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Engineering Professor (EngProf6)

        Hybrid Timing Model for Analyzing Stocks and Indices

 

Date:  Monday, October 2, 2006     (after the close) 

 

 I am working on implementing model version 3.5. I really like the results I have seen thus far – except, of course, for the current move which has the DIA sporting a loss of 2.48 (i.e. about 248 Dow points – Ouch!). But, I am not fazed by this. I still believe the market will go down (soon - in the coming days).

  

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

 

 

 

 

 

Check out the links at the bottom of this page.     

    

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.

 

Some comments about technical models and how they perform as compiled by ‘tradingmarkets’. Click here.

 

 

 

                                         

 

          My Comments on the Markets

  

My Comments after Wednesday (September 27):

 

As you may know, I did not update this page yesterday (Tuesday). Little was missed  because most of the issues remained in ‘status quo’ mode. SMH flipped to the up on Tuesday while IWM flipped today (Wed.). However, it should be noted that both will go back to the down side in a few days.

 

I am preparing for ‘My Journey’. I am a bit behind schedule. So I have pushed back the starting date by several weeks. Stay tuned.

 

With regards to the market, I believe it will go down. At this point, the model is showing a loss (on the DIA), but I am comfortable with the new version (3.5). So I think we will see the markets give back a few hundred points. Stay tuned.

 

My Comments after Thursday (September 28):

 

Today, there were some issues that went up like AAPL and AKAM and some that did little. AKAM had one heck of a good day. Now mind you, the model has it pointing down. And so is life. While I have yet to apply version 3.5 to AKAM, I doubt that there will be a change in the current standings. Thus, at this point, AKAM owes the model a few dollars. And the Dow owes the model a few hundred points. I think we will see this happen. Stay tuned.

 

My Comments after Friday (September 29):

 

Last week was tough on the model because it has most of the issues pointing down while the markets were up 4 out of 5 days. The model does not believe in the current up move of the markets. Thus, I have to conclude that a new all time high is not in the cards for the current move. Maybe next time.

 

If we look at the current move, there are several possibilities for the upcoming days given that a portion of the current  move has already taken place. One is that the markets decline enough to make this a winning move. The other possibility is that the loss remains or increases and the model ends up with a sizeable loss. The final possibility is that the move will be a loser but by less than the current loss. I think it will be number 1 or number 3. I don’t think that number 2 will happen. In other words, I do not see the markets going up further to increase the outstanding losses.

 

October is here and I am not ready to begin ‘My Journey’. I am delaying it by a month. I want to have the 2006 record for each entity computed before I start. This is taking longer than I thought. In addition, I have been swamped with a number of other tasks to take care of. Such is life. Incidentally, I have implemented version 3.5 for GOOG (in addition to DIA and AAPL). I am pleased with the results. It is interesting to note that all 3 (even with version 3.5) are sporting sizeable losses for the current move at this time (Oct.1). What will happen – I don’t know. But, I don’t think this move will end with all 3 sporting losses. In fact, I will go out on the limb and state that all 3 will be profitable by the end.

 

My Comments after Monday (October 2):

 

Monday was a better day for the model. We had down moves in a number of issues that the model was looking to go down. One of note was AAPL. Another was QQQQ and yet another was WMT. My comments from Friday stand. For the issues that I’ve completed version 3.5 (AAPL, DIA and GOOG), I am looking forward to see how we will do with this move.

 

All the other issues are still being computed by version 3.0. To move to version 3.5, requires a fair amount of work. That is why it is taking long. I think the results are worth the wait. So be patient. Naturally, it is possible that when I do compute the results for version 3.5, there will be changes to some of the historical moves that I have posted in the past. But, that is the price to pay for progress.

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.

 

 

 

 

ETF                     Forecast

 

DIA        Direction: DOWN   Started on Wednesday, September 6    Days Remaining: 15  (decrease of 1)

              Starting Price:  114.14        Current Price:  116.62       Loss:  2.48

Dow Industrials Fund (DIA) is in a DOWN cycle. The length for DIA is computed by the model version 3.5 at 15 days. Stay tuned.

I have implemented version 3.5 for DIA (and AAPL and GOOG). As I said for AAPL, the results are exciting. Check them out.

CLICK HERE  --- to view the results for DIA as generated by the model (version 3.5) for 2006     [NEW]

 

 

SPY       Direction: DOWN   Started on Wednesday, September 6    Days Remaining: 11  (decrease of 5)

              Starting Price:  130.52        Current Price:  133.03       Loss:  2.51

S&P 500 Fund (SPY) is in a DOWN cycle. At this time, SPY is still sporting a large loss. So, what will happen. Keep watching.

 

QQQQ  Direction: DOWN   Started on Monday, August 21    Days Remaining: 7  (decrease of 2)

              Starting Price:  38.42        Current Price:  40.14       Loss: 1.72

NASDAQ 100 Fund (QQQQ) is in a DOWN cycle. QQQQ is now showing a large loss. Let’s see where the model will take us.

