*Engineering Professor
(EngProf6)*

* Hybrid Timing Model for Analyzing Stocks and Indices*

During the last couple of days I have developed a firm hold on the modeling work I am conducting. The results you will see and which I will use on my journey are looking great. In addition, I have now successfully adapted the model to an hourly basis. This will make investing (on a short term basis) so much easier. You should note that there are 3 modes for a move: 1) red – down, 2) green – up, and 3) yellow – turbulence (for both up and down primary trends). Read the comments for Friday for more explanations.

As
I re-compute the results for the other issues, I will resume coverage of those
issues and I will post the results. I want to start ‘My Journey’ with a winning
model.

**If you are new to this site, be patient, scroll down a
couple of pages and you will find what the model is forecasting for the
following 15 issues:**

**DIA, SPY, QQQQ, OIH, SMH, IWM, OEX, EWJ and XLF {these are based on specific market
averages} and, AAPL, AKAM, ET, GOOG,
STX and WMT**

** **

** **

* *

* *

*There are 2 classes of investors I would like to reach,
in particular. If you are involved with **options**, you should
consider what I have to say. You are in the first category. If you trade on the
**short term** (a couple of
weeks on average), then you are in the other category of investor I am
interested in. I would like to hear the ideas and opinions from members of both
categories.*

* *

*One feature of my
analysis is that I have a count down to a reversal for each entity. Thus, if we
consider stock XYZ, my model tells you the current trend direction of the
stock. Moreover, it tells you how many days remain before the current trend for
XYZ reverses. This information can help you plan upcoming moves. *

* *

**My Comments on the Markets**

**My Comments after Friday
(October 13):**

I have erased my previous daily comments because I believe
that I am entering a new time frame. The model has now been refined to the
point that I am happy – I am satisfied – I am confident. And, I’ve carried out
some testing of the model with data on an hourly basis. It looks great. The
testing is preliminary but the results are exciting. So with a daily and hourly
model, I am rapidly approaching the point when I will ‘officially’ begin my
quest to convert 5K into 1M.

With regards to the model, it is necessary to point out that
the results given in the tables is not what occurs in real time. Think of the
results in the tables as optimum. In actual fact, about ½ of the moves will
disappear. This does not mean that the performance is worse. In fact, it can actually
be an advantage to eliminate some of the moves. I won’t go into details at this
point but eventually it should become clear.

Another point about the model is that it now generates 3
states. Taking back a move (i.e. confirmation) is gone. A stock can be in an up
cycle (indicated as green). It can be in a down cycle (indicated as red). Or it
can go into turbulence mode which is indicated as yellow. For example, let’s
assume issue SPY is in a down trend. And then the model signals turbulence.
This means that the issue continues in a down cycle until the turbulence
dissipates. Naturally, it is also possible the turbulence may become a reversal
to the up side. During stretches of turbulence, the stock will make attempts at
going against the primary trend. If these attempts have roots, then a reversal
will be forthcoming. If they are not, then the primary trend will persist.

One last point is that I will now start analyzing the issues
I will be investing in on an hourly basis and will make comments based on
hourly results on this web site, as appropriate. This should refine my
strategy. While this analysis is still preliminary, I am confident that the
hourly analysis will prove to be very useful. Stay tuned.

**My Comments after Monday
(October 16):**

Today, the market hung in as all eyes looked at the 12K
Dow. At this point, I have limited comments. We need to see more data to
clarify the turbulence issue. As soon as that happens and we realign, I will
start my journey and I will add the data for the other issues. While it may not
be obvious to you yet, the results from the model are exciting. Stay tuned – I think
you will be impressed once we close out the current moves and can start anew.

Good luck to all.

**SPECIAL
SECTION (under construction)**

** (How To) Grow $5,000 into $1 Million, Quickly**

** ****Click Here to Link to ****‘****My
Journey’**

Stay Tuned. You will get the opportunity to follow me as I
embark on ‘my journey’ to grow $5 thousand dollars into One Million Dollars –
Quickly.

The starting date was initially set for Oct. 1, 2006.
However, given the revised version of the model (3.5) which I am trying to
implement for all 15 issues, a more realistic starting point is Nov. 1. I will
announce the starting date one week in advance.

** **

**DIA** Direction: **DOWN** Started on Tuesday,
October 10 Days Remaining: **xx**

Starting
Price: 118.56 Current Price: 119.79 Loss: 1.23

Dow Industrials Fund (DIA) is in a DOWN cycle. Note
the yellow on the down direction. This means there is turbulence. The primary
trend is down but there is an opposing force. When in turbulence, the countdown
is suspended. It resumes when the situation is clarified or when the direction
changes.

