Magazine article Modern Trader

Timing the Market: How to Profit in the Stock Market Using the Yield Curve, Technical Analysis and Cultural Indicators

Magazine article Modern Trader

Timing the Market: How to Profit in the Stock Market Using the Yield Curve, Technical Analysis and Cultural Indicators

Article excerpt

Timing the Market: How to Profit in the Stock Market Using the Yield Curve, Technical Analysis and Cultural Indicators By Deborah J. Weir John Wiley & Suns Inc. 413 pages, $60

The term "market timing" has had a had connotation ever since New York Attorney General Eliot Spitzer used the term incorrectly to describe illegal after-hours trades that enriched institutional traders and cost mutual tund shareholders millions. Market timing is a strategy of investing during market uptrends and reverting to cash, or other alternatives, during market downtrends. Market timers do not subscribe to the buy-and-hold philosophy, where the investor is in the market 100% of the time. Investors utilizing market timing may he out of the market for months or years in an effort to eliminate losses.

Weir focuses on three main elements to determine when to enter and exit the stock market: the slope of the yield curve, selective technical analysis tools and unusual cultural indicators. She also provides general guidance on how to select investments.

Weir notes a change in the slope of the yield curve provides a one-year advance forecast of the economy. She points out the S&P 500 index responds to the change in the curve in a matter of days. A change to an inverted yield curve is a sell signal, a change to a normal or positive yield curve is a buy signal. Moreover, Weir pinpoints the specific buy and sell dates by incorporating three values in her analysis: changes in the maturity and quality of spreads, the price of 10-year notes and the rate of change in fed funds.

Weir uses technical analysis tools to further confirm her yield curve signals. …

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