a snapshot in time of just the last 60 years. What if we look at stock prices from 1900 through 1950? Was there a Presidential cycle at work then, and if so how close is it to the current one? In other words, does this pattern have legs or is it a post World War II phenomena? The answer is in Chart 1, where I have looked at just similar years starting in 1900 thru 2008. The picture, below, is pretty much the same.
Chart 1: Dow Jones Industrial Average Forecast 2010
An important note needs to be inserted here; the Road Maps tell us much more about when markets will top and bottom than the trend.
I’ve been writing about this pattern (I don’t see it as a cycle) since 1970 when very few were aware of the influence… this baby has had legs. It is the simplest timing tool I know of; charts and computers are not required. Just begin in 1934 and look for a major
As you will see the projection has, at times, been spot on while other times a little early or late… but seldom has a great buying point not been at hand. This tells me that in September and October we need to pay close attention to our other tools for a buy confirmation. Charts do help show the impact of the pattern, so here they are for your study.
Chart 2: 4-Year Low to Low Pattern 1938 - 1952
Stocks
A Quick Look At The 4-Year Low To Low Count
Chart 2 shows the 4-Year Lows marked off, as well as my “4-Year Cycle” indicator that forecasts or projects out when the 4 year low should develop. The exact projection is for September 28. On a weekly basis let’s just call that the first week of October.
3
And, of course, the current market trend at the time of the turn dates help us understand what the implications of the forecast are.
market low every 4 years from that point forward.
Forecast 2010
In other words, just because the Presidential Forecast appears to show a down move most of the year, that should be taken as suggestive only; the turn dates are more important.
US Stock Market
US Stock Market Forecast 2010 4 Stocks
Chart 3: 4-Year Low to Low Pattern 1954-1966
Chart 4: 4-Year Low to Low Pattern 1967-1981
US Stock Market Forecast 2010 5 Stocks
Chart 5: 4-Year Low to Low Pattern 1981-1995
Chart 6: 4-Year Low to Low Pattern 1997-2011
US Stock Market Forecast 2010 6 Stocks
As a special bonus I am next showing in Chart 7 the 4 Year Pattern out to 2018… calling for lows in 2010, 2014, and 2018. You can give this to the grandchildren.
a remarkable job of alerting investors to important market rallies. The pattern calls for a low the first week of October in 2010 in sympathy with the Presidential Cycle. In actuality these two have a lot in common, yet often diverge thanks to the muses of the markets.
However you look Chart 7: 4-Year Low to Low Pattern 2005-2019 at it, this Low-to-Low Every 4 Years Pattern has done
Chart 8: 8-Year Cycle Pattern 1990-2011
Don’t forget the mere fact this forecast a low also means it forecast a sell off starting about 4 months from the projected low.
US Stock Market Forecast 2010
Chart 8 of my Cycle Forecast for the 8-Year Cycle on a monthly chart of the Dow weaves in and out with the 4-Year Pattern. As you can see, lows in the indicator usually seem to inspire market rallies and of course dovetails with the October low.
His idea was that there is a 10-Year Cycle (perhaps based on the well known 11-Year Cycle in sunspots?). If that is true, all years ending in say 3, should have the same general pattern. Usually they do. So let’s take a look at the average of all years ending in ‘0’. The following chart is just that: 1900, 1910, 1920, 1930,1940,1950,1960,1970,1980,1990,
2000 averaged together. This is interesting! The ‘0’ years present a projection not too unlike the Presidential Pattern forecast as well as the 4-Year Pattern. All three suggest a sell off early in the year, a rally into April then a decline. But, the second half of the year is not so clear, suggesting a choppier market.
Chart 9: All Years Ending in 0 2010 Forecast Road Map
Stocks
Let’s next take a look at the Decennial Pattern first written about by Edgar Lawrence Smith in the 1920’s.
7
Decennial Pattern
US Stock Market Forecast 2010
Why it works; my belief is the power of the Decennial Pattern comes from the 11-Year Cycle in sunspots. Learn more here: http://solarscience.msfc.nasa.gov/SunspotCycle.shtml
8
Natural Cycle To Stock Price Activity
Stocks
This one is a bit different in that there are absolutely no cycles used to create these Road Maps, none at all. The forecast is the most unique thing I do because it looks at similar years from the past but not selected via pattern matches or cycles.
