Fabian criterion

For those, if any, who follow these things, Dick Fabian's (The Dad's)
criterion for deciding whether to be in or out of the market is that two
major indices, like the DJIA and S&P500, should both be above or below
their 39-week simple moving averages. At Friday's close both had dropped
below their MAs for the first time since the last buy signal on 20 May,
so it is time to sell out and move into money market funds.

This comes from his book "The mutual fund wealth builder". His son Doug
Fabian follows a similar line in his book "Maverick investing"

However I seem to remember that sceptics like Ed have pointed out before
that the Fabians are supposed to have come slightly unstuck following
their own criteria.

And before you mention it, you are too late. My family have already
suggested I could probably make more by selling off some of my
investment books :-)

Re: Fabian criterion

I sometimes listen to Doug's Podcasts. I believe he was 1/2 out of the
market, rather than fully invested, before this recent market correction. I
don't believe he is all out.

"David Wilkinson" <> wrote in message
news:did3ud$8a8$
> For those, if any, who follow these things, Dick Fabian's (The Dad's)
> criterion for deciding whether to be in or out of the market is that two
> major indices, like the DJIA and S&P500, should both be above or below
> their 39-week simple moving averages. At Friday's close both had dropped
> below their MAs for the first time since the last buy signal on 20 May, so
> it is time to sell out and move into money market funds.
>
> This comes from his book "The mutual fund wealth builder". His son Doug
> Fabian follows a similar line in his book "Maverick investing"
>
> However I seem to remember that sceptics like Ed have pointed out before
> that the Fabians are supposed to have come slightly unstuck following
> their own criteria.
>
> And before you mention it, you are too late. My family have already
> suggested I could probably make more by selling off some of my investment
> books :-)

Re: Fabian criterion

David Wilkinson <> wrote:
> For those, if any, who follow these things, Dick Fabian's (The Dad's)
> criterion for deciding whether to be in or out of the market is that two
> major indices, like the DJIA and S&P500, should both be above or below
> their 39-week simple moving averages. At Friday's close both had dropped
> below their MAs for the first time since the last buy signal on 20 May,
> so it is time to sell out and move into money market funds.

Mark Hulbert ranks them all and Fabian does alright. The top guys are
Richard Russel & Bob Brinker (he's #1).

Actually, all the top chart analysysts and stock market investors generally
agree we're in a secular bear with a cyclical bull since Oct of 2002. These
cyclical bulls generally run about 3-5yrs so this one is ending.

I read conflicting reports - Russel says this is definitely trouble. Others
say that if the S&P doesn't rally hard by the end of the week it's definitely
trouble. And other chart guys with good track records say we'll bottom out,
then rally to new highs before crashing.

What does all this mean to me? Not much really. I cashed out all of my
holdings in the S&P500 at 1225 & will buy in once the corrections comes into
play next year.

And yeah - if I'm wrong, I probably lost a few percentage points of gains in
the long run.

If there is no crash in '06 and the economy improves, I'll buy back in. I
just don't see that happening though.

-Mike

Re: Fabian criterion

Mike Stone wrote:
> David Wilkinson <> wrote:
>
>>For those, if any, who follow these things, Dick Fabian's (The Dad's)
>>criterion for deciding whether to be in or out of the market is that two
>>major indices, like the DJIA and S&P500, should both be above or below
>>their 39-week simple moving averages. At Friday's close both had dropped
>>below their MAs for the first time since the last buy signal on 20 May,
>>so it is time to sell out and move into money market funds.
>
>
> Mark Hulbert ranks them all and Fabian does alright. The top guys are
> Richard Russel & Bob Brinker (he's #1).
>
> Actually, all the top chart analysysts and stock market investors generally
> agree we're in a secular bear with a cyclical bull since Oct of 2002. These
> cyclical bulls generally run about 3-5yrs so this one is ending.
>
> I read conflicting reports - Russel says this is definitely trouble. Others
> say that if the S&P doesn't rally hard by the end of the week it's definitely
> trouble. And other chart guys with good track records say we'll bottom out,
> then rally to new highs before crashing.
>
> What does all this mean to me? Not much really. I cashed out all of my
> holdings in the S&P500 at 1225 & will buy in once the corrections comes into
> play next year.
>
> And yeah - if I'm wrong, I probably lost a few percentage points of gains in
> the long run.
>
> If there is no crash in '06 and the economy improves, I'll buy back in. I
> just don't see that happening though.
>
> -Mike
>
Wow! A discussion on investment!

