| The Profit Magic of Stock Transaction Timing by J.M. | | | | As you can see Hurst's price-motion model, although |
| Hurst was published in 1970. Many hundreds, perhaps | | | | it is a timing system, is not a repudiation of the |
| thousands, of investment or trading related books | | | | adage about market timing, but more of a |
| have been written since then. Few, however, no | | | | confirmation of it. 75% is a very large influence. And |
| matter how recently published, can match Hurst's | | | | because the secular trend of the US markets at least |
| work for its clarity and completeness. | | | | has been up for more than 200 years a Buy & |
| Hurst was a physicist and worked as an aeronautical | | | | Hold strategy makes eminently good sense over the |
| engineer for more than 25 years. He was careful to | | | | long haul. Hurst's price-motion model also maintains |
| provide the mathematical references for his work | | | | the integrity of fundamental analysis as a worthwhile |
| although few readers would have the academic | | | | exercise of stock market investing. |
| training or perhaps even the inclination to pursue the | | | | Perhaps most surprisingly Hurst determined that |
| theoretical basis underlying his trading technique. | | | | macro random events, like news shocks, which in his |
| Happily, J.M. Hurst focused his book on the application | | | | time would have been epitomized by the |
| of the principles and no such rigorous training or | | | | assassination of President Kennedy, and global events |
| mathematical background is required to understand | | | | such as war, even when combined with micro |
| and apply the stock trading method which Hurst laid | | | | random events, like an individual liquidating a stock |
| out in Stock Transaction Timing. | | | | portfolio to buy a summer house, account for only |
| Since, as the title tells us, Hurst set out to create a | | | | 2% of stock price movement in the price-motion |
| trading method based on timing the market, or more | | | | model. Hurst readily acknowledged that the short |
| accurately timing the buy and sell of individual stocks, | | | | term affect of purely random events on stock prices |
| he first established the reasons that stocks move up | | | | could be large but that the movement would still be |
| and down in price over time. His reasons are the | | | | only temporary. |
| product of nine years of research and 30,000 hours | | | | The remaining 23% of stock price movement in |
| of computer analysis, and he expresses them in the | | | | Hurst's price-motion model was determined to be the |
| book with a sense of scientific certainty that would | | | | result of semi-predictable oscillations. These oscillations |
| probably create some discomfort in investors new to | | | | are caused by the aggregate sum of several |
| the art of technical analysis. How many times have | | | | (non-ideal) periodic fluctuations, better referred to as |
| we heard that you cannot time the market so don't | | | | cycles. The nominal stock market cycles identified by |
| even try? | | | | Hurst are consistent with the periodicity of cycles |
| Hurst defined the process of stock price fluctuations | | | | determined by researchers subsequent to the |
| as a price-motion model. He determined that 75% of | | | | publication of Stock Transaction Timing. |
| all stock price movement is due to relatively | | | | In the next part we will discuss how to take |
| foreseeable fundamental factors pertaining to the | | | | advantage of the 23% cyclic contribution and why |
| stock market as a whole, to sectors and industries | | | | that is so important for achieving superior investment |
| within the market, and to individual stocks within the | | | | returns. |
| industry groups. | | | | |