These Natural Cycle Road Maps (i.e. Forecasts) for 2008 and 2009 did a pretty good job of breaking the trail, leaving blaze marks for us as to where to expect the path to turn as shown immediately below in Chart 10. This technique called the first of the year slide, nailed the March low and subsequent rally… but failed to catch the rally from July onwards. Darn, this forecasting stuff is not easy, and I have no excuses for this failure; just respect for the call for the first 6 months of the year as well as past years’ forecasts. Bottom line is we should be aware of the turning points this approach gives us.
Chart 10: Dow Natural Cycle Forecast 2008-2010
The turning points shown fit quite well with the Road Maps seen so far.
9
Yet the years that create this cycle are not from the Decennial, 4-Year or Presidential Years. It is very interesting to me how they all have the same message for this coming year.
Forecast 2010
Chart 11 is a larger view of the 2010 forecast using this approach.
US Stock Market
Stocks
Chart 11: Dow Natural Cycle 2010 Forecast
US Stock Market Forecast 2010
And Now For The Forecast…
10 Stocks
Here it is. A synthesis of all that you have seen so far, presented on one chart, one road map of the future. There has been a very powerful 17- Week Cycle bouncing stock prices all over our charts for the last 3 years. So I have overlaid it on the yearly forecast to give us additional guidance in Chart 12.
Presidential Clout Mechanical S&P Trades for 2010 Seasonal factors do influence commodity prices; and Presidential politics, as you have seen, influence stock prices even more. There are several specific ways we can take advantage of political influences this year. The first trade I am going to share with you is not “new.” After all, I first wrote about end of the month stock market rallies in 1974. While that was a general observation, what I have done is flesh out the specific times of the month to take advantage of monthly seasonal influence. Let’s start with an equity graph and tabulations on just how well the strategy I am about to teach you has been.
Chart 12: Dow 2010 Road Map Forecast
US Stock Market Forecast 2010 11
Chart 13: Equity Curve Presidential Clout Trade
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OVERALL RESULTS Presidential Clout Trade Total Net Profit: $259,783 Total Trades: 484 Average Trade: $537 Avg # of Bars in Trade: 2.58 Avg # of Trades per Year: 18.1 Max Closed-out Drawdown: -$11,075 Account Size Required: $32,101 Open Equity: $0 Current Streak: 5 Wins
Profit Factor ($Wins/$Losses): Winning Percentage: Payout Ratio (Avg Win/Loss): Z-Score (W/L Predictability): Percent in the Market: Max Intraday Drawdown: Return Pct: Kelly Ratio: Optimal f:
2.17 84.9% 0.39 0.4 18.0% -$14,783 809.3% 0.4584 0.76
WINNING TRADES Total Winners: Gross Profit: Average Win: Largest Win: Largest Drawdown in Win: Avg Drawdown in Win: Avg Run Up in Win: Avg Run Down in Win: Most Consec Wins: Avg # of Consec Wins: Avg # of Bars in Wins:
LOSING TRADES Total Losers: Gross Loss: Average Loss: Largest Loss: Largest Peak in Loss: Avg Peak in Loss: Avg Run Up in Loss: Avg Run Down in Loss: Most Consec Losses: Avg # of Consec Losses: Avg # of Bars in Losses:
73 -$221,473 -$3,034 -$7,920 $4,205 $582 $582 -$3,339 2 1.16 5.45
411 $481,255 $1,171 $12,230 -$3,920 -$561 $1,555 -$561 34 6.42 2.08
These are very good results for short-term trading, with 84% accuracy on over 485 trades. We have a large sample size. This is a quick “Pop” of a trade with an average hold of 2.58 days to net the $259,784 of profits and a high average profit per trade of $537.
What’s my secret to this strategy? It is simply this; I will buy on the best Trading Days Left in the Month (TDLM in my parlance). This is our attempt to catch the end of the month/ first of the month rally. The best set up days to buy the next day have been TDLM 2, 10,
US Stock Market
not a Genesis user, you are missing out on the simplest to use, yet most powerful, software in the business.
Forecast 2010
12, 19, 22, and 23. Again, we do not buy on these days but the next day. The performance of just these days is superb, yet it can be made a little better with two simple rules.
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•Today’s 200 day moving average of closing prices is higher than it was 3 days ago.
