Hi Schippi,

 

Thanks for your weekly market comments and data. I too am in the 2x long

ETF's (R2000 and NDX) and expecting a return to the market decline. What

indicators do you use to determine that the market has peaked?

 

.............................................................................................................

Bill,

  I think the daily short term CCP charts provide a multi-dimensional picture of the market state. (ie) When the top CCP sectors are displaying chaotic waves, it’s best to stand aside and prepare for the next move Up or Down.

 

  While this approach will keep you in synch with market it is always best to chart you current long, short positions. I have found that over the years it is best to monitor the stocks with Hurst envelops or a group of EMAs. Another powerful tool for market timing is the use of divergence. Change of state warning signals can come from comparing the stock or fund you are holding to chart indicators or with market indices.  Another device I use for quick exits is to monitor the daily percentage change of the issue I’m holding and when it exceeds it’s 3-sigma standard deviation over the past 120 days I will exit the position and stay away from that issue for a while. After Hurst and groups of EMAs my favorite indicators are the RSI, Slow Stochastic and Wilders DMI.

              Hope this helps

                     Schippi

Hope this helps

Schippi
 

Derk Email reply ( 03/30/07 )

Derek,
I continue to use Fidelity's sectors to identify the overall market trend and also to determine the current top sectors. I will usually drill down to find the best stocks or ETFs in the top sectors. So most of the time my positions are in stocks and ETFs. However, I would not hesitate to purchase the top long term sectors when market conditions are favorable.

Good Trading,    
     Schippi
.............................................................................................................

Hi Schippi,
Fidelity has terminated short term (30 day) trading in
the Select funds and only four trades per year are
permitted. How has this changed your investment in
the sector funds?
Thank you,
Derek
 

Mark Email reply ( 03/14/07 )

Mark,
      Because their is so much noise in the daily sector closing values, the text book derivative computation is almost worthless. (ie) mathematical derivatives are really only defined for "nice" ( smooth functions ).  Therefore when dealing with stochastic functions something else is required. Presently in the CCP tables the derivative and acceleration values are computed independently from the CCP sector ranking.

     The CCP sector ranking is based on a proprietary optimization technique that I derived. An estimate of the stochastic derivatives are obtained from a separate regression type process. 

                                      Hope this helps

                                               Schippi
 

Mark Email reply ( 12/17/06 )

Mark,

First of all I do not make recommendations. I try to present tables and charts which display those sectors which have the maximum gain per unit risk. These sectors should be the safest and produce the best gains. These tables are located at:
http://www.selectsectors.com/ccp.htm

Again, each individual investor must make and be responsible for their own investment decisions. I provide information which I hope will facilitate this process. About your phone call request, I do not hear very well and Email is the best form of communication. I will attempt to answer your questions to the best of my ability.

Take Care and enjoy the Holiday

Schippi

( 7/28/06) Shorting Brokerage?

Richard, I have been an active investor for over 25 years and I am not trying to be argumentive, but rather asking an "honest" question.

Presently I am long brokerage stocks and scoring good gains. The Brokerage Fund(FSLBX) displays a well defined "Double Bottom" and a "Breakout" with plenty of room to run to the Upside.

Yet you are advising "short positions". We are obviously on different pages, but why?

Respectively Schippi

( 7/23/06 ) Schippi Note

The termination of Fidelity's hourly NAV data, for the Select Sectors, does not preclude these sectors from be useful investment vehicles. Comparison of Select Sectors with corresponding ETfs, Holders, PowerShares, etc. show that Fidelity's Sectors usually enjoy superior performance, which I attribute to their active management. (ie) many ETFs, Holders are a collection of old or dated stocks.

I ran the Cruise Control Portfolios( CCP ) with just daily NAVs and the results appear to be satisfactory. This might suggest that the hourly NAVs contain mostly just "noise".

From a charting viewpoint, hourly candle charts, hourly ribbon charts will no longer be defined and this will be a loss, but it's not the end of the world. The sector daily NAVs will still provide a useful set of Indicators.

...........................Schippi

Professor Sornette ( 07/14/06)

Again thank you for sharing your work with the investment community. Below is URL that applies one of your equations to the S&P 500, NASDAQ Composite, and the XAU Gold/Silver Index, including a 100 day extrapolation. They appear to be a good representations for these markets.

http://selectsectors.com/sornette.htm

........Respectively
............... Schippi

Jim Email reply ( 04/02/06 )

Jim, Glad you enjoy my web site as I put a lot of hard work into it. Sornette's web page links are no longer active and I suspect he has abandoned them as his predictions did not work out.

However, I continue to use his equations as I think they are useful. For example his bubble equation and prediction when applied to Select Gold(FSAGX) is spectacular.

Stated another way, his bubble equations did not work as he expected when applied to market indices (eg SP500 ). However, I find they are quite useful when applied to sectors. I communicated these useful sector results to him, but I received no reply.

About your question "Are you a pastor?", the answer is no, but I am a servant of the Lord. Also I am quite pleased that you would ask such a question.

Good Trading, Schippi

Carl Email Reply ( 03/19/06)
Carl, Thanks for the stock info. Presently I'm trying to evaluate Sectors Vs Stocks. I have concluded that stock exposure is desirable when a strong market trend is present, otherwise speaking for myself, cash or sectors is a better risk adjusted proposition.

I am currently focusing on what has a strong long term trend. For example Brokerage (FSLBX ) shows up at the top of the 125 & 250 day CCP table. This is very graphic evidence of a strong trend. Comparing the chart of FSLBX with brokerage stocks I find Etrade (ET) to greatly outperform this sector, so I continue to hold it. Also, stocks demand a great deal of attention and effort and tend to interfere with my lifestyle.

Don Email Reply ( 03/03/06 )
Don, Enjoyed your email and agree with your comments. Entry and exits can be difficult. Also, as you pointed, stocks can be more volatile than Sectors.

About the entry points, what works for me, is to wait for a sector or stock to break out. This breakout may be from a long sleep ( no action ) or a breakout above a long sideways trading channel. Once I have established a position I will track it using StockCharts.com selecting The RSI, SAR, 10 & 20 day EMA and DMI/ADX charting options. I also compare all my positions using StockCharts PERF charts so I can identify what positions are working.

It is important to be certain of the current overall market direction and to establish positions only when the Market is moving UP. The charts of the Major Indices, $ndx, $spx, $nya or my SSx index based on a composite of all 41 sectors will reveal the Market direction.

Don't be overly concerned with the fine details of entries and exits. Just concentrate on banking a good portion of the move Up.
Good Trading Schippi

Thomas Email Reply ( 01/12/06 )
Thomas, enjoyed your letter and am quite envious of anyone so young and so focused, I'm delighted you find my web page useful, as it was intended to try to help people. About the McClellan Oscillator and Summation index, I applied both to the SelectSectors years ago but then discarded this approach for what is on the web page currently. I will try and dig this code up and review it and will let you know if I find anything worthwhile.

For investing purposes, I would like to make some comments, in order to establish a framework of where I'm coming from. First of all, presently I use SelectSectors only to identify the best risk adjusted sectors. What distinguishes my charts from what exist in the public domain is that all my charts are in percent, and the selection strategy looks beyond "Gain" to include "Gain per unit Risk".

With the best risk-adjusted sectors identified, I then drill down and try to find the best underlying stocks. So far this approach has greatly outperformed any of the top sectors and additionally circumvents Fidelity's onerous short term fees.

The downside to this approach is that you have to contend with what is known as " Single-Stock-Risk". (ie) Where a stock goes up week after week for a very long time and then without notice severely drops in a single day. The only mechanism of defense here is to have a well defined exit strategy and be prepared to act on it. Overall this underlying stock approach to the top sectors is more work and probably not for everyone.

About using hourly sector NAV data. This data can be
downloaded from fidelity via
http://activequote.fidelity.com/nav/select.phtml
However, this data has to be corrected for the total dividends when they are paid out, otherwise large jumps occur in the charts when say for example Health pays out a $10 total dividend. Fidelity's web page has contained gross errors and in my opinion must be run by children. I have complained to them numerous times, but to no avail.

In brief it's a nightmarish task to provide continuos hourly charts and I doubt my sanity for doing so. Perhaps more to the point after long and comprehensive technical analysis of these hourly charts, very little if anything is gained relative to just using daily NAV prices.

