Market Timing

March 30, 2002: Because of changing market conditions, we've updated the market timing model to make it more in synch with current conditions. Get all the details on the updated market timing model here.

Our market timing model is a computerized program that generate "BUY" and "SELL" signals to help make investment decisions. These signals are based on objective rules that are designed to predict significant changes in the direction of stock prices.

The product of years of painstaking research, our timing model works well because there's no human judgement involved. The program is primarily a trend following system. In real life, this means that the model will very rarely catch the exact bottom or top of a move, because it needs to "see" that the primary trend has reversed before it will generate a signal. But this also means that while the model can occasionally be wrong (resulting in small losses otherwise known as whipsaw trades) it's very unlikely that it will stay wrong. So the chances of a catastophic loss (for example by staying invested in a declining market) are minimized.

When the timing model is in a "Buy" mode our accounts will usually be fully invested in the market. When market conditions deteriorate, however, the model is designed to generate a "Sell" signal. Until the outlook for the market improves, we will adopt a defensive posture. This usually means moving all funds into a money market account and waiting for the next "low risk" opportunity to get invested. In the more aggressive systems, we will move all or part of an account into one of Rydex's reverse funds.