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•The day that just closed is not an Outside Day with a higher close. Those are all the rules for the entry. The exit is a $3,500 stop or an exit on the First Profitable Open (FPO). Here is the code for fellow Genesis users. If you use software and are
IF Next Bar Trading Days Left In Month = 23 Or Next Bar Trading Days Left In Month = 22 Or Next Bar Trading Days Left In Month = 19 Or Next Bar Trading Days Left In Month = 12 Or Next Bar Trading Days Left In Month = 10 Or Next Bar Trading Days Left In Month = 2 And MovingAvg (Close , 200) > MovingAvg (Close , 200).3 And (Outside Bar And Close > Close.1) = False And Next Bar Day Is (“Friday”) = False
The year by year performance bears study and shows the power of the simple 200 day moving average trend rule. It is interesting to see that in many years there are no or very few trades; the market was in a down trend. When in an uptrend,
Presidential Clout Trade By Year Performance Year 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
Trades 26 3 17 25 21 11 22 13 17 20 25 7 23 27 32 31 24 20 0 0 17 24 21 25 23 0 10
Win Pct 92.31% 66.67% 94.12% 76.00% 85.71% 90.91% 100.00% 84.62% 82.35% 90.00% 88.00% 57.14% 86.96% 81.48% 81.25% 80.65% 75.00% 80.00% 0.00% 0.00% 94.12% 79.17% 95.24% 76.00% 91.30% 0.00% 90.00%
AvgTrade $216 -$1,278 $106 -$43 $79 $341 $433 -$55 $6 $51 $110 -$334 $425 $264 $710 $1,172 $555 $1,748 $0 $0 $1,039 $201 $1,226 $255 $2,358 $0 $845
C/L 1 1 1 1 1 1 0 2 2 1 1 2 2 2 1 2 2 1 0 0 1 2 1 2 1 0 1
Max Loss -$20 -$3,945 -$3,945 -$3,945 -$3,945 -$8 $0 -$3,945 -$3,945 -$3,945 -$3,945 -$3,945 -$33 -$3,945 -$5,083 -$4,745 -$7,920 -$3,945 $0 $0 -$3,945 -$5,095 -$3,945 -$4,420 -$3,945 $0 -$3,945
Profit $5,618 -$3,835 $1,798 -$1,063 $1,668 $3,755 $9,535 -$710 $110 $1,013 $2,738 -$2,340 $9,765 $7,123 $22,710 $36,330 $13,320 $34,950 $0 $0 $17,660 $4,820 $25,755 $6,375 $54,240 $0 $8,450
Net Profit $5,618 $1,783 $3,580 $2,518 $4,185 $7,940 $17,475 $16,765 $16,875 $17,888 $20,625 $18,285 $28,050 $35,173 $57,883 $94,213 $107,533 $142,483 $142,483 $142,483 $160,143 $164,963 $190,718 $197,093 $251,333 $251,333 $259,783
US Stock Market
the accuracy is astounding; over 90% in 1982, 2003, 2005, 2007, and 2009.
Bullish On America Trade
Here is that code.
Unbeknownst to most traders is the very impressive record of stock prices to rally prior to the first Tuesday in November shown next. Of course we know that as the day we usually vote for the President and Congressional representatives.
Buy Before All Elections Performance Year 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
Trades 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1
Win Pct 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 0.00% 100.00% 100.00%
AvgTrade $330 $30 $318 $143 $130 $955 $630 $780 $455 $980 $80 $305 $1,693 $1,155 $630 $580 $1,830 $1,830 $1,080 $3,330 $3,880 $1,480 $3,355 $255 $1,830 -$3,945 $80 $4,405
C/L 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 1 0 0
Max Loss $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 -$3,945 $0 $0
Profit $330 $30 $318 $143 $130 $955 $630 $780 $455 $980 $80 $305 $1,693 $1,155 $630 $580 $1,830 $1,830 $1,080 $3,330 $3,880 $1,480 $3,355 $255 $1,830 -$3,945 $80 $4,405
Net Profit $330 $360 $678 $820 $950 $1,905 $2,535 $3,315 $3,770 $4,750 $4,830 $5,135 $6,828 $7,983 $8,613 $9,193 $11,023 $12,853 $13,933 $17,263 $21,143 $22,623 $25,978 $26,233 $28,063 $24,118 $24,198 $28,603
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IF MovingAvg (Close , 200) > MovingAvg (Close , 200).3 And Trading DayOfYear = 20 Or Trading DayOfYear = 63 Or Trading DayOfYear = 99 Or Trading DayOfYear = 212 Or Trading DayOfYear = 219 Or Trading DayOfYear = 232 Or Trading DayOfYear = 235 Or Trading DayOfYear = 254 Buy Tomorrow on the Opening
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The strongest “Political Clout” trade is one you have never heard about. So I want to explain it as well as show some examples.