About the parameters for the Hurst Oscillator, my work on Hurst charts is developmental, as Hurst to my knowledge did not leave us with a single equation. Also this is something I developed and perhaps should not have attached the Hurst name to it. However, I did so as his work greatly influenced my thinking. In any event I consider this process to be proprietary.
Good Trading, Schippi

Carl email reply: ( 10/23/05 )

Carl, sometime ago I wrote some code, called Total Stochastic Ranking ( TSR ). I ran that code using current data to see how it compared with the current CCP tables. I was pleased to find that the 1st, 2nd and 3rd places in the TSR table corresponded to the 1st place in the 250 day CCP table, 1st place in the 125 CCP table and 1st place in the 30 day table.

I am of the opinion that core fund positions should include the top 125 and 250 day CCP tables. The shorter 15 and 30 day CCP tables seem to be best adapted to short term swing trading. I have also concluded that the 15 day CCP chart provides a very accurate estimate of the investing climate.

The chaos of the recent charts coupled with all negative entries corresponds exactly with the current Double Red Market Alert.

Jim email question ( 7/28/05)

Jim, glad you ordered J. M. Hurst's book, I will be surprised if you don't enjoy it. The URL http://www.selectsectors.com/ssweekly.htm displays both a variation of Hurst envelopes and Sornette's bubble equations. I have two working models of Hurst envelopes so the these charts change form and depend on market dynamics.

The short term CCP tables point you to what is currently moving up in the market. The longer term CCP tables include a longer time frame may produce some great but slow moving sectors. An important feature of the tables is when a particular sector is at the top of several CCP tables. This is equivalent to multiple filtering and points to a really strong sector. Good Trading

Sandro email question ( 6/17/05 )

Sandro, I'm glad you enjoy my web page as I put a lot of hard work into it. About performance figures, sorry I do not compile performance figures on the Cruise Control Portfolios( CCP ).

However an indirect comment is that the original method " Maximum Gain Per Unit Risk" , I authored some 20 years ago, was recently described in Stocks & Commodities magazine as having a 31% average annual gain over a thirteen year span( 1990 - 2002).

The current CCP has a superior mathematical structure and avoids the pitfalls of the older approach.

Best Regards Schippi
(Technical Analysis of Stocks & Commodities, Trading Sector Funds Using Statistics, October,2004, Pages 82,88 )

Suresh email question ( 5/15/05)

Suresh, With regard to your question: " Your observation that fsagx is now in a collapsing mode appears to be opposite to Prof. Sornette's model. Which one should be believed? "

I think both may be believed, (ie) Gold short term looks like Niagara Falls, yet longer term Gold seems destined to rise, because the U.S.Dollar is just fiat and history reveals that all "paper currencies have failed".
Best Regards Schippi

Bill e-mail question ( 4/24/05 )
Hello Bill,
Historically I have relied on the NYSE and Nasdaq Indicators to reveal the health of the Equity Market. More recently, although I still monitor these classic indicators as a rough barometer of market conditions, I now rely more on the indicators I have developed by combining the hourly NAV changes in all 41 Fidelity Sectors.

For example the Select Sectors Hurst and Internal strength charts. I think these indicators are more reliable because the Major Market Indices have a lot of dead baggage in them, whereas the Sectors are actively managed and present a cleaner and more robust picture. Going forward I am developing code that will perform the SelectSectors Indices computation on an hourly basis. I strongly believe this hourly data when combined with the Big Picture data will put us out in front of anything in the public market place.

With regard to your question, First of all, if only 3 Sectors post positive gains, it is very clear the vast majority is in trouble and I will hold only the strongest sectors and reduce position size so the majority of my investment funds will be in cash. I will monitor and handle my International holdings on an individual basis, but expect them to be highly correlated to the U.S. Equity Market. I will also take on Rydex short positions from time to time, but trading these inverse funds is almost like day trading and in general much more difficult and probably not appropriate for most casual investors.
Best Regards Schippi

MKY Email Question ( 03/17/05),

I would suggest you trash the newsletter you referenced. We will never see cheap oil again. As for Gold, if you read the history of fiat currencies you will discover that every paper currency has failed.

Do you remember what happened in Mexico about 5 years ago, then all of South East Asia, Russia, Argentina and the list goes on. In contrast you will find Gold has held it value throughout all of recorded history.

As for the U.S. Dollar decline being a hoax, just check out the chart of the U.S. Dollar Index, It looks like Niagara Falls. However, it is a certainty that we will experience painful corrections in both energy and Gold. But eventually I think both will continue Up.

As I previously stated Energy and Gold are not in an ordinary rally but are undergoing structural change, where historical prices from one level transition to a new level.
Best Regards Schippi

Email Reply ( 1/03/05)
Hello Dave,
The Major Indices have had a Big move Up. Jumping in now would not be advisable as you would be chasing the Market, which usually works against you. The Nasdaq100 is displaying a sideways or topping motion. Any investor needs to monitor this, as this index usually leads the Market on both Up and Down legs.

Another consideration is that a market correction will probably lead to Sector rotation, so a new sector trend may emerge. Since this may be short lived, it would be best to use a Rydex Sectors or Indexes to avoid Fidelity's short term exchange fees. Yes I agree with you, (ie) If you do enter late in a established market trend, the very short term regression table would be expected to produce the best results. I might go a step further and pick a sector that has just popped up to the top of the regression list.

You also asked about performance. I do a lot of trading and have many portfolios and it's difficult to quantify all these trades. Also, I'm not sure percentage gains tells the real story. For example if I make 10% on a trade and someone else in the same time frame makes 15%, has he necessarily done better? You have to take the amount of risk into the equation. For example if he had twice my risk, I would consider my trade to be superior.
Best Regards Schippi

Mike Email Question: ( 11/08/04 )

Mike, I have not posted portfolio positions for some time. This web page has always been an information only page and not an advisory service. In the past I posted some portfolio positions in an attempt to demonstrate what kind of results could be obtained via the risk adjusted regression tables.

Posting meaningful portfolios is quite difficult, as there are all kinds of investors. (ie) day-traders, swing-traders, position-traders etc.
Best Regards Schippi

TJ Email Question: ( 11/08/04 )

TJ, About your " surprise minimum and subsequent rally Up " question.

Regardless of which Sector or stock you look at it's price charts is filled with random, but slightly correlated up and down points. This randomness makes chart reading difficult so moving averages and other filters are employed to smooth the data. The normal or everdyay moving averages that the financial press reports all have delays associated with them which cause you to be then late buying and late selling.

Much of my chart work is based on zero phase filters that have "zero delays" . However, these type of filters do not do well at the end points and some type of end-point constraint must be imposed. In running the programs that generate my charts, numerous intermediate charts are produced. Since I have received complaints about having too many charts on my web page I do not post them.

These intermediate charts are drawn in "filter space" and not the usual "price space". The extreme points ( minimums and maximums ) on these filter charts are mathematically exact. When such an extreme point presents itself you know that a Sector or Market turn is at hand. However, these extremes do not forecast the magnitude of the Up or Down move. This requires other info.
Hope this helps
Best Regards, Schippi

David wrote: ( 9/07/04 )
Schippi,
I really appreciate your site and use it daily as one source of "total market barometer". Thanks!

Could you provide your rationale as to why you prefer to use Hurst Envelopes instead of Bollinger Bands? Thanks

David, Thanks for the kind remarks about my web page. I put a lot of work into it, so it is gratifying to hear you find it useful.

About J. M. Hurst, his developmental work with envelopes provides a basis for market prediction. All other methods I know of basically attempt to just determine the current market conditions.

Presently I am using his work as starting point and many of my charts are not strictly Hurst charts, but variations on his basic ideas. They are a work in progress.

Speaking for myself, these type of charts really bring time vs price charts alive and perhaps more importantly, I have been dramatically more profitable using this methodology. Recommend you just enter "Hurst" into any search and checkout the references.
Best Regards, Schippi

Email Reply (7/13/04)
Hussman Strategic Growth Fund(HSGFX)

With HSGFX you can and will experience some short term dips. You have some choices.
1) Sell ( This would not be my choice )
2) Hedge ( ie ) Buy an inverse fund to protect your Long position. Rydex URSA fund ( RYURX ) is an inverse SP500 fund that has no load fees. Let say you buy a similar amount of this fund. If the market goes Down you win. If the market drives Up you win with HSGFX and sell RYURX. Basically this approach should keep you Market neutral during the rough spots.
3) Hold, This is OK but may not be as good as hedging. If you check out my web page, you will find that all the high Tech Indicators are RED and a High Tech sell signal has been posted. Also, if this high tech decline continues, it will drag down the rest of the equity market.
Hope this helps, Schippi.

