What THE CHARTIST is all about.
From latest newsletter.
The Chartist Hotlines were activated on Monday, August 24th 3:00PM West Coast Time.
The following
advice was given:
“Our long term models have flashed a major sell signal which dictates cutting back substantially in
both of our real money accounts. Investors who are acting in sync with our Actual Cash and
Aggressive Account are now advised to sell approximately 85% of all the positions with the exceptions
of Michael Kors (KORS) and News Ltd Cl A (NWSA), which we advise closing out entirely.
Again, sell all of KORS and NWSA. Sell 85% of the remaining positions.”
Per our hotline advice, we sold the following day
Tuesday, August 25th. From the sale of the
stocks, the Actual Cash Account garnered a profit
of $260,833. It also received dividends of
$39,452 for a net gain of $300,285 +49.89%.
The Aggressive Account, from the sale of the
stocks, gained $1,697,455, in addition to dividends
of $227,468 for a net gain of $1,924,923
+54.57%.
The printout of the Actual Cash Account on page
3 and Dan’s Aggressive Account on page 4 show
only the realized gain (loss) for the positions and
does not include dividends or tax withholding.
The results of the sales are being factored into our
long term track record, which is available to any
subscriber at any time upon request. The Chartist
is one of the very few financial newsletters that
acts on its own advice, featuring real money portfolios.
This is almost unheard of in the financial newsletter
business: a service that puts its own money on
the line, following its own advice right to the letter
and documenting the results in detail.
WHICH WAY NOW
At the lows on August 25th, the Dow had fallen
1845 points -10.7% in only four trading sessions.
In the process, our overbought/oversold indicator
dropped to -7.81, which was the heaviest oversold
reading in over four years. No question, a
snapback rally was way overdue. In fact, it was
overdue two days earlier, but that did not prevent
it from falling another 792 points to trigger a
long term sell signal. To repeat what we said over
our hotline of August 21st, “A snapback rally is
certainly overdue, but what really counts is what
happens after the rally.”
The rally, which is under way, has been most
impressive, with the Dow rocketing ahead 988
points +6.3% in only two trading sessions. If the
past is any guide, it will not be sustainable over
the short term. Despite the rally, the technical
damage was severe and we do not expect it to be
repaired overnight. Based on past experience, we
would expect a retest of the lows as the market
attempts to carve out an effective bottom.
Make no mistake about it: there is indeed a distinct
possibility that most of the damage has
already occurred. Of course, this begs the question:
why have we moved the bulk of our capital
to the sidelines if the worst might be over? Simply
put, we followed the dictates of our long term
models. While a bottom might be in the process
of being carved out, we do not want to risk being
loaded up with stocks in a lengthy bear market,
which is also a possibility.
The bottom line is that we do not have a crystal
ball, and the possibility always exists that the
market can resume its upward trend after a sell
signal. That fact should be accepted and understood
as being part of our methodology. It is
inevitable that there will be times when we buy
back in the market at a higher price than when
we sold.
Our models do not predict the market,
but only react to it. When they indicate that the
odds favor a significant decline, we sell for the
primary goal of preservation of capital. And
while the yields are almost nothing in the current
environment, it is far superior to being locked
into a full-blown bear market. Money market
funds are our insurance policy. They are a guarantee
that our capital will be intact to be
deployed on the subsequent buy signal.
It has always been our contention that following
a disciplined, long-term approach to investing is
infinitely more important than occasionally being
on the wrong side of the market. To be successful
and make money in the stock market, you must
have an investment strategy and you must follow
it. The difficult part with any strategy is to have
the resolve to stick with it during periods of
underperformance. The average investor will
quickly abandon even the most successful concept
after just a small dose of uncertainty. That is
why it’s important to realize that there is no such
thing as a perfect indicator.
We’ve been at this for
more than 45 years and can tell you flat out that
there is no holy grail. What we have seen over the
years, though, are investors without a set of clear,
well-defined rules to guide them.
They repeatedly
make decisions that are self-defeating and invariably
lead to poor investment results. A disciplined
approach to the market protects you from making
decisions based solely on emotion.
Our job at the Chartist is to follow our models
and to report to our subscribers when a change
takes place. We do not predict the market or
entertain preconceived ideas of where the mark
is headed. We are constantly bombarded with
news of our economic woes. Trying to understand
these concerns and the effect they will have on the
market today, tomorrow, or next year is exercise
in futility.
We study and listen to only what the
price action of the market is doing and saying.
The action of investors when they buy and sell are
reflected in the market trends. It is what people
are doing with real money rather than what people
are saying that is our primary focus