CLICK HERE --- to view the results for DIA as generated by the model (version 4.0) for 2006

**SPY** Direction: **DOWN** Started on Tuesday,
October 10 Days Remaining: **xx**

Starting
Price: 135.27 Current Price: 136.84 Loss: 1.57

S&P 500 Fund (SPY) is in a DOWN cycle. Note the
yellow on the down direction. This means there is turbulence. The primary trend
is down but there is an opposing force. When in turbulence, the countdown is
suspended. It resumes when the situation is clarified or when the direction
changes.

Read the comments for today for more details. Stay
tuned.

CLICK HERE --- to view the results for SPY as generated by the model (version 4.0) for 2006

**QQQQ** Direction:
**DOWN** Started on Wednesday,
October 11 Days Remaining: **xx**

Starting
Price: 41.54 Current Price: 42.45 Loss: 0.91

NASDAQ 100 Fund (QQQQ) is in a DOWN cycle. QQQQ is
like DIA and SPY. All 3 are in down cycles with turbulence. Let’s watch for a
clarified situation.

CLICK HERE --- to view the results for QQQQ as generated by the model (version 4.0) for 2006

**OIH** Stay Tuned.

**SMH** Stay
Tuned.

**IWM** Stay
Tuned.

**OEX** Stay Tuned.

**EWJ** Stay Tuned.

**XLF** Stay Tuned.

**A****AP****L** Direction: **UP** Started on Thursday, October 5 Days Remaining: **12**
(decrease of 1)

Starting Price: 74.83
Current Price: 75.40 Profit:
0.57

Apple Computer (AAPL) is in an UP cycle
according to version 4.0. Take a look at the tabulation of the results for 2006.
You should note that the moves shown in the table are the maximum number of
moves. In real time, the number of moves will be reduced by about ½ and the
starting and ending points will be adjusted accordingly.

CLICK HERE --- to view the results for AAPL as generated by the model (version 4.0) for 2006

**AKAM** Direction: **UP** Started on Thursday, October 12 Days Remaining: **19** (decrease
of 1)

Starting Price: 50.17 Current
Price: 50.67 Profit:
0.50

Akamai
Technologies (AKAM) is in an UP cycle according to version 4.0. The idea of confirming a switch in
direction has been incorporated in the algorithm. So when the direction is
down, it is down. The only catch is the occurrence of turbulence which would
entail keeping a closer eye on a situation but without changing direction. This
is what the yellow labels (see SPY) entail.

CLICK HERE --- to
view the results for AKAM as generated by the model (version 4.0) for 2006

**ET** Stay
Tuned.

** **

**GOOG** Direction: **UP** Started on Tuesday, October 3 Days Remaining: **xx**

Starting Price: 404.04 Current Price: 421.75 Profit: 17.71

Google (GOOG) is
in an UP cycle according to version 4.0. The reversal is on the horizon.
However, it appears to be turbulence. In fact, today GOOG went into turbulence
mode. Hence, the yellow labels. The primary trend remains in the up mode. So
stay tuned to find out what will happen.

CLICK HERE --- to view the results for GOOG as generated by the model (version 4.0) for 2006

**STX** Stay
Tuned.

**WMT** Stay Tuned.

**SPECIAL SECTION (under construction)**

** (How To) Grow Your
Wealth Quickly **

**and, after I complete my objective,**

**Anyone Can Make a Million Quickly**

I have invested over the years but I’ve had
difficulty making a good return. In retrospect, I didn’t have the discipline or
a model to be ‘successful’. All this changed when I started to use a model of
price movements. It just so happens that I developed what I refer to as the
hybrid timing model which evaluates cyclic price movements in the financial
markets.

My past investment universe included stocks, options
and futures. Again, in retrospect, I could not succeed because I was not able
to get a handle on the time trends of the issues I was investing in. So about 7
years ago, I stopped my active investing strategy (except for a few buy and
hold stocks). During this time, I fiddled with mathematics to try to get a
handle on how short term moves occurred in the markets.

In early 2006 I came to the conclusion that the model
I had developed was of sufficient accuracy to be of value in the short term
investing arena. During the last 4 months I have been posting some of the real
time results from the model on this web site. I am very pleased with the
results. Recently, I started to invest (with real money) in some of the issues
I follow (in particular, the market barometers). I started with stocks (or
ETF’s) but I have now moved to options for my speculation funds.

I have set a target for myself. My objective is to
convert $5,000 into 1 million dollars in 2 years. Hence, the title of my work:
‘Grow Your Wealth Quickly’. My plan is to use options to carry this out. My
official starting point for this endeavor is Oct. 1, 2006 (revised to Nov.
1’06). I realize this is a lofty goal but I feel I am up to it. I will report
my progress on this site. It will be one heck of a show, in real time. You will
get to see with real money what can be accomplished with the model.

