About the SGM Market Timing Model

The Strategic Growth Model (SGM) uses a Thrust / Trend Model (T/TM) for determining market conditions. This data-driven model has proved to enhance the SGM's returns during favorable market conditions and defend its capital during unfavorable market conditions. It does not depend on my subjective interpretation of data or my prediction of market trend.

The model recognizes that market tops and bottoms form differently, and different tools must be used to identify each one. For example, with stock indexes, bottoms are most often characterized by sharp, spiky formations resulting from rapid reversals in trend ("V" bottoms), whereas, tops are generally rounded and take longer to complete than bottoms.

The other important concept behind the timing model is that the closer an indicator is to raw price movement, the better it is likely to perform. Indicators derived from breadth, volume, and sentiment are useful for confirming price movement and analyzing market condition, but we buy and profit from price movement, so our decision tools should be as closely connected to price movement as possible.

The timing model has a specific component based on market internals for detecting bottoms and generating BUY signals, and another component for detecting tops and generating SELL or NEUTRAL signals. There is also a long-term component, which determines whether the timing signal indicating poor market conditions should be SELL or NEUTRAL.

This timing model has proved to be superior to one dimensional trend following systems, which can produce significant whipsaw losses leading to frustration and loss of confidence in what would otherwise be a profitable system.