Review of Timing the Market: How To Profit in the Stock Market Using the Yield Curve, Technical Analysis, and Cultural Indicators (Hardcover)

This work provides an excellent, professional grounding for one's approach to the markets. The theoretical basis for this foundation is ongoing analysis and interpretation of the U. S. treasury yield curve, bond quality spreads, and movements of the federal funds rate. The author's exposition of the yield curve is the best I've seen. She divides her analysis of the yield curve into short-term money market segments, the traditional spread between ten year bonds and three month bills, and longer-term bonds. Each of these segments affords the analyst important information as to the the present and anticipated state of the economy -- which determines the earnings expectations that drive markets.

The second section of this book affords a somewhat different take on technical analysis than is usually encountered. The author explains how to use the volatility index (VIX) and the put/call ratio as indications of short-to-intermediate term market turning points. She also indicates how margin debt and short interest levels can be used to reveal long-term market highs and lows.

The third section of the book describes cultural and demographic methods for gauging the market climate. These methods are qualitative only; subject to interpretational error; and questionable in the separation of "fact" from one's psychological projection. However, used strictly as adjuncts to yield curve analysis and technical indicator confirmation, they can be quite useful as further confirming tools.

The fourth section describes how to use market timing in a profitable, top-down approach to riding the business cycle through rotation from fixed-income investments into equities, then hard assets, foreign currencies, and back into fixed-income instruments. The author details how intelligent asset rotation leads to more favorable portfolio results than does buy-and-hold over the long run.

The market timing model which the author evolves over the course of the book substantially beats a buy-and-hold portfolio and does so while experiencing less volatility. The timing model's rationality, operations, and results are clearly explained and documented to facilitate a comprehensive understanding of her approach.

This book is well-written. Its thesis is logical; well-developed; and supported with numerous examples, data, and around sixty pages of appendices. I feel that its methodology will help investors understand and identify forces which move markets as well as avoid those traps of crowd psychology which lead to participation in mass buying at market tops and mass selling at bottoms. This work is an interesting, original contribution to the literature of markets!





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