Email Reply ( 5/05/04 )

Mark wrote: If the US dollar goes down, does that mean the international funds automatically go up? If so, what's the lag time between this cause and effect (leading indicator)? Thanks in advance. --Mark -----

Mark, I don't track international funds, so I have no comment about them. Looking backwards we had a clear inverse correlation between the US Dollar and Gold. Presently, exploiting this correlation becomes dicey as interest rates as forecasted by the Bond market are heading Up. However, my read of the $USD chart is that it once again failed at it's 200 day moving average. It was for this reason alone that I repurchased Gold ( FSAGX ). Best Regards Schippi

Email Reply ( 2/ 28/04) Questions about recent purchases

Bill wrote:
I agree with your purchase of FDFAX but FSPCX looks to be a bit of a risk at this point as indicators look to be rolling over (topping out) look at divergence of rsi vs price and MACD vs price,  but you never know.  Can you explain how you use your regression tables to determine the Buys / Sells?   Thanks for been so candid about your purchases and sales 
....................................................................................

Bill, Divergence can provide clues, but they can continue for a Long time. If the RSI was continuing Down, I would agree with you. However it is now pointing Up. So the recent dip may have been just a pause to refresh. The MACD is very popular but has severe limitations that the mainstream literature seems to ignore. I would suggest Wilder's DMI/ADX as better methodology.

The regression tables point you to both short and long term to those sectors that have the Best Gain to Risk ratios. At present the market ( except for some High Tech ) is going sideways and the long term regression table should be avoided, as you may buy right at the Top. The short term table attempts to identify those Sectors with emerging trends. But you must be prepared to sell as short term trends do not extrapolate well.
Hope This Helps Schippi

Email Reply (2/13 /04) Charges for non-Fidelity Funds

Bill, Yes, I have a Rydex account and trade from there. Fidelity, puts an ugly wrap on non-Fidelity funds you trade.

In particular it triples the exchange fees in dealing with outside funds, like U.S. Global. It's a very simple matter to transfer funds from IRA, rollovers etc.

You just fill out a one page form and include a bank signature stamp.
Call 1-800-820-0888 for Rydex fund info.
Hope this helps. Schippi

Email Reply ( 2/04/04)
Jane,           My Web page is for information only and is not set up to give investment advice. I work very hard in attempting to put in graphical form the current Market and Sector trends. This info is provided, with the hope, that it will help the individual investor make their own decisions.    

My take of the current Market situation is that we are at a point where a correction across all markets may occur. For this reason I have shorted the Market via the Rydex funds.

However, some Sectors continue to post large gains, (eg) Insurance, Medical Equipment. To be honest this presents a conflict. On the one hand, we have very reliable Indicators pointing to a Market decline, but a few Sectors continue to move Up. The question, of course is, do we play these Hot Sectors. So far I have not. But this choice is up to the individual investor.      
     Hope this helps     
           Best Regards                    Schippi

Email Reply ( 01/30/04) Sector Rotation

James, Yes, over the recent past, we have seen a great deal of Sector rotation and Yes, Sector exchanges do accumulate. I think this high rate Sector rotation sends a message. Namely, a market correction is near.

Presently, I have exchanged out of almost all sectors. I'm thinking about building a position that shorts the long bond, with Rydex's Juno fund. Also, I will short the market with Rydex's Arktos and Ursa funds whenever an opportunity presents itself.

Note that if you have an account with Rydex you can trade as often as you like, with no fees. However, most of their funds just have end-of-day pricing.

The Big question at present is, Yes there is a correction underway in the equity market, but will it just bounce Up from it's 50 day moving average as it has done so many times in the past.
Best Regards Schippi

Email Reply ( 01/18/04) New High Tech Index ( SSHTX )

Richard, The SSHTX Indicator in it's present rocketing Up phase implies that this is a very favorable investing climate for High Tech Issues.

To pick a High Tech Sector to ride this momentum:
1) go to SelectSector home page:
http://www.SelectSectors.com

2) At the top of the main page click on [HourCharts]
which is a tab on the main navigation bar. This will take you to a menu of all Sectors Hourly charts. By clicking on a line that contains High Tech Sectors, a group chart will come up.

I think you will be surprised as to how most High Tech Sectors have the same performance. Choose the Sector that has the best performance.
Then click on that Sector name at the top of the page for viewing it's long term performance. If both the short and long term charts look OK, this should be a proper Sector to ride.

Keep in mind Friday( 16 ) was an expiration day that could distort the Market, so the charts we are currently viewing may be slightly biased.
Hope this helps Schippi
Ps The above is for information only and not a recommendation.

Email Reply ( 01/16/04 )

Bob, Here is the current hourly SelectSectors Index Chart:
http://www.SelectSectors.com/ssindxhr.gif
The top chart shows a powerful ramp Up that has now transitioned into a choppy sideways motion. The below chart is my version of the DMI/ADX Indicator, note that it shows a clear crossover.

This is what I was trying to present on my web page. You of course score profits on powerful Up moves, but always want to be prepared to protect these profits. That was the point of the recent alert.

As for the fundamentals, in my opinion all the fundamentals of the world are simultaneously factored into the Market price.
Best Regards, Schippi

Email Reply ( 01/13/04 )

Mike Yes, Fidelity charges 0.75% for exchanges within 30 days. And yes these fees add up. But I have seen funds go down 5 or 6% in one day, only to be followed by big down moves the next day.

I have not really kept track of it, but I believe I have made more money by exchanging out whenever the situation presents itself.

Also, you can trade ETF's that correspond to Fidelity's Sectors for less fees, but I have found the performance of the ETF's to be inferior to Fidelity's Sectors.
Best Regards, Schippi

Email Reply 01/04/04

Mike, About performance, I really don't have a record. My web page is not an investment newsletter, rather I just try to post charts and info that I hope may be useful information.

The performance charts I post on the web site from time to time are merely intended to give a flavor of what you can do with Sectors. Also, I run numerous personal portfolios and it is not possible to sort them out as some sort of track record.

I suppose I could post an artificial example portfolio, but I thought it was more important to show where I was actually investing.
Best Regards, Schippi

Email to Traders.com (11/07/03)

Dave, Enjoyed your article in "Working Money" titled "Rising All The Way Down" You clearly described the positive attributes of the MACD. However, the Negative aspects of the MACD were omitted. I think it is very important, especially in article addressed to novice investors, that the MACD will give completely erroneous signals, in all time frames, when a sideways market condition is present.
Best Regards Schippi

Email Reply ( 11/02/03 )

James, Up front I want to make it clear that I don't have any great insight or expertize with other fund families. I do use Rydex and I strongly feel that you can use the dynamics of the Select Sectors to choose a sector and then purchase that Sector elsewhere, (eg) Rydex, Ishares, etc.

My main purpose in using Rydex is to score gains in a Down Market. There is no way that I know of, to do this with Fidelity funds from an IRA. You can transfer funds to Rydex by filling out their transfer form. It's very straight forward and just takes one or two weeks for the transfer to be complete. There are no service charges or penalties to do this.

A disadvantages of Rydex is that most of there funds and transactions use end-of-day-pricing or closing NAV for buy/sell orders. ETF funds are like stocks in that you can trade them all day long. I still think the hourly pricing is useful and have quite often, exited funds exactly at major turning points. Most of the time end-of-day pricing is OK, but there are some exceptions.

Always compare charts of the different fund families. (ie) Select Energy Service may be quite different than Rydex Energy Service. In general a lot of these Sectors are really nonsense as the fund manager is just using a sector index fund.
Hope this helps Best Regards Schippi

Carl, Thanks for your comments and article about the ADX. Yes, you have correctly identified one of my favorite Market Indicators. The bottom line of the StockCharts.com and BigCharts.com ADX article, is that the High, Low and Close are not available For Mutual Funds that record only the end of day NAV. Since the DMI/ADX computation require these values, This indicator is not defined for Mutual funds with only end of day pricing.

However, if you take out a sheet of paper and play with the DMI/ADX structure, it is easy to see that it is just a special case of a more generalized procedure. This generalization is what I have programmed. I have done this also for many other Indicators as well.