Based on what I have learned, I have concluded that
one needs to use options (or futures) to make money quickly (or to loose it
quickly). One problem with the simple buying of call and put options is that
this practice is a bit like buying lottery tickets. The odds are stacked against
the buyer. Investing in stocks is much safer but too slow for accumulating
wealth quickly. Thus, several conclusions I have made, regarding my speculative
funds, are:

1) I will not
invest in stocks,

2) I will
invest in options,

3) I will
focus on credit option spreads.

So what
are option spreads? Simply put, an option spread is a strategy (in its simplest
form) that involves 2 calls (or 2 puts). The investor buys 1 call and sells
short another call with a different strike price. For a credit spread, the
investor sells a more valuable option and buys a cheaper option for a net
credit to one’s account. This can be done with both calls and puts.

Let’s
consider the SPY ETF that mirrors the S&P500. I am writing this on Sunday,
July 30’06. Let’s consider the August 2006 contracts. Credit spreads can be
created with calls if you think the trend is down. Credit spreads for an up
market would be created with puts.

Consider
the following credit spread involving calls (down SPY trend):

Buy: August 129 SPY @ $1.10

Sell: August
127 SPY @ $2.35

The cash
SPY when these option prices were retrieved was $127.98.

In this
case you would be credited with $1.25 (less commissions). The maximum loss that
you can incur is $2.00. Thus, in initiating this spread, you would be required
to deposit $0.75 which would be coupled with the $1.25 credit for a total of
$2.00 (the maximum loss). The spread has an intrinsic value of $0.98. If by
expiration (in 3 weeks), the SPY has dropped to 127 (or lower), you pocket the
credit of $1.25 you received. If the SPY closes at expiration at 128, you get
to keep $0.25 of the $1.25 credit. If SPY closes at $129 (or higher), you give
back the $1.25 credit plus the $0.75 you deposited. The bottom line is that you
are risking $0.75 to have it become anywhere from zero to $2.00. If you are
good at identifying trends, you will be a winner.

Another
credit spread involving calls of SPY is:

Buy: August 130 SPY @ $0.70

Sell: August 128 SPY @ $1.65

This
spread would yield you a credit of $0.95. The intrinsic value of this spread is
zero. You would risk $1.05 to enter this spread. If the SPY remains unchanged
(or goes down) by expiration, you pocket the entire $0.95.

Why a
credit spread and not a debit spread. My simple answer at this point is because
of the eventuality that the market (SPY) reverses. Let’s assume the SPY has
just entered a down trend. You decide to sell the Aug 127 at $2.35 and buy the
Aug 129 at $1.10 for a credit of $1.25. The cash SPY is 128. Let’s further
assume you were right with the trend and 2 weeks later the SPY is at 127 (a
drop of 1). At that point in time, there may be an issue you will need to deal
with. Expiration may (for arguments sake) be 1 or 2 weeks away. You need to go
into a credit spread involving puts. So what does one do with the call spread.
With regards to the calls you can close the spread completely or you may buy
back the call you shorted (and hopefully you will be able to buy it with the
funds you received as credit). If you only buy the call you shorted, you would
be left holding the call you bought. If you are right about the reversal to the
up side, that call will increase in price. At the same time, you would initialize
a credit spread with puts.

A $1,000 investment if doubled ten times in a row would be
worth over 1 million dollars. Can it be done? Yes – maybe not 10 in a row, but…
What you need is to have a good handle on the trend. I plan to do it. This is
my Tour de France. Stay Tuned. Naturally, your comments are welcome.

**To Be Continued….**

**MY MAILBAG**

It is Oct 1’06 and I am
posting one new message.

Message #1:

Header: The problem with
the model

Time: September 29, 2006 6:31:55 PM

Text:

A mathematical
predictor model will fail too often
when events that effect the company and then the stock are unpredictable. A
mathematical way to say this might be to say that when a company’s income or
loss is subject to dramatic change by unforseen events, that the standard deviation from the mean in
your model will be large. The opposite would be true when the company is less
likely to be affected by those events. Therefore, your model will not work well
for smaller companies, for high tech companies that may be affected by
competitive changes in the market place and for other high growth situations.
It should work well for large cap companies whose trend is related to years and
decades of typical growth. Examples might be utility stocks, large retailers
and large financials. In these cases the standard deviations would likely be
small and the model will be accurate more often. Good luck.

My Reply to Message #1:

I agree with
the views of the writer. The model will be more accurate for larger, ‘more
stable’ companies. It will also be more stable for indices. It is one of the
reasons why I focus my options investments on ETF’s and indices (like SPY,
QQQQ, DIA, OEX etc..). They provide smoother data.