Forecast 2010
If you can be more selective in your trading and only take buy signals on the specific Trading Day of the Year (TDOY) with the following code you would have had 120 trades since 1982 with 119 winners, using the same stop and FPO exit as discussed above.
US Stock Market Forecast 2010
Here is the code for this trade: IF November And WeekOfMonth = 1 And Monday Buy at Next Bar Open
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It seems to me that both sides of the political spectrum get optimistic just before the elections because they think: “My guy/gal is going to win and things will get better.” So, they bet their bullishness in the stock market. You don’t think so? Then explain the tabulation of trades buying on Page 13. This is an impressive record but let’s delve a little deeper into our politics. In 2010 we will have what are known as “Mid-Term” elections for Congressional positions. As you can see below there has been an even more marked pattern for prices to rally four days out, than for just the first Tuesdays in all Novembers.
We have to be a little careful of the data as you can see from the next clip. Until 1966 it used to be that Election Tuesday was a holiday for Wall Street. The red line or Seasonal pattern is constructed for the Dow from 1918 forward. Stocks were closed in the fall
Chart 14: Mid-Term Elections
US Stock Market Forecast 2010 15 Stocks
Chart 15: Enlarged View of Mid-Term Rally 1982-2009 of 1914, so there was no data for that time period. Using data from 1982, when the S&P began trading, it has been best to buy on the opening of the next to last trading day in October and wait at least one day for the FPO. That strategy produced the Mid-Year Election
results below for traders. Next is the Seasonal Forecast Pattern for 2010 which tells us to start looking for a buy signal on October 20th and a forced entry on the 28th. (Note the red line is a forecast of what should happen in 2010. It is not a repetitive Seasonal indicator).
Mid-Term Election Trade Results YEAR 1982
TRADES 1
WIN PCT 100.00%
AVGTRADE $305
C/L 0
MAX LOSS $0
PROFIT $305
NET PROFIT $305
1986
1
100.00%
$80
0
$0
$80
$385
1990
1
100.00%
$930
0
$0
$930
$1,315
1994
1
100.00%
$2,143
0
$0
$2,143
$3,458
1998
1
100.00%
$7,330
0
$0
$7,330
$10,788
2002
1
100.00%
$2,455
0
$0
$2,455
$13,243
2006
1
100.00%
$955
0
$0
$955
$14,198
US Stock Market
Chart 16: Dow Mid-Term Election Forecast
Forecast 2010 16 Stocks
Buy Before All Mid-Term Elections Year By Year Performance YEAR 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
TRADES 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1
WIN PCT 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 0.00% 100.00% 0.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 0.00% 100.00%
AVGTRADE $830 $30 $143 $68 $293 $1,580 $630 $180 $80 $930 $868 $243 $1,693 $655 $1,155 -$3,945 $1,455 -$6,545 $3,955 $4,205 $3,580 $255 $205 $255 $1,380 $9,880 -$6,420 $2,505
C/L 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 1 0 1 0 0 0 0 0 0 0 0 1 0
MAX LOSS $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 -$3,945 $0 -$6,545 $0 $0 $0 $0 $0 $0 $0 $0 -$6,420 $0
PROFIT $830 $30 $143 $68 $293 $1,580 $630 $180 $80 $930 $868 $243 $1,693 $655 $1,155 -$3,945 $1,455 -$6,545 $3,955 $4,205 $3,580 $255 $205 $255 $1,380 $9,880 -$6,420 $2,505
NET PROFIT $830 $860 $1,003 $1,070 $1,363 $2,943 $3,573 $3,753 $3,833 $4,763 $5,630 $5,873 $7,565 $8,220 $9,375 $5,430 $6,885 $340 $4,295 $8,500 $12,080 $12,335 $12,540 $12,795 $14,175 $24,055 $17,635 $20,140
With that let’s take a look at what’s in store for Europe, or at least Germany, in 2010.
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Nonetheless, it is possible to forecast these markets based on the Natural Cycle mentioned already because it does not need 50 or 100 years to ferret out price cycles.
While some will tell you the markets are all about time, I disagree. Unknown incidences will occur at any time in the future that upset the general cyclical or Road Map Forecasts. However, by and large, our experiences with the Road Maps are that they do offer us a great representation of what will happen in the future.
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Now comes the hard part of this forecast... working with markets around the world where we don
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