On the subject of Indicators, it is perhaps more important To point out that there are some serious FLAWS in some of the major Indicators. (eg)The media touts the MACD, yet it will always generate a strong SELL signal when the fund just trades in a sideways channel.
Best Regards Schippi ( 8/17/03)

Andre wrote: ( 08/07/2003 )
I am interested in using Profunds to do timing and sector trading Do you have a newsletter that summarizes your signals in Rydex, Fidelity and Profunds? I have been to select sectors.com but I am not sure where you indicate when a position is to be sold. ********************************************* Andre, Sorry I don't have any data or info about Profunds. I'm quite busy trying to keep tract of Fidelity and Rydex funds, just don't have time presently for Profunds.

About Buy/Sell signals My Web page has always been for information only and is not an advisory service. I do post some trades that I make, but again this is only what I'm up to and perceive as a proper trades and are not recommendations. Best Regards Schippi

Bish wrote: (07/29/2003 )
Dear Schippi,  I have been a silent reader of your web site and more recently a subscriber to your email "newsletter".  First I want to thank you for providing this service.  I really appreciate your analysis and quick links for more information.  Seems like it would take an awful lot of work to put this all together.

  Although I have lost more than I have made trading Select funds in the past three years, I still believe in playing sectors with part of my savings.  Most of my 10 years of investing experience is with Fidelity mutual funds in a 403b account.  The biggest benefit is I can avoid the 3% loads although I am still subject to short term fees and penalties.

  My question Schippi is how do you set up STOPS?  Can these be done directly on-line with fidelity?  I feel like I could have done much better if I had automatic stops since I cannot watch the funds hourly on a consistent basis.  If time permits I would be grateful to learn how you accomplish this.   Thanks again for what you are doing to help others.   Bish
...................................................................................
Bish,
Deeply bothers me that your account is Down over the past 3 years. In order to defend yourself you have to be able both Buy and Short the Equity Market. Rydex's Arktos ( inverse Nasdaq100) and Ursa ( Inverse S&P500) are appropriate vehicles.

Fidelity does not provide "stops" on any of the Fidelity Sector Funds. I agree with you that it would help if they did. I realize you spoke of a 403b account which limits your investment choices, but in order to survive in the Market you have to be able to trade Up as well as Down.

If you do not have the time or interest to consistently track the funds, I would suggest you stay away from the High Volatility sectors such as, BioTech, Energy-Service, Gold, (ie) any sector with a high standard deviation ( see Regression Tables ) I would also suggest that when an Uptrend / Downtrend occurs you employ the 10 and 20 day EMA crossovers detailed under the Timing link on the navigation bar for Sector switching.
Best Regards Schippi

Michael wrote:( 07/28/200)
Hi, two thoughts; #1. is a plausible scenario that the stock market keeps showing resilience on the hopes that saddam will soon be killed/captured, and then if he is, the S&P rockets above 1015, blowing out many Shorts, turning scads of technical indicators bullish, and THEN is a great opportunity to go SHORT ??? .................................................................................................... Michael, I think your #1 scenario is quite on target. " Market Shock Value" for the JFK assassination was -2.8% and of very short duration. This is the magnitude I would expect for Sa-ddam's demise. ............................................................  

#2. Visited your site over the weekend, and looked at the McClellen graphs which         (it seems to me) has clearly had a bearish prognosis for many weeks now.         Question Is there any point in time, when a historically trusted indicator does   not seem to be working out, that you begin to consider that fact, in and of itself,         is now actually an indicator for the opposite direction ?? .............................................................

Michael, Some comments about the current behavior of the Summation Index. The SP500($SPX) chart shows the index confined to a plus and minus two percent range over 35 market days. In this time interval each new peak value is LESS than it's predecessor. The 35 market days preceding this sideways channel, produced a 10% gain with each peak value GREATER than it's predecessor. This is clearly a trend change as indicated by the Summation index.

The NASDAQ composite is much more difficult to interpret as it presently has a head and shoulders formation, which is unusual for the Summation Index. The price chart shows each move up is followed by a collapse, but then a miraculous recovery occurs. However, the current price is BELOW it's previous peak, so at the moment the Summation Index is still not telling lies. The real power of the summation Index occurs when there is wide spacing between points.
Best Regards, Schippi

James wrote: ( 7/02/03 )
Schippi: In spite of your warning, the market appears to be going up. Is this temporary situation, you think or your prediction is not panning out? Hope to hear your comment on this very subject. Thank you!
.........................................................
James, Coincident with the Summation Sell signal we did experience an Equity decline. Yesterday (7/01/03)morning the Market was Down BIG but turned around and finished Up for the day. This is a classic candlestick Hammer chart Buy signal. This Rally of course continued today. The question in my mind; "Is this new rally just going to form a Double Top from which a swan dive into Sep-Oct low, will occur?".

Don wrote: ( 05/29/2003 ) Subject: Regression Tables
Dear Schippi I'm a first time visitor to your site. Your  math prowess as well as your  willingness to share your analysis with others is really impressive. Other than  the most simplistic expressions, math is not best subject. However, I have noticed the relationship between price and regression on stock charts and am interested in learning more about the specific Gain/Risk and 2*std calculations you use. ie is G/R 16.08 a good number for Utilities; a very good number etc. Is there an explanation of same somewhere on your site? Thank you, Don
........................................................................................................................
Hello, There is a ton of reference material on the FAQS page. The hot link to the FAQS page is located on the navigation bar near the top of the Main page. About the Regression tables. They are most useful when an Up trend is occurring. The indicator page attempts to ascertain the current Up or Down status of the Market. Assuming the indicators are mostly Green then the regression tables are useful. Selecting the Top of the table should produce the best results. However, in a Down Market, when the Indicators are mostly Red, the Regression Table should not be used. An alternate market strategy is necessary. The Rydex fund family offers funds that short the Market, (eg) ARKTOS and URSA and are good vehicles for a Down Market. Regression and Gain to Risk ratios will indicate the safest fund to employ for an Up trend. However, you should always verify the best regression fund by charting the fund for short, medium and long term time frames.
Hope this helps, Schippi

Question from Carl ( 2/4/03 )
Subject: Re: Question on Protective and Trailing Stops with Fidelity Select Funds

Carl The main intent of the paragraph you referred to is: When you purchase a Sector or stock you must have an exit strategy. The ideal exit strategy prevents big losses and keeps you in for most of the trend. You have to shape the exit strategy to suit the current fund dynamics.

For example recently Energy Service has been moving Up and Down like a Yo-Yo. One could day trade this by keeping close trailing stops. On the other hand Gold is in a long term trend and you could stay in the fund until a strong moving average crossover occurs. Several moving average crossovers examples are presented on the Timing page.

For hourly fund NAV data enter : http://activequote.fidelity.com/nav/select.phtml this will bring up the current hourly NAVs for all the Select funds. If you click on the fund description on the left of the screen, it will bring up a profile of that fund. On the same line if you click on the funds trading symbol (eg) FSAGX it will bring up a small window that shows the hourly NAVs and includes the change in percentage form. Most of the time big changes are posted at the beginning and end of the trading day.

The regression tables post 2 * standard deviation (std) for the top Sectors hourly change in percentage form. I have seen too many funds / stocks that move Up and Up for a very long time and then suddenly collapse. For this situation if an hourly percentage change is posted that greatly exceeds the 2STD, I will exit the Sector.
Hope this helps, Schippi

Jeanie wrote: ( 1/26/03 )
Dear Mr. Schippi, Do you feel it would be prudent just to buy gold on monday and hold it for a few years, or should I try to get in on Monday and watch when you say to get out? (I do check your site daily) I got burned on gold this summer by not following your advice. (won't do that again)
Jeanine

..........................................................................................
Jeanie
I have all sorts of mathematical credentials, but I am not a financial advisor. I try very hard to provide info on my web page so that each investor may make their own decisions.

However, I usually post exchanges for some of my accounts. These buy/sell are not recommendations but just merely a record of some of my actual trades. I post them because sometimes actions speak louder than words.

With the above in mind, here are a few Gold comments. Gold presently is going straight Up. This is clearly not sustainable. The dilemma is that the current gains are large but a blow off top or correction lies ahead. How does one navigate this? In a Fidelity account you pay penalties for short term exchanges. This is why I am currently suggesting that transferring or opening an account with Rydex is the way go. With Rydex you can exchange as often as you like with no fees or penalties. This is also true for ProFunds.

This leads to the question of " when do I make an exchange?", If you click on the Timing Tab on my web page, you will find many examples and info about when to switch to the money fund for safety. For a quick and easy method for exiting a sustained trend, don't look at the daily fund data on the chart, and concentrate on the spread between the moving averages. The spread will narrow in advance of an impending sell signal and then finally generate a moving average crossover. Once a crossover occurs you are at risk in holding a position.

