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News Cycle Timing - September Edition



September 07, 2011 – Comments (13)

Last month I engaged in the fools game of timing the market based on the news cycle and was able to generate a return that beat the S&P 500 by 9.72%.

The volatility in August was historic and I do not expect such wild swings to abruptly halt in September. Reviewing the strategy, I am prepared to take on this foolish pursuit for another month since I was right more times than not last month. Also, I feel that with swings of 2-3% commonplace, there is enough benefit if I can time it correctly more often than not.  

I am not as defensive as I was last month, however I will almost definitely sell any strength today and tomorrow to head back into cash before the end of the week.

My feeling is the market is due for a short term bounce higher after the last few losing days. The decision this week is whether I want to hold equities through the end of the week or move to safety prior to Obama's job speech Thursday evening. I am going to stay invested until market close Thursday because I believe the rumors of more tax cuts could help the market rally here in the short term.

So to review, unless conditions change I am long large cap value until Thursday close. I am selling prior to Thursday's close in a buy the rumor, sell the news strategy. 

13 Comments – Post Your Own

#1) On September 07, 2011 at 4:07 PM, RallyCry (28.47) wrote:

This 2% + rally Wednesday was stronger than I expected. The financials that comprise much of my large cap value holdings were particularly strong. I liquidated and moved back to cash prior to the close. I think tomorrow will be a flat to slightly down day. The uncertainty surrounding Republicans wilingness to approve more stimulus in the wake of past failed stimulus plans (that have driven up our debt and failed to create jobs) leads me to believe that there will be great uncertainty in markets short term. 

I think the media will spin any Obama proposal that is met with criticism as the Republicans trying to intentionally ruin the economy. With this on tap, I think it is correct to stay in cash for the time being. I may wade back in next week if there is some decline on the order of 5%. I fail to see how a speech at this point will lead markets higher unless Obama proposes massive tax cuts on business, which I believe he has neither the political support nor the willingness to propose.

The speech will most likely serve as window dressing to show Obama is engaged on the economy. To me it is merely putting lipstick on the pig that is failed spending policies.

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#2) On September 09, 2011 at 9:26 AM, RallyCry (28.47) wrote:

Preserved 1.39% on Thursday by moving into cash at market close on Wednesday. This outperfromance was against the large cap value fund I was holding for the big move up on Wednesday. Also outperformed the S&P 500 by 1.06%. Early indications show another down day on Wall St. I am still going to look for a re-entry point about 5% below current levels. I think in general, it is important to sell into any strength short term.

I think the political bickering over Obama's stimulus plan will keep uncertainty in the market. I will most likely staying in cash until early-mid next week. I feel it is also prudent to be defensive around the ten year anniversary of 9/11 in case there are any attacks, which could significantly hurt market performance short term. I think most institutions will share this sentiment and we will sell off again today. I think it is a prudent strategy to be risk adverse going into the weekend.

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#3) On September 09, 2011 at 3:31 PM, RallyCry (28.47) wrote:

Ok this is where it gets tricky. The market has sold off over 3% today Friday 9/9 and if I get back into the market here before the close I could basically lock in 5% outperformance so far this month versus the S&P 500 and the large cap value index. With cities on high alert for any 9/11 anniversay attacks my gut tells me to stay in cash..however the great Warren Buffett tells us to be greedy when others are fearful and fearful when others are greedy so I will move back into the market before the close into the large cap value fund. Basically, I'm hoping we have a quiet memorial weekend and a relief rally Monday.

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#4) On September 13, 2011 at 1:01 AM, RallyCry (28.47) wrote:

Early Monday morning it appeared that I made the wrong move getting back in my large cap value holdings before market close on 9/9. As the day progressed, the market bottomed and rallied mostly higher on the hopes that there may be some finality to Greece's debt situation through a default. There were also some rumors that China may step in to help bailout Italy. I feel that the next several weeks will continue to be volatile. The two opposite ends of the news pendulum are contagion fears and resolution/default. The reason why I think we will see a mix of volatile up and down days is due to these words being used to present a glass half empty and glass half full argument to support or attack Eurozone debt issues. So to review, I was up .0.60% in my large cap value holdings Monday versus 0.70% for the S&P 500 and down .49% for the bond fund. I am looking for a modest rally by Wednesday 9/14 to get defense again.

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#5) On September 13, 2011 at 3:34 PM, RallyCry (28.47) wrote:

Moving back to cash this afternoon 9/13 out of large cap value. There is no real momentum or conviction on the buy side in this market, only pockets of seemingly good news. One important consideration is that financing China provides to Italy or other Eurozone nations is really a stop gap aimed at plugging liquidity problems that are being percieved as real whether it is or not. It is a crisis of confidence. A liquidity crunch is like an animal that feeds off of bad news and grows louder each day. I would wait for overdone stories predicting financial implosion in the Eurozone before getting back into equities here in the USA. Cash is my bet and I may stay on the sidelines for a period greater than a week, which in this experiment is a long time.

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#6) On September 15, 2011 at 9:14 AM, RallyCry (28.47) wrote:

Definitely missed out on Wednesday's move up 9/14. Holding cash underperformed by 1.43% vs. the large cap value fund and 1.35% vs the S&P 500. Jobless claims were weaker than expected Thursday morning so markets may see red again 9/15.

Treasury Secretary Geithner said Wednesday that Europe will not allow Greece to fail like Lehman Brothers. I believe this comment was aimed more at restoring U.S investors confidence in U.S markets and is not predicitve of any motion ECB will make. I would be suprised if Geithner's comments have a lasting impact on the deteriorating situation in Europe.

