Stock Market Timing with
The Brownlee Report

Modern Portfolio Theory states that the most direct route to substantial stock market profits is timing the market. The problem with market timing is that few market participants can time the market well. Hence the theory broadens and detours into asset allocation in an attempt to outperform the S&P 500.

Asset allocation is a buy-and-hold strategy that varies the weighting of individual stock issues in an attempt to outperform the overall market. Adjusting the size of a position or adding or eliminating a position is the weakest form of market timing.

Timing is involved whenever a security is bought or sold, whether it is recognized or not. Timing the market cannot be avoided. The difference between success and failure in the stock market is the quality of the timing.

The financial markets are the only places where money is exposed for the taking. Unfortunately, the money is protected by a wall of information that is thicker than any steel vault and much harder to penetrate.

There is one number in which all the information, opinions, fundamentals and actions of all market participants are stored and continually updated and refreshed. That number is the constantly changing price displayed clearly by every tradable security.

All the knowledge necessary to participate in the stock market successfully is constantly being broadcast by the price movement of any individual stock issue or the cumulative wisdom of a stock market index. Successful stock market timing therefore depends upon realizing the direction in which a price is traveling and recognizing when a price reverses direction.

Trend analysis and pattern recognition are the technical tools employed to determine price direction and detect directional changes in the price of an individual stock issue or index. The principals of Technical Analysis are universal and apply equally well to the bond, currencies and futures markets. All markets are related and the movement of one affects the direction all the others.

Since the focus of The Brownlee Report is the stock market, inter-market relationships are of interest only to the extent that the price action of a related market affects the motion of the stock market.