There are basically two ways this can occur. The fund data along with the moving averages can all move sideways and approach a single point. There is very little info in this type of crossover. The second type of crossover is there is an abrupt drop in the fund and a steep crossover occurs. You are at risk if you ignore this signal.

Also, you have some advance warning when the fund data is much higher than the moving averages. I think of this as an air pocket beneath the fund data and expect it to decline back to the moving average level, which sometimes can be a substantial correction.

The best Gold Indicator is to monitor the US dollar index. Be sure to do this for different time scales, (ie) monitor daily, weekly, monthly US Dollar charts.
Hope some of this helps
May the Lord be with you
Schippi

Bill wrote: ( 12/14/2002 )

Greetings Schippi,
  Did you go back into gold on the afternoon of Dec. 4 or Dec. 10?  Was the decision based on a projected ADX chart near the close of a day?   I chickened out on the Dec. 8 drop and a false interpretation of a brief dollar upward movement.  I appreciate your sharing of your work and thoughts.   Bill  

Bill, About my Gold position, first of all if you stated it was just "Dumb Luck" I would not argue with you. However, I like to think I had some reasons. First of all trading Gold was the only way to prosper during the past many years. Recently there has been a confluence of events that caused me to take off my trader hat and put on a longer term trend hat. This is why I was substantially long and added to my Gold position. Graphically if you compare the charts of the S&P500 and a Gold index you get a clear picture that despite Gold's Ups and Downs it's the place to be. This also the reason why I think an Equity short position is presently appropriate. Have a Great Holiday Schippi ............................................................

William wrote: (11/27/2002 )

Hello again Schippi
  Thank you for your response to my last questions about your exit strategies.   I am enjoying your site daily and beginning to learn more every time I read something new on it. Thank you for all the interesting articles you have posted that I never would have found elsewhere.   I have a few questions if you would be so kind to clarify about your methodology. 

I am still quite new to your site so please forgive my steep learning curve. With the sell off yesterday 11-26 and all five of your top regression sectors exceeding there 2*STD one would have exited any long positions in accordance with the hourly data. But would you re-enter long a position again today with the bear rally coming back and continuing to make up those losses and then some? 

 Since the 2wk EMA has not crossed the 4wk EMA yet either in the top sectors or your SSindex would you get back in if your investment climate indicators turned all green again?   In fact was there ever really a good time to enter this current bear rally in the last month since your envestment climate indicators didn't turn all green that often during this run up?  With your S&P chart indicating a trend down and sometimes indicating a sell and mostly forming a local top, didn't this make going long in this bear rally quite risky?

  Anyway, according to my interpretation of your indicators, I did not see a good time to go long in this bear rally until Monday 11-25 and then we had the sell off  Tuesday and then the bear rally resumes again today.   You told us about your entry into certain sectors just before this bear took off and I was wondering if you re-entered into it any time in the last month?   Do you usually require all three of your investment climate indicators to be green before entering long?   I realize you do not give investment advice and I am trying to learn  more about how I might interpret all of the information on your site, which is considerable.   Being a former College Teacher I wanted to endow you with an Honorary Doctorate in Investment Decisionology. This is a field from which one never graduates but only realizes that  " I know I do not know. Therefore I know".   Regards   William

William
Delighted you enjoy my web page. I put a lot of effort into it and your generous comments help make it worthwhile. The 2*sigma quick exit strategy is not infallible but an attempt to capture or lock in current gains. If one exited on the day you indicated you would have indeed captured a large run up. After a big move up I will never jump back in. Rather stay on the sidelines a wait for a big decline.

The crossover of the moving averages works very well in a trending Market and I recommend you click on the Timing tab and study the examples posted. The moving average crossover will keep you in the Market longer, but you will also take a loss before it gives a sell signal. Sometimes during a Big run up If too much space develops between the NAV data and the moving averages I will also sell because the fund usually will decline after exponential gains.

The Market Indicators posted attempt to quantify the general investing climate and will never change quickly enough to pick up a rapid and strong Bear Market rally. This leads to the concept of investing coupled with speculation. My first rule is preservation of capital. If you loose Big you are in a lot of trouble and it may even affect your psychological well being. So I think of having a foundation or base in very solid investment vehicles and then employ a much smaller amount for speculation or higher risk investments. I believe this layered approach will produce the best long term gain.

The S&P500 chart is posted because so many people understand and follow it. However, again it just represents the general trend and my SSindx is very similar but a little more sensitive. ( Has a higher Beta )

For speculation the Hourly charts depict any breakout from the moment it occurs. I think the best use of these Hourly charts is to wait for a substantial decline and then move in, on the breakout. However with this type of trading you must have a well defined exit strategy and can not hesitate to sell.

My best "guess"at to what lies ahead is that the overhead resistance level on the S&P500 and SSIndx is a "line in the sand" that everyone is watching. I assume the Market manipulators will drive the Market up through this resistance, making all the shorts cover, the Mob seeing this big move up will pile in and we will have the completion of an exhaustion gap and that will be the end of this Bear Market rally. I will plan to use the Rydex or Profunds at this point to short the Market.

Hope this helps, Best Regards Schippi

PS
I accept your generous offer of awarding me "Honorary Doctorate in Investment Decisionology"
Doc Schippi ( Sounds Good!, Yes? )

Response to William ( 9/17/02)
Regarding Quick-Exiting based on Standard Deviations (Std)
from the Regression tables.

I think it's important to try to explain what I'm trying to accomplish with this quick-exit scheme. I have observed all to often funds/stocks that go up and up for a long time and then suddenly just loose a great percentage value all at once. Moving averages crossovers will take you out but only after a substantial delay. I employ this 2*std quick exit only for funds that have had substantial gain and I want to lock in as much profit as possible. It has worked numerous times and is especially valuable when a fund's growth goes up in an exponential manner. By way of contrast when funds are bottoming and exhibit their usual erratic behavior, I completely ignore the 2*std quick exit procedure.
Hope this helps Schippi

Response to Camlesh (8/04/02 ) questions:

In response to some of your questions, I have added a daily Market Summary to the top of my web page

Current Summary( 8/06/20)
1) All 41 Sectors continue to have Negative Gain/Risk ratios on the 30 day Regression Table. ( Avoid the Equity Market ) 2) The Daily Regression Table shows which Sectors are the strongest, but should be avoided because of the Red Alert in progress.
3) The Hourly Select Sector Index ( SSINDX ) depicts a sideways trading channel is developing. Waiting for the breakout of this channel may save you from false breakouts. 4) When to enter the Market? Wait for the 2 week EMA to crossover the 4 week EMA. Note that there has been No SSINDX EMA crossovers for the Past 90 Market days.
5) Gold is usually inversely related to the Equity Markets, and appears to be moving Up. However Select Gold is lagging the Major Gold Indexes.

About exiting before 30 days. If the Sector goes against me, I exit. A lot of these Sectors can go down 5 or 6 percent per day, so 3/4% penalty is not fun, but is better than being killed! ( You must always avoid large losses. Hanging on and praying for a recovery is a looser. )
Buying broader base funds like the S&P500 Index is OK in an Up trending Market. But should be avoided when Red Alerts keep popping Up.
Hope this helps.
Best Regards, Schippi

Response to Carolyn's (7/17/02 ) question:

     Select Gold ( FSAGX ) had a great run Up and indeed it was a Great Sector to own. I choose Sectors based on their performance and risk. Over the years I have found it best to own the strongest sectors when Market conditions are favorable. So when Gold  deteriorated I took my profit and exchanged into the current top sectors. In brief I trade rather then buy and hold. As to what makes Gold move Up and Down, I really don't know or care, certainly the US$, inflation, etc, can drive it. But at any given time there are countless factors pushing and pulling the Gold stock price. I just try to measure it's trend and compare it with the other sectors. If I don't like any sector I just move 100% to the money market.  
               Hope this helps.                    Best Regards                         Schippi

Response to Dr. K's (6/26/02) questions:

When traveling, I download the hourly NAV data with a laptop or get someone to download it for me. I don't think Fidelity provides old hourly NAV data. Fidelity does not even keep a history of the hourly NAV data.

There are two standard deviations( std ) per fund. One for how the model fits and the other representing the spread of the hourly percentage change. This latter one is useful for exiting a fund when sudden large percentage drops occur. I will look at posting this one. A second question here is, are asking about the top Sectors or a std for all 41 sectors?