That's interesting, Mike. Fabian looks at his indicators only once a
week using Friday close values of the indices. I make the latest 39-week
MAs 1199.5 for the S&P500 and 10,502 for the Dow, so they both have to
get above these values for a buy signal from Fabian. The indices are
respectively only 1.1% and 2.0% below the MAs so it will not take much
gain for a buy.

Of course, if the market really is at a peak then there could be a
period of whipsawing as in year 2000 until it starts to definitely go
down. I switched out of the American Index fund I was in a week or so ago.

Re: Fabian criterion

David Wilkinson <> wrote:

> Of course, if the market really is at a peak then there could be a
> period of whipsawing as in year 2000 until it starts to definitely go
> down. I switched out of the American Index fund I was in a week or so ago.

I moved out of the S&P 500 sometime ago. I still hold GLD, some Fidelity
engergy funds and Dodge & Cox International. So far those are doing well.
I also moved out of some bonds because of rising interest rates.

Brinker is ranked as the #1 timer over all and I'm interested in hearing
what he has to say about this. I haven't followed him too clsoely in
the past few weeks though. I believe he's still bullish even if the
S&P drops to 1150 (but again, he feels we're in a secular bear).

The fact that Fabian & Russel are getting even more bearish isn't a good
sign though.

I can't ride the trends too much though. I believe the market will
fall hard before 2006 is over. The correction we had in 2000 wasn't
that drastic when you take into account prior corrections in history
and that valuations of the S&P minus energy are not that great.
Valuations with energy still aren't that great.

If I'm wrong, and the economy improves (I don't see how that's going
to happen) then I'll buy back in and lose a few percentage points of
gain.

-Mike

ps, S&P500 is up for the day. Volume wasn't that great though.

Re: Fabian criterion

"Mike Stone" <> wrote

> If I'm wrong, and the economy improves (I don't see how that's going
> to happen) then I'll buy back in and lose a few percentage points of
> gain.
>
> -Mike

Re: Fabian criterion

Ed <> wrote:

>

I know Ed, I've read the Bull arguments too and realize that my
assesment could be wrong.

But here's the deal, let's say that this is right and we're in the
beginnings of a major bull market move, the fundamentals of the
economy will improve in 2006, the stock market will continue to
rally and I'll buy back in near the end of 2006.

If the Dow is headed to 40,000 sitting out 1yr is a hit, but not
a huge hit. In 2006, the economy will improve drastically. I'm
patient, I'm willing to wait and see.

I just haven't seen any real positive signs that the economy
is picking up steam.

If I'm right though, we're in for a REALLY bad year in '06. Some
comments regarding this article:

- The hurricane damage to New Orleans is in NO way a boom
to the economy. No legitimate economist will tell you
that wiping out a major American city cane somehow benefit
our economy
- Oil production continues to dwindle, oil prices will probably
pull back but continue an upward trend in the coming years. This
will continue to be a drag on the economy.
- Our present growth since the 3/2000 crash and bear market have all
been due to housing and low interest rates, neither of which are going
to be around next year
- Hays thinks we're going to have 7% GDP growth, even the Bush administration
isn't so rosey. How in the world do we manage to pull off 7% GDP growth?
We didn't even have that in the '90's.
- Inlfation at 1-2%? Again, how does he determine this?

Plus, this is the business cycle at play. Japan spent over 10yrs in their bear
market, we did the same in their 70's. Every time this happens, someone is
there to tell you "This time it's different". Really, it never is.

-Mike

Re: Fabian criterion

"Mike Stone" <> wrote in message
news:eST4f.58340$
> David Wilkinson <> wrote:
>
> > Of course, if the market really is at a peak then there could be a
> > period of whipsawing as in year 2000 until it starts to definitely go
> > down. I switched out of the American Index fund I was in a week or so
ago.
>
> I moved out of the S&P 500 sometime ago. I still hold GLD, some Fidelity
> engergy funds and Dodge & Cox International. So far those are doing well.
> I also moved out of some bonds because of rising interest rates.
>
> Brinker is ranked as the #1 timer over all and I'm interested in hearing
> what he has to say about this. I haven't followed him too clsoely in
> the past few weeks though. I believe he's still bullish even if the
> S&P drops to 1150 (but again, he feels we're in a secular bear).
>
> The fact that Fabian & Russel are getting even more bearish isn't a good
> sign though.
>
> I can't ride the trends too much though. I believe the market will
> fall hard before 2006 is over. The correction we had in 2000 wasn't
> that drastic when you take into account prior corrections in history
> and that valuations of the S&P minus energy are not that great.
> Valuations with energy still aren't that great.
>
> If I'm wrong, and the economy improves (I don't see how that's going
> to happen) then I'll buy back in and lose a few percentage points of
> gain.
>
> -Mike
>
> ps, S&P500 is up for the day. Volume wasn't that great though.

