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What got you interested in investing and market analysis?
While in college and law school I became keenly interested in the stock and commodity markets. Upon completion of my MBA I was fortunate to work for one of the first pension and profit sharing funds in the United States. The investment group was not only very conversant in market fundamentals and economics, but they also believed there was a third necessary component to investment success: market timing. I was asked to spearhead the effort.

Because of our company growth and ability to pay for research with a large commission budget, I was able to meet and establish relationships with many well-regarded retail and institutional Wall Street technicians. At that time, there were not a wealth of timing tools available – the most popular being moving averages, trendlines and sentiment indicators. Due to the size of our fund and our requirement to buy and sell large market positions, these conventional trend following methods were not helpful. We needed to be trend anticipatory. Consequently, it was my assignment to create proprietary indicators designed to buy market weakness and sell market strength. I was obsessed with the work and the initiative ultimately shaped the trajectory of my career.

What was your most memorable investment?
My most memorable investment was a commodities trade in the early 1970’s, at the outset of my career. Our investment company was active in the equity and fixed income areas, so employees were prohibited from personally trading in those markets. However, there was no such restriction in the commodities markets.

At that time, there was much interest in the metals markets, so I turned my focus to Silver. Whenever I was able to break free from work, I would retreat to a neighboring brokerage firm to learn about commodity trading. I spent countless hours in front of the office’s “klacker” (named for the distinct sound it made as each trade took place), mesmerized by its activity. I was determined to become a successful Silver trader.

My first trade took place one seemingly ordinary day shortly after the market opened, with Silver trading unchanged around $2.90. I excitedly watched my transaction come across the klacker before it was immediately displaced by a sea of activity…all of it to the downside. With Silver trading down $0.10, and my confidence shaken, I decided to exit the trade at a loss. I instructed my broker to sell my Silver contracts, to which I was informed I could not do so because the market was “locked down-limit.” This was an entirely new concept to me. He explained that Futures have a required daily limit, beyond which trading was halted, and that I would need to wait until the following morning to exit the trade.

I returned to the brokerage ahead of the next day’s open to place my sell order. I nervously sat in front of the klacker, waiting for confirmation that I was out of the trade. The market opened with a single klack and fell silent – down-limit once again. The market closed and I was still long. I asked what could be done and was told to return the following day and try placing the order once again. The personal losses were becoming serious and I was unable to think of anything but my losing trade.

The next day, I took off of work and arrived well before the open with my sell order. I retrieved my seat in front of the klacker and waited impatiently for the day’s trading. Once again, the market opened down-limit with a single klack. However, instead of reading down $0.10, as it had the prior two days, the daily limits had been increased and Silver was now stuck down $0.20. I was in a panic. The Silver market had lost more in three days than it had in months, and I was trapped.

I told the broker I absolutely had to exit the trade and that he should do anything and everything he could to accomplish the sale. He placed a standing market order, which was filled at the low later that day as Silver began trading up off its limit. Even though I lost $0.40 in just three days of trading, at great personal expense, I felt an overwhelming sense of relief. However, that relief soon turned to anguish as I watched Silver Futures rally $0.40 off its low that very same day, followed by a prolonged rally over the subsequent months.

Though I could not recognize it at the time, that trade was one of the most formative of my career. It taught me there was more to trading than simply liking or disliking something. It taught me, firsthand, the dangers of trading on emotion. It taught me that the timing of an idea was just as critical as the idea itself. This trade served as an impetus behind my research and the development of my market timing models.

What sectors are your watching now?
One of the most fascinating things about the market timing indicators we’ve developed and employed over the past four decades is their applicability across markets and time periods.

We’ve been impressed with the efficacy of the indicators when applied to various financial instruments, including equities, options, currencies, financial futures, and commodities, among others; time periods, all the way down to one-minute time frames; regions, both domestic and international; and even non-market data series, such as inventories, unemployment, production results, and more.

While my primary focus will always be the United States markets, over the past several years I’ve been particularly interested in the various Chinese markets, where our work has proven to be quite reliable. In fact, the timing has been even more accurate than that of other markets. Since the end of 2012, I have made numerous forecasts in the Shanghai Composite (SHCOMP) and Hang Seng (Hang Seng China Enterprise Index) in various media outlets, most of which have presaged similar responses in the United States markets.

I continue to monitor these indices closely and expect them to decline once again, with downside projections of 7672 in the HSCEI and 2589 & 2521 in the SHCOMP. Given these levels, we believe the Chinese markets will become an albatross upon other world markets.

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