The daily moving averages are calculated using the daily closing NAV data, similarly the hourly moving average and statistics are computed using the hourly NAV data. Presently using a 30 day window for the hourly NAV.

Thank You for your comments and questions
Best Regards Schippi

Response to Willi's ( 6/16/02 ) questions: 

  Thank you for your generous remarks about my web site. About Indicators. Yes, as you commented I write all my software. I'm a retired Aerospace mathematician and possess a life time of analysis and computing experience. I have written so many programs that I can no longer keep tract of them all.

The indicators I post on the web are easy to understand and use. I have others that are both difficult to understand and use so I don't post them.

The indicators I post should keep you on the right side of the Market and Max Gain per unit Risk tables identify the best Sectors. Each sector has it's own dynamics and must be handled appropriately. Gold, BioTech,  Energy Services and some HighTech sectors are the most dynamic and difficult to handle.

The 2 and 4 week EMA work well for trending funds. Most charting services provide EMA, MACD and ADX or DMI which are my favorites. The hourly Gold ADX coupled with the daily Gold ADX on my web page should keep you on the right side of Gold moves.  When a Sector runs Up too fast, the vertical distance between the 4 week EMAV and the current NAV value becomes too large and a local correction usually lies just ahead.

I do not follow any service and strongly believe that everyone should just follow the Market via the various Indexes and charts. I also much prefer the Sector approach versus individual stocks.

At this time Email alerts are not available but due to numerous requests I may consider doing this in the future. I try to update the web page whenever a significant event or Indicator changes. But it is always updated at least once per week. usually on the weekends.

Your question about which Sector will lead on a breakout, my experience shows that if you view the Hourly Sector charts, the Sector that was leading coming into the correction usually gets slammed down the most and will lead the rally on a subsequent breakout.  Keep in mind this approach may lead to buying on Monday only to sell by Friday.  In general there are lots of ways to play the Market, but I do not wish to having to spend the day with my nose to the screen, so I try to follow the trends and avoid the everyday twists and Market turns.  The breakout which follows all funds contracting is graphically displayed on the Hourly Sector charts.

I would appreciate your pointing out anything on my web page that is not clear or suggestions about some feature  that may be missing.

        Best Regards,       Schippi

From Hersh 5/28/02
Do you send emails with end of day ideas on the top sectors to be in? ......................................................................................................... Hersh
My Web page does not give advice or make specific recommendations. I try to provide information and technical approaches that may aid individual investors in making their own investment decisions. The two web page example portfolios are real trading portfolios and are updated daily and depict my own sector preferences.
Best Regards Schippi

Reply to questions from Bill 3/16/02

Bill
The filter that is overlaid on the SelectSectors Index chart is "FiltFilt" This filter is in the Matlab Signal Processing Toolbox. It is a technique that filters both forwards and backwards to eliminate the lag associated with the popular moving average methods. It is a very powerful method but seems to be unknown in the mainstream investing literature.

About the funds that move in opposite directions. Yes, I think you can use them to advantage. Gold and the S&P500 Index comes to mind.

However, my own personal choice is to throw everything into a basket and then feed it to the computer with the investing criteria you wish to employ and follow the top computer results. While this approach may not be as much fun as jumping on the "Hot" fund on your computer screen, you will be more profitable in the long run and perhaps most important you can sleep at night.
Best Regards Schippi

Hello,     Here are a few brief replies to some of you questions.

At 0736 AM 02/19/2002 -0500, you wrote
Greetings Shippi, .......... I notice that FSAGX has about 1/2 the volatility (vs the S&P) than it did in previous years like 98.  Would you say that FSAGX volatility might be a measure of perceived political/economic uncertainty?  Or maybe reduced volatility is a function of serious buying pressure?
.........................................................  
  I think both of the reasons you stated are relevant. Gold's price behavior seems to be bounded by the central banks. The only way to keep Gold Down is by them selling or talking it Down. They seem to have been successful once again, as today Gold was knocked out of First place on the Short Term Regression table. This is not a Good sign.

Have a question about the Wavelet Dyadics chart.  Are these plots "projected" from previous data?  Do they represent the typical price behavior of FSAGX relative to previous data? ...............................................................................  
Wavelet chart is a representation of the current data by using Wavelet techniques that presents the data decomposed into components that have Zero phase ( lag ). The chart is useful, but more difficult to read. I would suggest that for an Up Gold market, each of these components must have their proper ranking. (ie) The chart heights must be in the same order as the chart legend. there is always a difficulty at the chart end points. The chart data there is ambiguous and determined by artificial boundary constraints. It is best to backup say three points and then check the dyadic component ordering.

Price Of Gold as a function of US$-Index, CRB, 30Yr- Treas & Oil ............is this similar to a "neural net", where the mentioned inputs are projecting the price based on previous relationships? ..................................................................
Price Of Gold computation is very complex. The above US$, CRB...  are used as independent variables in an iterative non-linear matrix approach. The iterative approach also determines  a sinusoidal error model. I have found references that this approach is equivalent to Neural-Nets. To be honest I don't know if this chart is really useful, but I do believe that this code does all you can with this approach.

Am wondering what are the factors/methods that you find most useful for trading gold (FSAGX)? You have an interesting site. ..................................................................................................
My approach in general is not to chase big gains but to look for the best gain per unit risk.  The performance of this approach has been outstanding. For example, before the 9/11 disaster the regression table dumped all the sectors and placed Gold on top. During the subsequent rebound Gold sank an we rode the other top sectors Up. Then once again Gold moved back into first place and remained there. However, today Gold was kicked out of First place on the 30 day regression table. The long term table still lists Gold in first place. The change of Gold from First to Second place does not seem serious, however there has been a huge deterioration in the Gold score.     Best Regards          Schippi
....................................................
Would appreciate any info. THANKS.

Schippi Comment: ( 01/01/2002 )

Win, about your investing question. Your planned allocation and diversification of funds seems logical but I think it is flawed.

First of all you have to be an active investor. You can not work all your life and simply put your assets here and there and turn your back and assume that everything will work out. This is the Bull Shit recipe that Wall Street pedals every day.

Market timing is something you have to be aware of and practice. Over the past six months Trillions of dollars of Equity have evaporated. Some of which will never come back. You cannot deflate or inflate the Equity market by trillions of dollars without causing Market Indicators contract or expand. My web page lays these indicators out and they are all you need to defend yourself against the vascillation of the Market. OK with Market Timing now in hand lets outline where to put the money.

There are currently 41 Fidelity Sectors. I am convinced that these sectors collectively act as a proxy for the entire equity market. This fact provides a great simplification as you no longer have to dissect the universe of stocks to find those few to invest in.

I have formed the daily average of all 41 sectors , something I call the SelectSectors Index, Charting this Index with the S&P 500 you will find that it outperforms the S&P . With this fact in hand I assume if you invest in the top performing Sectors you should easily outperform the major market indexes. Does it work? Yes, as this helps pay for private schools and expensive travel vacations.


The top sectors are quantified and exhibited on my web page. I apologize that although the web page is free it does place the heavy burden upon the user that he has to click his browser on http//www.SelectSectors.com

George wrote: (10/17/2001)

Schippi

I managed to exit a bunch of positions in early September on your 'Double Red Alert'.

Thanks, George

John wrote: ( 8/24/2001)
Thanks for all the hard work and information you provide. Following the train of thought from other faq's I have a question for you - If you have currently entered into a trade based upon the top ranked fund - and are using an ema crossover or stop loss to exit the trade, or any other strategy - while you are in that position a new fund may well take over the top ranked position - In your experience does it make more sense(profit) to stay with the current position until the exit strategy closes the trade out or to switch out into the new leader, assuming the market is trending favorably? Not having the historical perspective that you must have from having worked with your methodology my gut feeling would be to stay with the current position, or else one could possibly end up switching with a whipsaw effect. Thanks.
...............................................................................................
John
I will only switch out of a Sector position when the current trend appears to be terminating or if it experiences a sudden and very large hourly drop. ( Please see Hourly Exit Note under the web page Timing tab.)
I would simply add a new Sector position that enjoys the Top overall ranking, assuming the overall sector score is at least 70% and the General Market Indicators are favorable. Many Sectors have a corresponding Index (e.g.) Gas Index, Oil Index, Gold Index, ...
Try to make sure that before you invest that the Index corresponding your Sector choice is moving in the right direction.

