Investment Scoring & Timing
Newsletter
So What's The Catch? -
Updated By Request
Michael Kilbach
Dec 27, 2006
In early November 2006 we published
an article titled So
What's The Catch. Based on readers' feedback to have the
editorial re-published, we are providing an updated version of
the original article. You will notice the following changes:
1) Our Newsletter name has
changed to Investment Scoring & Timing Newsletter.
2) For this article we have removed the Canadian equity SSO.TO
Custom Scored Timing Chart and by request inserted US
symbol SSRI Custom Scored Timing Chart. Please note that
these charts are only available on websites that allow individual
equity analysis.
3) To prepare for a public newsletter service we have been fine
tuning our formulas to produce the best trading signals possible.
As a result you may notice some different patterns from our original
article.
With all the difference of
opinions from so called "experts" on how to invest
your capital, how does an investor cut through the "noise"
to get a reasonable return on their investment? Is investing
really that complicated? Can the average person make money in
the markets? In our opinion it can be much easier than most people
think.
How? Through observation and
analysis we have developed a unique scoring system to simplify
investing in equities. Our approach is simple but effective.
We follow a set of time tested rules and disciplines that allow
us to eliminate emotional trading decisions and instead execute
well timed, profitable equity trades.
1) We believe all major
macro market trends will not end until an extreme is reached
in the direction traveled. Once that extreme is met, like
a pendulum swinging, the new trend will start and will not end
until the extreme is met in the other direction.
2) We evaluate and determine the major long term trend in
the markets. This requires significant long term data to
clearly illustrate the trend.
3) We eliminate the distractions of day to day "noise"
and media hype. In our opinion, daily newscasts and justification
for a particular markets movement is just "noise" that
complicates ones thinking and is generally irrelevant to the
long term trend.
4) Once we have identified a long term bull market, we take
positions in related equities at low risk entry points. We
have a portion of our holdings for long term investment which
we buy and hold. Another portion of our investment we trade in
and out of the bull market for potentially greater returns.
So how does one remove the
human emotions of "fear" and "greed" from
the decision making process when buying in and out of a particular
investment? In our opinion investors must be disciplined and
have a predictive, reliable system. Let us show you ours. We
will display a series of charts and explain our process of trading
mining equities.
1)
Long Term Macro Market Trend
The monthly chart below
illustrates the long term movement of a current major macro market
trend. Using a total of six different market indexes combined
into one gauge, we measure the progress of the long term Precious
Metals (PM) bull market against these various other markets.
The Blue line is our scoring system which measures the long term
trend. When the blue line is trending down, commodities and precious
metals are considered to be in a major bear market. When the
blue line is trending up, commodities and precious metals are
considered to be in a bull market. The thin grey line in the
background is the price of Silver.
Chart 1:
You will notice the score peaks
at ten at the top of the commodities bull market in 1980 relative
to these other markets. It then bottoms in 2000 against these
same markets before heading higher again. You will also notice
the recent breakout from the long term downtrend. In our opinion
this confirms that the new bull market will not end until the
gauge reaches the upper portions of the chart. This is an example
of one major trend not ending until the next extreme is reached
in the opposite direction. As a general rule, one should add
to investment positions once the trend turns up from its low
and it is still in the lower portion or green sections of the
chart. We believe as the precious metals bull market matures,
evident when the blue line scoring system nears the upper portion
of the chart, it would be wise to lighten up significantly on
invested positions. This approach helps investors ignore the
"noise" and disregard the media hype of the exciting
nature of a maturing bull market spike.
As illustrated above, the long
term trend in precious metals is in the very early stages of
a bull market. According to our strategy, this is when to purchase
precious metal investments.
2) Ignore The "Noise" And
Take Positions
We then created a timing
system for entering and exiting investments that benefit from
the Precious Metals bull market. How?
1) We pick equities that profit
from the mining and exploration of mainly silver and some gold.
2) We make sure these equities have enough trading history to
effectively break down their data into our scoring system.
3) We then overlay our customized scoring system on top of the
equity and use it as our guide to add, lighten up, hold or sell
positions.
4) Basically we add to positions when the score is near or at
the bottom of the chart and lighten up or hold onto positions
at the top of the chart.
5) Generally we do not think one should exit positions entirely
until the major trend is nearing the end of its bull market.
As illustrated in our first chart above, we think this bull market
has a very long way to run yet.
In the following charts please
take note at how profitable a trade would have been if you had
taken positions when the gauge was in the green area and lightened
up on those positions when the gauge was in the red area.
Chart 2:
Chart 3:
Chart 4:
Chart 5:
So What's The Catch?
Every trading system requires some degree of human discretion
and common sense. We are "straight shooters" and admit
there are a few times where less than ideal signals may be given.
However, as a general rule we have determined that our timing
system can greatly enhance an individual's probability of outperforming
the market. But our performance speaks for itself. Take a close
look at the charts above and note just how accurate and profitable
our trading system has been. Our strategy is not to buy or sell
an investment position all at once. Instead we buy in stages
and average into our investment when the timing score is in the
green area and sell in stages as we near the top of the scoring
system. Using our customized scoring system we greatly increase
our odds of consistently buying low and selling high. We have
found this strategy exceptionally profitable. Simply look at
our charts and ask yourself, 'could my investment decisions benefit
from this insight both from a long term and short term perspective?'
This article is a trial run
to determine if readers would like to know more about our system
and possibly use it as part of their investing strategy. We need
your feedback. Would you like to view these charts and other
mining equities that are updated on a regular basis according
to our customized scoring system? If you like what you have read,
please provide your feedback to article.feedback@hotmail.com.
In the event we receive a significant number of responses we
will publish a low cost newsletter every two weeks showing a
series of precious metals Custom Scoring and Timing Charts.
The strategy of the service is to ensure it is low cost and affordable
enough that one small, well timed trade can easily pay for the
six month subscription fee. Please reply as your feedback is
invaluable to us. We look forward to hearing from you.
Good luck and all the best
in investing and in life.
Dec 27, 2006
Michael Kilbach
email: article.feedback@hotmail.com
Michael Kilbach
holds a Business Administration Diploma from the Southern Alberta
Institute of Technology and is the owner of two successful retail
businesses. With his keen interest in finance, Michael has also
developed a strong understanding of the markets. Through personal
experience, observation and analysis, Michael has formed a unique
viewpoint for interpreting market movements. He believes it is
important to understand the larger perspective of the markets
in order to be successful. In that way, an investor can take
full advantage of the markets most profitable mega trends.
Disclosure
and Disclaimer Statement: The author of this article advises that he has
personal investments in silver and gold mining and exploration
companies in addition to and including the companies listed in
this article. The author does not claim any of the opinions expressed
in this article are to be considered complete, absolute and/or
exact but rather general beliefs. The author does not accept
responsibility for possible errors in calculations, data presented
on charts or loss of investment using the trading system. Attempting
to time an investment does not guarantee results. The author
is an independent analyst and not a qualified investment advisor.
It is recommended investors conduct their own due diligence on
any investment including seeking professional advice from a certified
investment advisor before entering into any transaction. The
author has neither been paid or received any other compensation
to write this article.
321gold
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