 

OIH        Direction: UP   Started on Monday, September 18    Days Remaining: 1  (decrease of 4)

              Starting Price:  129.33        Current Price:  126.15       Loss:  3.18

Oil Services Holders (OIH) is in an UP cycle. So OIH is up while the Dow is down. An interesting situation. However, OIH is about to flip to the down side on Tuesday. So we will have both the markets and oil services pointing down for a while. Stay tuned.

 

SMH      Direction: UP   Started on Tuesday, September 26    Days Remaining: 1  (decrease of 1)

              Starting Price:  34.38        Current Price:  34.08          Loss:  0.30

Semiconductors Holders (SMH) is in an UP cycle. But, the cycle is quite short and is about to reverse on Tuesday, so stay tuned.

 

IWM       Direction: DOWN   Started on Friday, September 29    Days Remaining: 4  (decrease of 3)

              Starting Price:  72.00        Current Price:  71.32        Profit:  0.68

Russell 2000 Index (IWM) today entered a DOWN cycle. The cycle is now only 4 days long. So keep watching.

 

OEX      Direction: DOWN   Started on Friday, September 22    Days Remaining: 13  (decrease of 2)

              Starting Price:  609.38        Current Price:  619.24       Loss:  9.86

S&P 100 Index (OEX) is in a DOWN cycle. OEX is now in line with the markets. But, it too is sporting a loss at this point. So, keep watching.

 

EWJ      Direction:  UP   Started on Tuesday, August 29    Days Remaining: 4  (decrease of 2)

              Starting Price:  13.75        Current Price:  13.68       Loss: 0.07

Japan Index (EWJ) is in an UP cycle. EWJ has battled back from a sizeable loss.

 

XLF       Direction: DOWN   Started on Thursday, September 7    Days Remaining: 9  (decrease of 3)

              Starting Price:  33.25        Current Price:  34.51       Loss:  1.26

Financial Sector Index (XLF) is in a DOWN cycle. The model now has a length of 9 days for XLF to reverse.

 

 

       

                  

 

 

Stock                  Forecast

 

AAPL    Direction: DOWN   Started on Monday, September 11    Days Remaining: 4  (decrease of 2)

              Starting Price:  72.50        Current Price:  74.86       Loss:  2.36

Apple Computer (AAPL) is in a DOWN cycle. So when will this AAPL move be profitable. Stay tuned. Let’s see where the model will take us on this move. Given the strong advance (not including today) by AAPL, it will be interesting.

I have implemented version 3.5 for AAPL. The results are exciting. Check them out.

CLICK HERE  --- to view the results for AAPL as generated by the model (version 3.5) for 2006     [NEW]

 

AKAM   Direction: DOWN   Started on Wednesday, September 20    Days Remaining: 10  (decrease of 1)

Starting Price:  46.17        Current Price:  49.83       Loss:  3.66

Akamai Technologies (AKAM) is in a DOWN cycle. Let’s see what is in store for AKAM. At this point the model is sporting a large loss. But, the game is not over yet. So, stay tuned.

CLICK HERE  --- to view the results for AKAM as generated by the model (version 3.0) for 2006 

 

ET         Direction: DOWN   Started on Thursday, September 21    Days Remaining: 8  (decrease of 1)

Starting Price:  24.40        Current Price:  23.82        Profit:  0.58

E-Trade (ET) is in a DOWN cycle. ET is now aligned with the markets. Stay tuned.

 

GOOG  Direction: DOWN   Started on Wednesday, September 20    Days Remaining: 6  (decrease of 3)

              Starting Price:  397.00        Current Price:  401.44        Loss:  4.44

Google (GOOG) is in a DOWN cycle. GOOG is showing a medium sized loss. But, where will it end. Stay tuned.

I have computed the results for GOOG for 2006 using model version 3.5. Click the link below to find out how they stack up.

CLICK HERE  --- to view the results for GOOG as generated by the model (version 3.0) for 2006     [NEW]

 

 

STX       Direction: DOWN   Started on Tuesday, September 5    Days Remaining: 11  (decrease of 1)

              Starting Price:  22.23        Current Price:  22.93       Loss:  0.70

Seagate Technology (STX) is in a DOWN cycle. STX is showing a big loss. So what will happen in the near term. Stay tuned.

 

WMT     Direction: DOWN   Started on Thursday, September 14    Days Remaining: 4  (decrease of 2)

Starting Price:  48.37        Current Price:  48.44       Loss:  0.07

Wal-Mart (WMT) is in a DOWN cycle. WMT is now moving to the up side in the near future.

 

 

 

 

SPECIAL SECTION (under construction)

 

 (How To) Grow Your Wealth Quickly

and, after I complete my objective,

Anyone Can Make a Million Quickly

 

Introduction

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.

 

My Target

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. 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.

 

Methodology

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.

 

Examples of Credit Spreads

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.

 

Food For Thought

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

 

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’.