Hope this helps
Best Regards, Schippi

Bill wrote: (8/9/2001 )

I am grateful for your generosity in continually enhancing your already excellent site. It is to be hoped you will maintain the performance evidenced in your reply to Clyde of 9-27-99.
1. Please comment on the possible strategy behind FSAGX frequent moves counter to XAU. At times it goes down while XAU and other gold indexes are marching up and at times it is held virtually motionless all day while XAU is in motion up or down.
.............................................................................................
1) Most of the time the XAU and FSAGX are well correlated. However at times, they can go in opposite directions, sometimes for a month or so. You can also see the same disparity between Comex-Gold and the XAU (ie) at times going in opposite directions.
The source of the divergence between the XAU and FSAGX can be traced to the different stocks each holds. I still feel that on the average the XAU is a good Gold stock indicator.

2. Do you feel a stochastic reversal is an effective tool for establishing long positions in the Fidelity Selects or perhaps the StochRsi? What do you consider the most useful exit signal?
.............................................................................................
2) Don't have any real experience with the Stochastic RSI, I tried it
but it's charts did not tell me anything(consistently).
The most useful exit signal depends on which fund I'm trading.
For really dynamic funds I will some time trade by the hourly charts.
This is not recommended for passive investors. For trending funds
I will buy/exit using the 2&4 week exponential moving averages(EMA) coupled with an early warning provided by the trigger signal associated with the Oscillator. This is equivalent to the classical MACD.

3. Could you comment on "typical" hold periods of positions?
.............................................................................................
3) Each sector fund has it's own personality or dynamics and must be handled accordingly. Gold, Energy-Srv., Bio-Tech are the most capricious and require special handling and are probably not appropriate for passive investors. In the last major Gold runup I sold (100%) a large Gold position within one hour of it's peak value.
I do not recommend this type of trading as it's very difficult.
For the top Regression computer picks, I will exit as the EMA or MACD trigger signal dictates. I try to keep what I "think" the fund might do, completely out of the trading strategy. This is documented
on my web page under the "Timing" tab.

4. Do you incorporate Wavelet Dyadics into your trading actions as a trigger or more as a confirming factor. Do you feel it better than other robust smoothing techniques.
.............................................................................................
4) I put up the Wavelet Chart because this is a new and exciting development in mathematics. It allows you to view the Fund data and the Wavelet components without the customary time lag associated with moving averages. However, the downside is that at the right hand end point there is a discontinuity ( a reflection ) that
corrupts the last 2 or 3 Wavelet points. This comes about by how you choose the right hand boundary conditions. I feel that when the Wavelet components have their proper alignment ( not inverted) it's a good signal. My own personal preference for normal trending funds is to use the 2&4 week EMA coupled with the early warning supplied by the Trigger signal associated with the Oscillator.

5. Do you feel AI has a useful place in gold trading?
Thanks again, Bill
.............................................................................................
5) I am really at ground zero with respect to AI, Neural Nets etc.
However, from my general reading, nonlinear matrix theory claims to produce equivalent results. For me this is a much easier and familiar path and is what I use in my POG forecast chart.

Thank You for your comments and questions.
Best Regards
Schippi

Richard wrote: ( 7/30/2001)

Schippi,  
        Just a note to thank you for your consistent preparation of your data displayed on your web page.  I do not remember how I came across your work this past April, but I have been following it since.  Having worked in Wall Street in a firm that used early computer models for investing, I really appreciate your thoughts.  I have been very interested in and pursuing an improved approach to mutual fund investing for myself.
          You have stated that you have been at this since 1982. I don't know if you release any data showing major decision points over past years.  For example,  when the BioMed fund showed up first on the scope, this signal was taken until something else replaced it at a later date. What was the theoretical or potential result?  Having a chronology of prior signals with the health of the overall market at the time could be enormously reassuring.  Do you have data that one can purchase?  
        Thanks again for all.  There are a lot of crackpots out there.  I like your approach and your work.  Logging in data from your site has become my first task for Monday mornings.  
..............................................................................
Richard
Thank you for your comments. Unfortunately I don’t have the data your looking for. From memory the Regression data picks, do outstanding in a uniform up-trend and deteriorate when the up-trend terminates and choppyness or sideways motion follows.

The best attribute of the computer or Regression picks is that it strips away human emotions that came into play when trying to select a winning sector. For example at present, Automotive(FSAVX) , which seems like a plain vanilla choice, is outperforming all the other Sectors.
Best Regards Schippi
PS
A new feature recently added, is that when you are viewing an hourly chart, clicking on the fund-name will bring up a long term chart. Also the page is usually updated by Saturday night. However there are numerous charts updated daily.

Reply to John 5/16/2001

John, the hourly charts show in percent the gain from the lowest point to the highest point. For example FSAGX showed at the open a 4% gain for the past 10 Market days, today it moved up to 8%, for a one day gain of 4%, and of course an 8% gain over the 10 day time span. Perhaps what is more important is that the current regression tables show that Select Gold is outperforming ALL other 39 sectors. We have not seen this in a very long time and it is clear evidence a powerful Gold trend is in progress.
Hope this helps Schippi

Bill wrote:(4/6/2001)

Your site is very useful
. ..........
Thanks!

I wish their was a way of comparing the Relative Strength (not RSI Index) of one chart with another. i.e. FSAGX vs FSELX
. ....................
www.BigCharts.com and several other charting sites allow you to enter a fund and then compare it with another or several other funds. The resulting chart depicts the funds relative performance in percent.

Also of displaying mini charts of as many sector funds as is reasonable on the monitor
. .........................
YAHOO provides charts of all the Select Sectors. Check Out: http://biz.yahoo.com/p/fam/fidelity_group.html

Also of displaying FSAGX current day hourly movements.
......................................................
I sometimes do post Select Gold real time charts. However you can obtain the current set of hourly NAV from fidelity and manually update yesterdays chart. I would caution against paying too much attention to hourly prices as you need to have a long term trend or Market turn in place. However, I do think a single very large price increase/decrease can be a very useful alert signal.
Best Regards
Schippi
.........................................
Thanks for your excellent site.
Bill

John wrote:(3/12/2001)

Say one is invested in the five funds with the highest ranking. If a fund is dropped from the top five list do you recommend exiting that trade or would you still hold onto it subject to one's particular exit strategy. Would the new fund be added to the five, resulting in holding six or more funds? Does it make more sense to be invested in only the top five funds at all times from a performance
perspective.
I know you have traded the funds and would appreciate any insight you may be able to provide based upon your past experience - which is no indication of the future performance. Thanks.

..............................................................................
John

Before you can talk about choosing what sector or sectors to be invested in, you first have to evaluate the investing climate. The "Indicators-hot-link" located on SelectSectors.com navigation bar attempts to describe and quantify the current investing climate. The idea here is that before you commit any funds for investing a serious attempt must be made to ascertain that the current Market conditions are favorable. If you choose to invest in a Sector in a Down Market, you might profit but the risk is high.

Now with the assumption that the current Market is in an Uptrend
( which is Not the case at present) lets talk about which sector we
might choose. Fist of all it has been my experience that quite often the Top Sector is all alone. (ie) The Sector in 2nd and 3rd place, etc... is very far behind the first place sector. In this situation I would just choose the Top Sector. Sometimes there is a close tie between the first two places, in this case I would invest in both sectors. I don't think I ever invested in all the top five sectors.

For exiting sector positions I suggest you click on the "Timing-hot-link" located on the SelectSectors.com navigation bar.

I would like to stress that these comments are just my opinions and may not be appropriate for others. In the final analysis each investor must make their own decisions. I always pray that they will be conservative and not put family or friends at risk.
Hope this helps
Schippi

 

Dale wrote:( 3/29/2001)
Schippi

I just saw your new Select composite index yesterday.  Great idea. I've done sub-composites of groups (tech, energy) but not all of them together so I liked seeing this.  Great work! I did have a few questions about the construction so I can interpret your graph correctly.

Question(1)
If I read this correctly and add some understanding based on other charts you have posted, each day you have the 120-day percentage chart for each of the 40 select funds.  These charts are scaled in percentage, not dollar terms with 0% representing the lowest price within the last 120 days.  You then take all 40 percentages for each day and average them to produce a single number.  So if fund A were at 10% and Fund B were at 4%, you take a simple average resulting in 7%. Each day the index effectively could be rescaled since some funds may be setting new lows thus changing their own 0% point. Consequently, the composite index values may be completely rescaled each day though presumably the shape should remain the same. Am I understanding the index construction correctly?
...................................................................................................
Answer(1)
Dale, you are 100% correct.