Still in cash for the next few days unless we see a major selloff.

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#7) On September 22, 2011 at 12:59 AM, RallyCry (28.47) wrote:

Today 9/21, the S&P 500 Index fell by 2.94% and the large cap value fund fell by 2.91%. I was parked in cash and did not feel these declines..

The S&P 500 closed at 1172 on 9/13 and closed at 1167 today 9/21 so it is down 0.5% since I moved to cash on 9/13. Therefore I am outperforming the SPX by .5% during this period by staying on the sidelines. The large cap value fund closed down .99% in the period 9/13 - 9/21. So I'm ahead by roughly 1% against large cap value in the past 7 trading days.

I am going to buy back into large cap value if we sell off another 4-6%. The big difference between market timing in Aug. and Sept. is that in Aug. I outperformed by 9%+ primarily by avoiding big sell offs. Today was one of the few if only big sell offs in Sept. I've avoided by staying in cash. Due to my caution, I've missed some nice moves up in Sept. as well.

The lead up to operation twist was a perfect buy the rumor, sell the news event. Unfortunately, I never bought the rumor. I may wait another few days before wading back into equities. That is if we get more big sell offs. I will also run the numbers from 9/7 to current day to determine the outperform/underperform levels of my poftfolio vs the benchmarks since I resumed the timing in Sept.

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#8) On September 22, 2011 at 5:11 PM, RallyCry (28.47) wrote:

I moved back to large cap value before market close today from all cash. The market sold off over 3% and so this was the type of day that was commonplace in August that helped me time the market successfully. I do have some nerves about a deeper sell off, but I expect a bounce back day tomorrow where if I can get a 1-2% move higher, If we get a day like this, I will sell into the strength. Fundamentally, the market is broken short term.

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#9) On September 26, 2011 at 11:56 PM, RallyCry (28.47) wrote:

At this point on 9/26, I am still holding onto my large cap value fund. I think that the Buffett's Berkshire share repurchase is bullish and signals the market holds significant value at current levels. Therefore, my conclusion is that it is appropriate to hold onto a large cap value fund that has exposure to financials for another day or two. 

Stayimg invested in the market went against my plan to sell  into stength from my previous post last Thursday 9/22. Consequently, I may give up some of the nice gains enjoyed today as the large cap value fund went up 2.59% vs. 2.33% for the S&P 500.

My September rate of return will be available in a week. I estimate my performance from September 7th - September 25th is 8.42% while the S&P 500 is down 2.97% in this period and the large cap value fund is down 3.71%. If I can end the month and outperform by more than 10-11%, I will be very satisfied.

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#10) On September 28, 2011 at 12:11 AM, RallyCry (28.47) wrote:

Back into cash from large cap value at market close 9/27. Small outperformance today as the large cap value fund was up 1.32% while the S&P 500 was up 1.07%.

I think the dollar will continue to rally relative to the Euro in the short term as the details of the PIGS bailout come into shape. This dollar strength will pressure U.S stocks, but a good re-entry point may occur once the market is able to see actual steps/ action in Europe leading the dollar to back off its strength.

Im more risk adverse until a European TARP is implemented so I will resume investimg in short spurts, but will stay with cash for now.

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#11) On September 30, 2011 at 12:59 AM, RallyCry (28.47) wrote:

I moved out of cash and back into large cap value at market close Thursday. I missed out on a nice 1.45% move in large cap value, however I did avoid a 2% plus sell off Wednesday 9/28 so I am ahead by .5% in this two day period. I am excited to see how the monthly performance for Sept. turns out

I'm not sold on recovery, but my bias toward being invested in equties over cash has to do with what I believe is an upcoming announcement of TARP in Europe.  There should also be a mild decline in the dollar as people move back into riskier assets and take profits from its sharp rally. Higher market levels should be helped by a weakened dollar and attactive dividends and earnings multiples in the US.

In the intermediate term, the Euro-zone is still a mess and the Euro will continue to be trashed, but just not everyday in a straight line down.

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#12) On October 02, 2011 at 9:37 PM, RallyCry (28.47) wrote:

Friday was not kind to me in the outperformace department. Holding large cap value was not the best move as I lost 2.51% which mirrored the S&P 500's performance of -2.50%. However, I moved back to cash before 9/30 market close Fri. and plan to stay on the sidelines much of the week as the Euro-zone crisis hopefully plays out and meets some form of stabilization. Final stats on the Aug and Sept market timing experiment tomm. September ROR was positive which is great considering  market volatility.

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#13) On October 05, 2011 at 1:05 AM, RallyCry (28.47) wrote:

Final Stats on the Aug and Sept Market Timing Experiment:

Rallycry Aug Return 4.43%

S&P 500 Aug Return -6.04%

Large Cap Value Aug Return -5.56%


Rallycry Sept Return 1.53%

S&P 500 Sept Return -7.75%

Large Cap Value Sept Return -7.96%


Aug 1-Sept 30 Rallycry Total Return 6.02%

Aug 1-Sept 30 S&P 500 Total Return -12.46%

Aug 1-Sept 30 Large Cap Value Total Return -12.25%

Aug 1-Sept 30 Rallycry outpaced S&P 500 by 18.48%

Aug 1-Sept 30 Rallycry outpaced Large Cap Value by 18.27%


I feel these numbers show the experiment was an overwhelming success!

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