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MUTUAL FUND SECTOR TIMING REPORT & UPDATE(page1) by Henry Ford
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For Tomorrow, Monday June
22,1998
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NO TIMING ENTRANCE SIGNAL TODAY
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NEXT PROBABLE FUND CHOICEFSVLX , (Fidelity Select Home Finance Fund) Alternate:RYFIZ,(Rydex
Financial Services Fund)
IF TODAY'S CLOSING PRICE OF FSVLX IS BETTER THAN
$54.96 ENTER FUND TOMORROW MORNING
**MARKET UPDATE COMMENTARY**
LONG TERM,(3-6 months) INTERMEDIATE,(1-3 months)ACTION IS UP...SHORT TERM(1-7
days)UP
The anticipated triple witching volatility didn't disappoint us on Friday. This
is always a nervous time for investors as the quarterly squaring of accounts by speculators
runs the markets into a feeding frenzy the last week before expirations. Now that
we are finished we can concentrate on seeing where the real state of the market is.
Worries about quarterly reports will still keep some volatility in the markets for
another week or two, but other signs are more favorable to a forthcoming rally into
July.
Cash inflows to mutual funds have slowed to just over 450 million from the previous
weeks 4 Billion. That's an obvious sign that investors are truly getting concerned.
At the same time, the put call ratio has risen to .88, (remember .85 is our threshold
for a bearish public sentiment),again indicating that the public in general has lost
faith in this market. The professional floor traders on the other hand are firmly
bullish at this point, (and they are usually right since their day to day livlihood
depends on being right most of the time).
Our work shows a transition within the next three days where we should be putting
in a local minima low which would provide the support base for a launch to new highs.
This low will be an important support level that if not held could take us down again
before a rally begins. The markets of course will do what they will do, (with a little
help from the specialists).
NEW MAGIC NUMBER: $54.97.......... If tomorrow's
closing price of the FSVLX is greater than $54.96, we will enter FSVLX, (Fidelity
Select Home Finance) on the following day. Those who trade with Fidelity can call
them and get the last hour's pricing and place your order or enter at the 10AM price.
Others will have to wait for the closing price. For those adventurous souls who want
to trade the RYDEX instead, the timing signal would be the same. The same relative
fund is the leader, (RYFIZ, or RYFIX) depending upon whose symbols you are looking
at. Rydex is looking better and better....Still working hard on getting comparative
performance data to you as quickly as possible.
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questions or comments?
Email us at pbinvestor@gmail.com
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*CURRENT TIMED SECTOR ROTATION POSITION*
S T I L L GETTING READY TO GET READY....Still no magic number, so today's report
is same as yesterday, and the day before and the day before, and the daybefore....Just
remember that this could have been a buy and hold nightmare avoided by being patient
for an entrance signal..
For those interested in where the timing information comes from, a little hint...Instead
of looking at the general market or "canned" indexes, we look at those
member stocks which make up the sector funds.We don't use reported ownership since
that's usually way out of date, but "synthesize" a sector by symbiotic
industry groups. The price action of these stocks individually must show us the right
type of price performance consistant with growth before we will authorize a "buy",
or "sell" signal.
Just about done with the RYDEX study, and no surprises so far. I am also completing
the INVESCO study at the same time, so you should see those results posted here real
soon....
***INDICATORS***
OUR MARKET CRASH INDEX (PCI) : -4
(UPDATED DAILY only for subscribers)
**VOLATILITY INDEX**One of the indicator's I have talked
about is the VIX. This is another indicator from CBOE whose full name is Market Volatility
Index. This index, while it has no nice fixed number, (like >0 = oversold;<0
=overbought), can be best evaluated with the use of simple 20 period Bollinger bands.
When the VIX rises to meet or exceed the 20 day upper band, you can generally count
on a rally within the next two days....conversely, when the VIX drops near or through
the lower ban, you can expect the market to reverse and fail within the next two
days....It doesn't ALWAYS work that way, but when used in conjunction with some other
simple indicators can give you a pretty good idea of market direction near term.
Right now the VIX is dropping after yesterday's rally, but we are still well up into
the upper third of the band range.(bullish).
VOLATILITY INDEX (VIX) 21.55 dropping but still in upper range
**Fair Value**For those who like to trade
or watch the S&P and use that as a guide for what's going to happen to the market
near term we look at three key computed numbers. FAIR VALUE is the S&P500 futures
price that is closest to balanced...no bias bearish or bullish. The BUY TRIGGER is
that number which most large block trader's computers are set for that when hit will
trigger them to automatically start buying "market baskets" of stocks.
SELL TRIGGER is the reverse and causes to dumping of stocks.CNBC gives out their
own version in the morning, but it is not accurate enough for daytrading.
Whenyou hear them talk about buy programs "kicking in" this is what they
are referring to, and is the primary reason we see curb rules go into effect.
TOMORROW'S BUY PROGRAM TRIGGER: $14.63
TOMORROW'S SELL PROGRAM TRIGGER: $9.88
TOMORROW'S FAIR VALUE: $12.16
PUT/CALL RATIO .88
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