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The PRS Time plane is our primary Timing
tool. It is not a precise market timing tool in that it is
not designed to tell us exactly when the market is going to top
or bottom. The good
news is precision of that nature is not necessary to achieve
significant investment returns. The PRS Time Plane will tell us
when it is time to be more conservative regarding new
purchases. It will also tell us when it is time to be
aggressive and have lots of exposure at the most important
time, when the market is ready for a strong upside move.
Over the course of time, there are periods when it
doesn't matter how good your selection process is, most stocks
end up going down. Avoiding
these times or simply reducing your exposure will save you a fortune. What's even better is the best buying period always follows the
inevitable unfavorable time
periods. Getting getting one of these unfavorable / favorable
cycles right will produce incredible investment returns and
that is what the PRS Time Plane enables us to do.
The PRS Time plane tells us when it is time to
be conservative and or very conservative, and it alerts us when
to become aggressive as the market cycles through rough
periods. Rough times always follow good times and good times
always follow bad times. The best times to buy always come after a corrective
market phase has
been underway for some time, when historical returns are low. The
time to be cautious is when historical returns are high and or
very high. We will always be confronted with the proverbial
"how high is high" dilemma, but using history as a guide
the PRS Time Plane makes it easy for us to get it right when it
counts the most.
Our PRS time Plane Stretches back over 14 years.
With that much data it is easy to establish high confidence
levels from which to gauge when we should adjust our level of exposure to
maximize returns over time.
Many subscribers continually insist the PRS
Time Plane is the most important piece of market timing
information they receive on a monthly basis.
Big Picture timing
is much more important than most people think it is, especially
when putting new money to work. In the chart below, the red
arrows are points were the PRS Time Plane is urging extreme
caution. The green arrows indicate points at which
investors can become more aggressive. The PRS Time Plane was
urging extreme caution in late 1999 and early 2000. The PRS Time
Plane was telling us to Buy in September and October 1998,
October 2001, and from the summer of 2002 through the fall of
2002.
Hindsight is always
20/20, but these metrics provide
us with a gauge that tells us where we are within the overall cycle
of the market’s ups and downs. The truth is, markets can only
go so far and so fast before something has to give. The PRS
Time Plane tells us when the market has gone too far too fast,
and we can adjust our level of exposure accordingly. Imagine if
you had sold half your stock holdings in late 1999 or early
2000? While it did not seem like the thing to do at the time,
the PRS Time Plane was screaming, THIS IS A BAD TIME TO BUY
STOCKS.
But don't forget, not only does the PRS Time
Plane tell us when to be conservative, it tells us when to be
aggressive too. Through the entire summer of 2002 the PRS Time
Plane was telling us that this is as bad as it gets. And before
you know it, stocks were rocketing higher. Yes, that was an
extreme time, and with a little luck we won't have to go
through that again for a long time. However, if you look at the
chart below, you can see there are many minor points in time
where being a little conservative would have been a good thing,
like summer of 1999. And, following the conservative points in
time are periods to be more aggressive.
The metrics on this chart are not based on what the S&P 500 is
doing or what the NASD is doing. These metrics are based on the
performance of all stocks relative to one another.
The Blue line tells us how well the best stocks are performing
on a three month basis while the Red line tells us how the
worst stocks are performing on a three month basis.
Good times follow bad times and bad times follow good times.
Then the cycle repeats all over again. While the magnitude of
each cycle varies, the whole thing repeats over and over again.
The PRS Time Plane Provides us with a road map. It tells
what where the market really is and what the best course of
action likely is as we look several months forward.
The PRS Time
Plane shows us how stocks at a given PRS level have
performed over three, six, or twelve months. Now, because a
stock’s PRS can change every day, the time plane is not showing
us how a group of specific stocks have performed. The PRS Time
plane is showing us how the stocks at a specific PRS ranking
have performed.
We also look at a 12-month PRS Time Plane.
Because the calculations cover a much longer time span, the
signals are much slower to develop. As conditions deteriorate
and improve, the signals wax and wane. Over the mid-1990's, it
is clear that once the PRS_12 line at 90 (meaning the average
weighted 12-month return for stocks with a PRS of 90) reached
the 80% level, it was about time for the market to begin a
corrective phase. When the sum of the red line plus the blue
line, illustrated by the area portion of the chart, neared
zero, it was time to start getting more aggressive. In the case
of 1998, a bit of common sense and patience would have resulted
in a bit of hesitancy, but it quickly became obvious that a
tremendous buying period had been reached.
With the PRS Time Plane, we know where the
market really stands. Has it really gone up a lot? Is there
potential for it to go up a lot more now? Is it time for prices
to "pause to refresh?" Is this a really great buying
opportunity?
The PRS Time Plane continually answers these
questions for us and that is why it is such a valuable tool for
us today.
With the PRS Time Plane you can buy with
confidence when the time is right. And, when the time is right,
you will know it is time to stand aside, even though everyone
you know is screaming buy buy buy. But you will be able to
stand aside confidently know that a much much better time to
buy lies ahead. And let's face it, getting in at the right time
will make a huge difference in your long-term investment
returns.
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