Question(2)
Unless every fund hits its 120 day low the same date, the index will never go as low as 0%?  This is itself was interesting to me.  Have you done any backtesting to see the typical range for the index over 120 days?
...................................................................................................
Answer(2)
This is a mathematical property, nothing more.
(ie) If you scale a chart relative to it's minimum value,
the chart can not go below zero by definition.
This is true for each of the 40 sector charts in percent form.
Also, I have not done any back testing as I have just programmed this index.

Question(3)
You show several EMA for the chart. What does "cor" mean? I'm guessing about a 1 week EMA or is it something else?
...................................................................................................
Answer(3)
The curve labeled corEMA is my rather poor name for the corrected moving average, which attempts to minimize the lag inherent in moving averages. This is computed by computing the difference between the 2 week EMA and the 4 week EMA and adding this result to the 2 week EMA.

Question(4)
What is the Select Sectors Index Oscillator? Feel free to say it is proprietary. I'm guessing either a simple difference or rate of change over some defined period 10-20 days?
...................................................................................................
Answer(4)
The standard definition of an oscillator is simply the difference between two moving averages. I use two and four week EMA, but the methodology would work for different time intervals. Therefore the Select Sectors Index Oscillator is just the difference between the two and four week EMA of daily time average of the forty Select Sectors NAV.

Question(5)
Have you overlaid this index against the other major composites (NYSE, Nasdaq, SP500) to see how they compare in relative terms? It looks the same in basic shape but the magnitude seems dampened. In my own work, I've found that the monthly average or median of the Selects have generally hugged very close to the broad composites.  A notable exception was the Tech explosion; last two years which caused some imbalance.
...................................................................................................
Answer(5)
I have not done anything definitive along this line, however casual inspection, for todays time frame, shows that the S&P500 has a very similar shape and basically the same percentage magnitude.

       Hope this helps
             Schippi

Thanks again for this new addition.
Sincerely,
Dale

Ted wrote:( 3/16/01)
Schippi
Enjoy info on your site!!

How do you determine a ranking of sector funds?
e.g. Chemicals is current top ranking with 75% ranking.
How was this calculated and what are the other fund rankings?
...................................................................................................

Ted
With regard to the ranking of sector funds, regression tables are computed for each of the forty Select Sectors for seven time frames. In aggregate this is 7*40 = 280 regression fits.
All these tables are updated each week.
Since several Email questions were received,
asking to identify the best performing sector,
a method to combine all this regression data was synthesized. The method currently employed is
not necessarily optimum or efficient. It is in fact a work
in progress. In words what the ranking method tries to do, is to find the Sector that is moving up in the most
uniform manner, which is my geometrical explanation
for the maximum gain per unit risk method.
An example of this methodology is provided
by Medical-Delivery (FSHCX) at a time when the Market itself was declining.
Please refer to Timing page located on the web page main navigation bar.

At present (3/16/01) Chemicals ( FSCHX ) enjoys the top ranking of 75%, but is not recommended.
This brings up the important point that the overall ranking is relative.
Since a RED-ALERT is in progress almost all funds are not going up. Therefore this 75% ranking is correct relative to all
the sectors performance, but is still poor as all sectors are doing
poorly. What you would really like to have is all market indicators
in a Green state with an overall sector score greater than 75%.

Hope this helps
Schippi

Mick wrote: ( 03/11/2001 )
When you say 30 or 60 market days, that does not equate to one or two months...right?
 In fact, 60 market days is more like 3 calendar
months...correct?  

And I assume all of your work adjusts for distributions?  Correct.

Great web site.  I like the risk adjusted approach.

Mick
...................................................................................................

Mick
Yes, market days implies 5 days per week.
Again, yes all Fidelity distributions are accounted for.
Also, the hourly charts will also be corrected for total
distributions when they are paid out.
Best Regards
Schippi

John wrote: ( 1/9/2001 )
I really appreciate the effort you are expending to provide this data
for those of us with an interest in the Sector approach. Thanks.

Now a question. I like to print some of the charts. The use of the black
background provides an attractive color chart. However the black
background is a real ink hog. Would it be feasible to provide an
alternate print condition wherein the background would be just white?

Respectfully with thanks--
...................................................................................................

John
   The point you raise is a very valid one.
The way I get around this is by using Capture Pro.
www.creativesoftworx.com  ( for further info )
This software is very powerful and I use it every day.
For example to get rid of a black background, you first
capture the picture or the portion of the picture that you
are interested in. Then from Capture Pro's pull down menu
you just select invert.  This will provide an all white background.
Also, the software allows you to edit the charts, draw trend lines
and include text. Another useful feature is that you can convert
from a gray-form background to just black and white.
                Hope this helps
                     Schippi

Matt wrote: ( 03/02/2001 )

I had just begun to figure out market timing using the weekly and monthly
percentage ratio given in my stockmaster.com portfolio, containing all
fidelity sectors.  Stockmaster.com is no more, do you know of another site I
can get the weekly and monthly percentages? 
Please help

Still Looking,
Matt
...................................................................................................

Matt
   I'm not familiar with Stockmaster's  weekly and monthly percentages.
Does the regression tables at www.SelectSectors.com  not provide
you with the data your looking for?        
           Best Regards
                       Schippi

 

1/21/2001 Schippi,
Your site is fantastic! I have traded Fidelity sector funds at low frequency for many years and have used Fund Kinetics for much of that time. I recently let my subscription lapse, found they no longer published, and found your site while looking for alternatives. My mindset has been relative strength, like Fund Kinetics, but your approach using regression and timing is very interesting. However, I have a few questions about your site.
1.) Where do the Hourly-Charts fit into your system? The Regression-Tables, Indicators, and Timing seem to have no use for 10-day hourly charts. How could I use them and would they be more useful if they were for 30 or more days instead?
...................................................................................................
The hourly charts are useful for both entry and exiting a position. For example Medical Delivery ( FSHCX ) out performed, on a risk adjusted basis, all sectors during the current severe market decline. But when it finally declined it did so very rapidly. The hourly charts give the "best" graphic early warning. Similarly, the current breakout or bounce in the High Tech sectors is also captured.

2.) What are your thoughts on how a relative strength system compares to your risk-adjusted regression system? Did you develop it yourself or is there some reference that gave you the idea?
...................................................................................................
The risk-adjusted-regression system is something I put together. I have no comment on how it compares to relative strength. Perhaps someone, like you might care to fill this gap.

3.) The depth and variety of information on your Gold page suggests that gold is more interesting to you then stocks or mutual funds. I browsed your Gold page offerings but came away snowed and confused. What is it about gold that seems to fascinate you so much? In other words, what am I missing?
...................................................................................................
This is the most difficult question to answer, I suspect it would require a few volumes, much or all of which you would probably have little interest in. Basically I fear hardworking people of many nations have nothing to show for their lives work , except paper dollars. This currency was once backed by Gold then by Silver and now by "Hot Air". To my knowledge there is and has only been one store-of-value throughout history and that has been Gold. For a more coherent response I would suggest: www.usagold.com/cpmforum www.kitcomm.com/cgi-bin/comments/gold/display_short.cgi www.gold-eagle.com/cgi-bin/gn/get/forum.html

FYI, if you were not aware, Fund Kinetics has evolved into www.soundsectorstrategy.com where they offer free daily sector fund recommendations for Rydex and Profunds, which they now use instead of Fidelity. Naturally there are for-fee services that they say are better. Likewise, the relative strength concept of Fund Kinetics is outlined in the book "The Investor's Guide to Fidelity Funds" if you have not seen it. www.fundkinetics.com/FidelityBook.htm Thanks for creating your site and please stay with it! Looking forward to hearing from you or seeing your response in FAQ's.
...................................................................................................

I have enjoyed your comments and questions. Good luck with Your investments. Schippi

 

John 11/03/2000
     Thanks for your interest in my Web page.
Almost all my work is done in percent, for easy
comparison between funds and different time frames.
This means for the regression calculations, you first
find the minimum NAV over the length of time window
your interested in.  The percentage change relative to
this minimum, is computed for all other data points.
This has the effect of placing the lowest NAV on the
 bottom  of the chart and all other points as their
percentage growth from this minimum. Once this is done
a quadratic regression curve is fitted to the data. This is
done for each of the 40 sectors. I define the Gain as the
value of the regression fit at the last data point of the
window. The Risk is defined as the standard deviation of
the residuals between the NAV data and the regression fit.