Mike:

I'd be interested to know what makes you think the economy isn't doing well.
Given the shocks it has withstood it seems pretty resilient to me. I don't
really follow PEs but I didn't think they were very high vis-a-vis projected
earnings.

Why don't you think the economy will continue to grow next year?

-herb

Re: Fabian criterion

Herb <> wrote:
> Mike:
> I'd be interested to know what makes you think the economy isn't doing well.
> Given the shocks it has withstood it seems pretty resilient to me. I don't
> really follow PEs but I didn't think they were very high vis-a-vis projected
> earnings.
> Why don't you think the economy will continue to grow next year?

So many factors that I don't even know where to begin.

- GDP consistently revised down for past quarters
- job growth has been anemic
- many new jobs are in real estate and are temporary, expect them to go away
- most jobs are actually government jobs
- job growth generally doesn't keep up with population growth (needs to be greater
than 150K a month)
- look at the BLS report and you'll find that unemployment is much higher than 4.9%
- budget & trade deficts constantly expanding
- interest rates will continue to go up
- all this consumption we see is driven largely by people using home equity loans or from
the sale of new homes, without this there wouldn't be much consumption and hardly any growth
- housing is starting to slow down, our economy has largely stayed afloat due to the momentum
in housing speculation, this is coming to a stop
- Oil prices will probably fall in the near term but will continue to go up in the coming years,
this has a HUGE drag on the economy
- the effects of Katrina will not be immediate but will settle in next year
- poverty rate is increasing
- health care costs are going up
- wages are stagnant
- car sales are forecasted to drop off soon now

How often do you see a bull market in commodities and a bull market in stocks overlap for
a long time?

Pick up a few good books on stock market cycles and you'll see where we are right now. Cyclical
bull in a secular bear.

Even guys like Bob Rubin & Alan Greenspan have been saying the next head of the Fed is going to
face some really tough problems.

Look, I'm not a permabear. I'm not predicting a depression or some major economic crisis. Just that
we're in a bear market.

Re: Fabian criterion

Mike Stone wrote:

> David Wilkinson <> wrote:
>
>>For those, if any, who follow these things, Dick Fabian's (The Dad's)
>>criterion for deciding whether to be in or out of the market is that two
>>major indices, like the DJIA and S&P500, should both be above or below
>>their 39-week simple moving averages. At Friday's close both had dropped
>>below their MAs for the first time since the last buy signal on 20 May,
>>so it is time to sell out and move into money market funds.
>
>
> Mark Hulbert ranks them all and Fabian does alright. The top guys are
> Richard Russel & Bob Brinker (he's #1).
>
> Actually, all the top chart analysysts and stock market investors generally
> agree we're in a secular bear with a cyclical bull since Oct of 2002. These
> cyclical bulls generally run about 3-5yrs so this one is ending.
>
> I read conflicting reports - Russel says this is definitely trouble. Others
> say that if the S&P doesn't rally hard by the end of the week it's definitely
> trouble. And other chart guys with good track records say we'll bottom out,
> then rally to new highs before crashing.

I don't know if there will be a sudden crash. But there will have to be
some kind of cyclical bear after the current cyclical bull ends.
And cyclical bears within a secular bear can be severe, possibly erasing
all the gains of the preceding cyclical bull. (The market decline of
1973-74 was, if anything, worse than the decline of 2000-2002.)


--
Steven D. Litvintchouk
Email:

Remove the NOSPAM before replying to me.

Re: Fabian criterion

Steven L. <> wrote:

> I don't know if there will be a sudden crash. But there will have to be
> some kind of cyclical bear after the current cyclical bull ends.

No, I don't know that either. But I'm trying to avoid some risk by staying
out of the S&P and focusing more on energy/gold,commodity & foreign funds.

> And cyclical bears within a secular bear can be severe, possibly erasing
> all the gains of the preceding cyclical bull. (The market decline of
> 1973-74 was, if anything, worse than the decline of 2000-2002.)

Good point.

I think this thread needs to die so people can go back to arguing about
Bush.

-Mike