How Turner Capital Makes Market-Directional Investment Decisions

Turner Capital Market-Bias Chart

Turner Capital has developed a proprietary market-directional investment process based on the following:

  1. Market and Equity pricing trends can be measured with mathematical certainty, and

  2. Markets and Equities can be categorized as being in a bullish, transition or bearish trend, and

  3. Historical pricing volatility provides an excellent indicator of whether or not a prior trend has ended and a new trend has been established, and

  4. Based on the condition of the market, as mathematically determined by trend, an investment bias of bullish, neutral or bearish is used to make buy, sell or hold decisions.

The Market-Bias Chart (upper right) shows how the Market-Directional Model has performed over time.

All macro conditions (bullish, transition or bearish) are based on how and where the market is currently trending in relation to the slope of the 200-day moving average of the market.  The "market" is defined as the equally weighted average weekly percent change of the S&P 500, the Dow, the Nasdaq and the Russell 2000 indexes.  If the slope of the market (center line of the yellow highlighted line on the chart) is how our algorithms signal a bull-trending, bear-trending or flat-trending market.  Our investment bias is bullish in bull-trending markets, bearish in bear-trending markets and in cash in flat or transition-trending markets.

Portfolios tend to be fully invested in long-only positions when the slope of the 200-day moving average of the market is positive.

Portfolios are moved toward being in cash when the slope of the 200-day moving average of the market is flat.

Portfolios tend to hold cash and/or inverse ETFs when the slope of the 200-day moving average of the market is negative.

This methodology is utilized both for market trend analysis, as well as, individual stock/ETF buy/sell decision-making.

The black line in the chart above, represents the weekending closing price of the Total Market Index, which is the equally weighted average of the weekly percent change of the S&P 500, the Nasdaq, the Dow and the Russell 2000. 

The yellow highlighted section of the chart indicates the range of volatility of the market based on one standard deviation of normal volatility above and below the 200-day moving average of the market.

The red and green triangles indicate when the 200-day moving average of the market has been confirmed to have moved from bull-to-bear or from bear-to-bull.  These are "TIP" alerts.  TIP is the abbreviation for "Trend Inflection Point".  A green triangle signifies when a bullish trend has begun.  A red triangle signifies when a bearish trend has begun.

The orange diamonds are TIP "Warnings".  A bearish TIP Warning can occur when the 200-day moving average is lower, this week than it was last week.  A bullish TIP Warning can occur when the 200-day moving average is higher this week than it was last week.

* Please note that any reference to performance is hypothetical in nature and does NOT represent actual trading.  Past performance is not indicative of future returns and all of the performance numbers noted herein are purely theoretical and do not represent actual trades, the cost of trades, tax consequences or management fees.  No recommendation is being made to buy or sell any security.  Investing in the stock market involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. Nothing contained herein should be construed as a warranty of investment results. All securities trading, whether in stocks, options, or other investment vehicles, is speculative in nature and involves substantial risk of loss. Turner Capital encourages you to read the investor information available at the websites of the Securities and Exchange Commission at www.sec.gov, the Financial Industry Regulatory Authority at www.finra.org, and the Options Clearing Corporation at www.optionsclearing.com

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