+++++++++++++++++++++++++++++++++++

Message #2:

Header: Model performance
on the DIA

Time: August 3, 2006
11:39:10 AM

Text:

I took the dates
from your 1.1a proformance listing.
Your prices do not match actual market data in many cases however, the
approximate gains/losses tend to match.
It is interesting to note how late the model turns often are. Typically much more than a day.

My Reply to Message #2:

The writer has
a good point which I have now addressed. I have speeded up the model. The model
should be faster and more accurate. There will be however, more moves. I think
the model is now improved. This is especially important for the option players.

+++++++++++++++++++++++++++++++++++

** **

Forecasting
the markets is like forecasting the weather. Our knowledge base (I am referring
to mankind) is such that the only reliable forecasts are short term. Long term
forecasts for the weather or the markets are simply beyond our reach at this
time.

Remember
last year, the forecasters got caught up with the unusual number of hurricanes
we were having. As a result their forecasts for 2006 were worrisome to say the
least. We were told there would be as many and more. They weren’t forecasting,
they were simply extrapolating. Now as we approach the 1 year anniversary of
Katrina, we haven’t had any hurricanes to speak of.

Yes
there is Ernesto on the horizon, but as I write this, he doesn’t know whether
he should be a tropical storm or a hurricane. Try forecasting what will happen
in the next 3 days. It’s not easy, even for the pros.

As I said,
long term forecasting is beyond man’s capability at this time. Long term
forecasting of the markets parallels that of forecasting the weather. It cannot
be done with any degree of accuracy. It boils down to ‘A Random Walk Down Wall
Street’. These are my personal views.

So what
about short term forecasting? Well that is a different story. We can all agree
that short term forecasting of the weather is a reality. It is within man’s
grasp. Five or even ten day forecasts are generally quite accurate.

What I do is short term forecasting of the markets (without any detail). The model tracks the cyclic, short term trends and tells us what to look for. It assigns no magnitudes (not yet anyway). Remember, money management is equally important as the forecasting component. If you are careless and lose all your worth on a wrong move, then being right 80% of the time will amount to nothing. You need to be WISE. Good luck to all.

* *

* *

**Announcement:**

** **

**The following is an introduction as to what I am planning for the
near future. **

** **

**There are several reasons why I am publishing this web site. Two
of them are: 1) to discipline myself when it comes to investing, and 2) to find
a viable, winning strategy for investing in options. My unofficial name for
this work is ****(How To) Grow Your Wealth Quickly****. I will be using this
heading more frequently in the future and it will be the title of a book I will
write on the subject.**

** **

**At this point, I am working on the ‘how to’ part of the program. I
have already formulated a preliminary strategy which I am testing with my own
money. The strategy is focused on options and more specifically the combination
of buying credit spreads and the buying of straight calls and puts. I won’t say
any more at this time besides stating that 90% of a winning strategy is
centered on getting the direction of the move right. Given that the model can
do this about 80% of the time, I am finding that being successful trading
options is viable and is, indeed, quite profitable.**

** **

**Soon, I will write more about my progress and my plans. Stay tuned.**

** **

Do you want to see past issues of this page? Click the link below.

** ****Past Postings
of This Page – Click Here**

Questions, Comments, Suggestions or whatever else you may fancy

**are welcome. I can be reached
at:**

**engprof6@hotmail.com**

** **

**Please
Note This Disclaimer:** The above results are generated from a
mathematical model. It provides some insight into what may be expected
in the short term (2 to 4 week cycles). While reliability is of highest
importance, life is such that the model is not always correct. Neither is past
performance necessarily indicative of future performance. Stocks, markets, and
options can change greatly in value in short time spans because of
unpredictable events. The model cannot foresee such events. When they happen,
the model’s performance will be poor and in some cases - wrong. The user is
advised to be cautious and to try to couple the results for individual stocks
to those for the market averages.

One
last point I wish to emphasize. The accuracy of the model is also dependent on
the entity that is analyzed. Some entities are more amenable to the type of
analysis the **hybrid timing engine**
performs. Others (especially those with elevated volatilities and/or irregular
trading volumes) may not match the anticipated performance. It is up to you to
satisfy yourself that the performance is adequate and to draw your own
conclusions.

** **

** **

[[ Find
Out About the Model – click ]]

**[[ See Past Postings of This Page – Click
]]**

**Why Are There Events That Go
AGAINST the Model? – Click Here**

**Interpretation of Signals -
Click Here.**

** **

**Find Out What Timing Did For AAPL
- Click Here**

You may have noted that what I originally called
a mathematical model is now called a hybrid timing engine. The term hybrid
comes about because of the method of conducting the analyses. It combines
several techniques into one package. The term engine refers to ‘computational’
engine – a terminology that is frequently used by researchers. Thus, the model
will henceforth be referred to as the **‘hybrid
timing engine’ **or the** ‘hybrid
computation engine’**.

** **