Winning on Wall Street

张玉 · 发表于 2009-12-16 13:17

• A bear market has a drop of at least 20%
• Shun the idea of buy and hold
• Analysts cannot consistently predict earnings
• Mutual funds and other institutions as a group have failed to beat the broad market averages over the years regardless of their methods
• Charting and relative strength don’t predict any better than pure chance
• Expensive and lengthy research reports from brokerage houses fail to pin point stocks that outperform the broad market
• The major direction of the market is dominated by monetary considerations and the movement of interest rates
• Never fight the tape
• Use fundamentals for 90% of stock selection but only 10% for predicting the market as a whole
• The stock should react well relative to the market before I buy it.
• Buy when the probability  is the greatest that the market is going to advance.
• Put in a stop at 10 to 20% below the current market price.
• In the long run probabilities favor using stops.
• To succeed in the market you must have discipline, flexibility and patience.  You have to wait for the tape to give its message before you buy or sell.
• Committee decisions are mediocre.
• Buy on strength and sell on weakness.
• In playing the market, remember you must deal with probabilities, employ sensible strategies to limit risk and get aggressive only when conditions warrant
• Don’t fight the Fed
• When interest rates are rising the markets go down and  the reverse is true too.
• Buy on any initial cut in the prime rate if the prime peak was less than 8%
• If the prime rate peak is 8% or higher, a buy signal comes on either the second of two cuts or on a full 1% cut in the rate.
• Sell on any initial hike in the prime rate if the prime rate’s low is 8% or greater.
• Sell if the prime rate’s low is less than 8% and it is the second of two hikes or a full jump in the rate.
• Fed Indicator:
• Grade discount rate and reserve requirements separately.  Then their scores are combined.
• A hike in the discount rate or reserve requirements receives minus one point for that component of the fed indicator.  It would also wipe out any positive points that might have been there at the time.  The negative point remains for six months and is then discarded
• An initial cut in either two wipes out any negative points that may have accumulated and also kicks in two positive points.  An initial cut is the first one following a rise in that component or a cut is initial if it marks the first change in the instrument in at least two years.  Lose a point if nothing happens in the first 6 months and lose the second point after a year.  If a second reduction were made in the discount rate, it would add one more point and would stale six months later.
• Merely add the scores together – normal range – minus 5 to plus 7
• Extremely bullish +2 or more
• Neutral 0 or +1
• Mildly bearish –1 or –2
• Extremely bearish –3 or more
• Installment debt Indicator
• When demand for loans rises excessively, it puts upward pressures on interest rates.
• The year to year percentage change in installment debt is the only calculation one has to make with this indicator.
• 9% is the key indicator.
• A buy signal is given when the year to year change in installment debt has been falling and drops under 9%.  A sell signal comes when the change hits 9% or more when its been rising.

• Monetary Model
• This model is merely the addition of all model points.  The maximum score is 8.  You can never hit 7.  Add the Prime Rate Indicator, Fed  Indicator and the Installment Indicator together.
• When the monetary model hits six, it trips a buy signal that remains in effect until the model falls to 2 at which point it flashes a sell and stays their until it goes to 6 again.
• Another way to use this is:  When at 4 be 50% invested, at 5  65% invested and at 6 @ 80% invested and at 8 @ 100% invested.  In the other direction 3 =40% invested, 2 = 25% , 1 = 10% and at zero = 0% invested.
• The stock market is no place to be when monetary conditions are hostile.
•
• Momentum Indicators
• Strength does indeed lead to greater strength.
• One of the frustrating things for people who miss the first rally  in a bull market is that they wait for the big correction and it never comes.

• Advance/Decline Indicator
• Use a 10 day a/d line
• If the 10 day A/D is greater than 2  then the markets momentum is strong.
• If the tape can’t ignite then the conditions are not right.

