Friday, 7 June 2013

Non Farm Payroll

Today should be an interesting and key day on the US market. At 1:30pm London time, (8:30am Eastern) the US Government will publish its employment figures(aka Non-Farm Payroll). They have been trailed for most of the week. On Monday the Purchasing Managers’ Index gave a positive signal, suggesting that the market was in better health than had been thought. On Wednesday ADP, an independent research outfit, released figures that showed an improvement in employment though a smaller improvement than had been expected, yesterday unemployment claims were down, in line with expectations. Today the actual employment number will be released.

Predicting how the market will react is tricky. In theory a good number, indicating improving economic health, should be good for the stock market. In these perverse times it will probably have the opposite effect. A poor number will be hearten buyers. They will interpret it to meant that the Quantitative Easing program will continue for longer. The supply of cheap money will be unabated and they can continue to buy. The expectation is for a very modest change, but the ADP number would suggest that the number could be below expectations. Result: we could see the market spike upwards. Not long to wait and then we’ll know what the numbers tell us and how the market will react.

Support and Resistance (S&R)

The core of my new timing system for buying shares is S&R and the last few days have given good examples of how well S&R works.  It is the latest break of support that has provided me with a signal to exit the market. A new horizontal support line (which I drew a couple of days ago) has brought the pull back in the market to a halt. Time will tell whether this is temporary or longer term. If it proves to be significant, i.e. the market resumes its rally my ten day rule will come into play and I will have to wait until a the market has been above a new support line for ten clear days before I can start buying again. This will keep me out of the market during any whippy period that develops. (See 2nd June post under the heading “But in the mean time”)

More backtesting

I haven’t screwed up the courage to go back and create a longer timing list so I can backtest further but I have broken down the results achieved over the past 5 years by Picker b) (see that same 2nd June post under “The big bucks come from share picking” and “Stop press”) to provide a year by year result. The years run from March 24 to March 23 each year. (Date picked at random.) The figures come out as follows:

S&R timing list/Picker b)
DJ Industrial Average

Remember that this is a very aggressive picking system. Often finds few or no shares that match its criteria, shares so there are periods when there is little spread of risk. Shares are never held for more than 4 weeks and most are in very small companies. On the other hand the timing system and its failure to find shares  has kept us out of the market for most of the ghastly year 2008/9. This is not a system for the faint hearted but the results are extraordinary.

New Label

During the next couple of days I shall create a new label. “Vector Vest Research” will quickly bring together all the posts which report on the development of my Vector Vest trading system. You will be able to find it in the label cloud to the right of the posts.

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