EXPLANATION OF MY INDICATOR

Over the years, I have observed that while no two Bull or Bear markets are ever exactly alike, there are certain ingredients that must be present for them to form. Years ago as a young flight instructor  in the Air Force I taught Meteorology for a time. In the study of thunderstorms, it was obvious that there were a combination of factors that had to come together, for them to form. It wasn't just moisture in the air or moisture aloft at higher altitudes that was required, but also a source of lift. Air needed to be lifted, either by passing over a mountain  range by summer heating of the ground below, or a cold frontal system moving in under the existing warmer air. That combination, with a little help from unstable air and Zeus, the ruler of the celestial realm, usually caused cumulus clouds which then developed into thunderstorms. And then the thunder and lightning began !

While every schoolchild realizes that the future is not knowable, nonetheless some things are predictable, like the weather! Believe it or not, I've seen the figure of 93% used as to the correctness of weather forecasts.

The purpose of my Stock Market Major Trend Timing Indicator is to identify changes in the trend of price movements on the major stock averages. It has been said many times in Dean Witter publications that "the genius  of investing is recognizing the direction of a trend - not catching the highs or lows". Neither the duration nor the extent of the move can be predicted in advance. None of the input that goes into my indicator is from forecasts, all is from existing printed public information.

I would like to give Dean Witter credit for believing in investment timing as evidenced in their 1975 booklet "Will COMPARE improve Your Sense of Timing?: "Dean Witter believes timing - knowing when to buy and when to sell - is one of the most important factors in any investment decision".

But Dean Witter was not the first to believe in timing. Over 50 years ago, in 1945, an advertisement by Merrill Lynch, Pierce, Fenner & Beane stated "With world-shaking events a commonplace many an investor seeks an investment guidepost, realizes now more than ever that when to buy ranks equally in importance with what to buy. Too, wise investors also know that no security today can be bought and forgotten, that successful investment practice requires keen judgment in timing sales as well as purchases".

I think it is important to point out that the historical record shown here is not a ˜live" record all the way back to 1953 for the following reasons: The statistics I use in the Schannep Timing Indicator were not made available until 1968.  The first index fund was not introduced until 1976, after which it WAS possible to 'buy  the market' and seek returns like those listed here.  I was not able to produce daily calculations used in the ˜capitulation" and the Schannep Timing Indicators until 1984.  Capitulation was not an original component but was added in the 1990's.  Likewise, the definitions of "Bull and Bear" have been added as a part of this indicator since the publication of my book The Dow Theory for the 21st Century in 2008.  Capitulation has been a 'pre-buy' indicator for many years and is used to start accumulating a position in the stock market before the Schannep Timing Indicator is completed.  My definition of "Bear" is used as a safety valve stop-loss level in the event the components for a Schannep Sell had not yet come together.  Conversely, if my definition of "Bull" is attained before the Schannep Timing Indicator completes its Buy signal, then its signal is used to complete a Buy signal.  For more information on these definitions click on "Bull & Bear" at the top of this page.

As data became available on a more timely basis from the Federal Reserve Board and I was able to generate the necessary calculations on my own computer, I have streamlined, refined and made my Indicator more time responsive than its rudimentary start in 1969 (earlier posted results are from back-testing). While  the makeup of my Indicator is proprietary, nonetheless it is not subject to individual interpretation such as is The Dow Theory. My C.P.A. is privy to my Indicator's very specific construction and had no trouble certifying its signal dates without contradiction with my own interpretation.  Dividends received and interest earned on 3 month Treasuries are added in as received quarterly or at the appropriate dates in the results shown, with dividends reinvested. Furthermore, the account is rebalanced according to the listed percent invested as each signal is received.  My thanks to Tom Halgren, a subscriber with a computer capability that escapes me, for calculating these results. He and I believe this/his calculation is as true and correct as is possible to construct.  Following the rules for this Indicator explicitly would have resulted in the record show. 

The Note column identifies what caused the signal:
1 = Regular Schannep Timing Indicator Buy signal
2 = Regular Schannep Timing Indicator Sell signal
3 = Capitulation
4 = A second Capitulation
5 = Definition of a Bull market met
6 = Definition of a Bear market met

The dates and market levels through 1998 are shown in the CPA verification for my Timing Indicator.  Since that time they have been published publicly.

Further updates are available for Subscribers only.