• Up Volume Indicator
• Up volume to down volume
• Ignore volume for unchanged stocks
• When up volume is greater than 9:1 it is a significant  sign of positive momentum.
• The down side is not as good an indicator.
• Two 9:1 days within 3 months is significant especially if there are no 9:1 down days in between

• The Four Percent Model Indicator
• Designed to hold you in the trend
• Buy if the weekly close on the  Value Line index is up 4% and sell if its down 4%

• Super Model – the only model you will ever need.
• If the 4% model is in a buy situation, assign it 2 points, when it is in a sell mode assign zero points.  Then add the respective points to the Monetary Model
• When the super model reaches 6 points buy and be 100% invested, When the model drops to 3 a sell signal is given and you should move to 100% cash.
• Adapt your percentages to fit your risk levels.

• The best gains tend to come in the first 6 months of a new bull market.
• Investment Advisors ratio –when below 40 % this is bullish, when it hits 75% its bearish.  Use a 13 week smoothing curve.
• Secondary Offerings – drop to below ten per month on a three month average, things are bullish.  If monetary conditions are negative then let it drop to 3 per month. If it goes to thirty then it is bearish and to 15 in negative monetary conditions

Seasonal Indicators;

• Price trends near holidays are extraordinarily bullish.
• New Years and Labor Day are the most averaging 87%
• After Xmas and thanksgiving is very bullish as well. So buy before the holiday and hold for a day or two after.
• Monday has a slightly down bias.  If you are going to buy wait until Tuesday.
• Friday has a slight upward bias – people feel better on Friday than they do on Monday. Sell if you must late Friday.
• Monthly strategy – Buy at the end of May and sell after Labor  Day.  Best month is December, January, November, March, April, July and August.  Down months are September and February.
• Markets are generally stronger the last three days of the month and the first 6 days of the following month.
• Pre-election years gain 70% of the time.  Election year is second best.  The market does decline in the year after an election.
• Tax loss buy strategy.  In mid December buy stocks hitting new lows and sell them at the end of January.

Bull and Bear Markets

• The existence of a 2 to 1 advance/decline figure for ten days is the first condition necessary to herald a bull market.
• The Fed Indicator(see previously) must go from zero or less to a plus three – second condition necessary.
• Most of the gains in the market have occurred in the 18 month time span immediately after these two indicators took place.
• Bear market – a decline of at least 15% in the DJII, S&P 500 and the Value Line Index – it must be in all three!!!
• Bear markets have at least one of the following three:
• Extreme deflation  e.g. A drop of at least 10% in the producer price index in six months.
• Ultra high price earnings ratios – e.g.  S&P500 greater than 18, DJII greater than 20.  The exception is during a severe business downturn, when corporate profits have been hacked so low that p/e ratios are high only because earnings are down.
• An inverted yield curve measured on a monthly basis.  A month or two means little but if the spread between commercial paper rates and bond yields keeps widening in  a negative direction, look out.

Picking Winners

• This system will have three losers in eight.
1. Obtain latest quarterly figures.
2. Look for reasonable growth in both e.p.s. and revenues from last year to this –doubles are nice
3. If the stock drops the day of the earnings report, ignore it as those shares will under perform for the next one or two quarters.  Rotten price action on an earnings report no matter how good it looks is the kiss of death.
4. Stocks with low p/e’s out perform stocks with high p/e’s in the long term, not necessarily in the short term. So avoid high p/e’s
5. Earnings growth should be higher than the p/e is by a substantial amount or the stock may be subject to extreme volatility(probably negative)
6. Low p/e’s are also dangerous if they stay in the 3,4,5 range for any length of time – the company will under perform for the next year or two.
7. If the market p/e is 10, I will buy a stock up to12 or 13 times
8. If a stock has excellent growth and a low p/e, I get suspicious.
9. Eliminate any stock not keeping pace with the market, is wallowing at a low or is in an obvious downtrend.
10. Watch for breakouts from an accumulation pattern – positive. Or from long basing periods.
11. Watch for a clear up trend and buy on 5 and 10% pullbacks where there is a series of higher highs and the pull backs do not come down below previous lows.
12. Better performing industries have better performing stocks.
13. Do not pick stocks for 5 or 10 % gains as they are not worth the risk.
14. If insiders are selling the stock on a net basis big time – avoid the stock.  If they are buying – buy.
15. Insiders selling with high p/e’s is deadly.
16. Use stops on all trades.
17. Set stops at 10 to 20% below purchase price or set it just below a previous low when the market is moving up.
18. Never worry about taking a good loss – one that gets you out automatically.

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