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  Signal Definitions  

Our mechanical timing models generate three different signals: Buy, Sell, and Neutral. This article will define their meaning.

NEUTRAL: Neutral means "market neutral." Neutral means that a long position has been liquidated into cash or is fully hedged. Neutral signals are generated when a price index has begun to weaken to an extent that a Buy signal is no longer viable, but the longer-term picture is still positive enough that a Sell signal is too aggressive at the time the Buy signal is closed. The primary purpose of the Neutral signal is to eliminate market exposure in order to avoid a more serious decline if prices continue to weaken, but it avoids the costly mistake of being short in a bull market.

BUY: Go long.

SELL: Go short. Sell signal caveat: Some timing models (the Price Momentum Model, PMO crossover, LT Trend Model) can only switch from Buy to Sell, or Sell to Buy -- there is no Neutral signal. With these models, you must use your own judgment as to it is better to be in cash/hedged or short.

You should not act blindly on any signal on any timing model. You should fully understand how the models work and have observed them over a period of time. Timing models are tools to help you make trading/investing decisions. Their signals are not recommendations to buy or sell any security.

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