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Is the Nogales Market Alert a market-timing tool?
Why is Market Alert Free? Why give it away?
Does Market Timing work?
Why is Buy and Hold risky?
Is the Market Alert less risky than Buy and Hold?
Will the Market Alert also work in the future?
Can you describe exactly how the Market Alert works?
What are the Market Alert returns?
What drives stock prices?
Why do most small investors lose money in the stock market?
How do I use the Market Alert?
Is the Market Alert simple or complicated?
Can it be used to purchase of sector funds or stocks?
Can I subscribe and get prompt notification when Market Alert changes its position?  

Is the Nogales Market Alert a market-timing tool?
Broadly, yes. The Thomas Nogales Financial Market Alert is a risk-based strategy that attempts to outperform the S&P500 and other broad market indexes by avoiding steep losses.  It exits the market when it's subject to a significant decline and buys back when risk is much lower.  In a strong bull market it may be in the market for years and in a down or volatile market perhaps for only a thirty-day period.  You can expect it to buy or sell at most twice a year in volatile markets. Market Alert is for investors who are willing to take on some active management of their capital.  It can’t predict where the market will be one year from now but attempts to warn of risks and opportunities. Market Alert is not day trading or a get-rich-quick scheme. It is an experimental timing model for serious long-term investors.

Most people should remain invested in a self-managed asset allocation plan using index funds. For more information on various asset mixes and how they've performed over time, run the TNF Asset Mix Calculator.

Why is Market Alert Free? Why give it away?
I use Market Alert for my personal investing and am committed to a public evaluation of the scientific methods. It works for me and I hope you can benefit from it. No strings attached and no agenda. With Market Alert, you learn WHEN to buy/sell but not HOW it's done. However, on this site you have a real-time means to verify the performance.

Does Market Timing work?
Yes and no.  Back testing shows that various methods are statistically proven to beat the index but many of them have extended losing periods or perform poorly in bear markets.  Some are very simple and successful, like seasonal investing, which is only in stocks from November through April. I've even developed moving average systems that beat the S&P500 by 2:1 over 30 years. Overall though, market timing has a deservedly bad reputation due to the unscientific and inept practices of timing promoters.

A timing method is useful if it’s easy to use, avoids steep losses, rarely trades, and ideally beats the S&P500 index. 

Why is Buy and Hold risky?
Buy and Hold is a fine strategy during a long-term rising market but what happens during a Bear market?  The US economy also has seen long down cycles where holding stocks can destroy your capital.  Down periods have occupied almost half the market's 200 year history; 95 months of bear market and 103 months of bull market since 1802.  Look at the average yearly Bull/Bear returns below.

 
            Data Source: Stock Cycles by Michael A. Alexander

Is the Nogales Market Alert less risky than Buy and Hold?
Yes. Risk/Reward can be a complex topic - let's make it simple.   Since 1980, a buy and hold strategy has returned 10.1% per year while the Market Alert model has returned 17% with less risk.  For the 3 years from the market peak in 2000 to 2002, the average investor lost over 10% per year whereas Nogales Market Alert is up 10%+ per year. The trade history on the performance page tells the story.

Will the Nogales Market Alert also work in the future?
The Market Alert Model was created based on investor observation and later a computer program validated the concept. The model has been back-tested on 27 years of historical data.  Since starting to use it “real time” it has performed stunningly during the recent bear market.  It stays invested with few trades in bull markets and performs wonderfully in bear markets. I'm reasonably confident this performance will continue but make no guarantees. It is not wise to "bet the farm" on this or any other timing model.

Can you describe exactly how Market Alert works?
The method is proprietary. Nogales Market Alert works because it makes decisions using mathematical discipline and common sense.  It manages risk and employs no superstitious methodologies, momentum schemes, moving averages, or subjectivity.  It seldom trades and consistently makes money. It's in the market at all times except during the danger period. I use a Traffic Signal on the main page to indicated the current risk level. Green and Yellow are IN phases and Red is OUT.

What are the Nogales Market Alert returns?
$10,000 invested with the TNF Market Alert model in 1979 would now be worth $543,000 vs. $126,000 for Buy&Hold.

During the great bull market from 1982-1999, the Market Alert was in the market 84% of the time.  The S&P500 index returned 10.7% per year and Market Alert returned 17%.  It made only 7 buy/sell combinations as it rode the Bull but they made a big difference.  The S&P500 went up a whopping 1160% but the Market Alert Model went up almost 2000%. 

Remarkably, since the market crash started in 2000, Thomas Nogales Financial Market Alert has greatly outperformed the S&P 500 index while making only 4 round trip transactions. The market's increased volatility has led to even higher returns for Market Alert.  In 1998 it exited the market in July and earned 5% per year in cash.  In 2000, while the Nasdaq crashed 60%, it got out and actually made 5% sitting in the money market.  In 2001 it was in the market for only 3 months and earned 14% while the S&P500 index lost over 10% for the year. In 2002, it was up 16% on two trades and the S&P 500 went down over 20%. In 2003, it earned 34%. The market in the years ahead will likely be more volatile than the past and this is the sort of environment where Market Alert excels. 

Is the Market Alert simple or complicated?
The signals used to flag the Nogales Market Alert turning points are simple to construct but non-obvious. It manages risk. A Market Alert Buy signal does not mean the market will go up. It means there is little chance of it going much lower so it’s safe to buy.  A Sell signal does not mean the market will fall.  It means there is little chance of it going much higher so we sell and move to the safety of short-term government bonds

TNF research shows that the major indexes can go a few percent beyond the trigger points but rarely much more.  Market panics are an exception like in September 2001.  The model bought quickly (mechanically) after the 9-11 disaster but the market declined in panic for another week and then quickly turned up.  Still, we made 4% on that trade and were in the market for only two months. 

To summarize: I can’t predict the exact top or bottom of the market.  I don't make market predictions but do indicate when it’s safe to buy and prudent to sell.  A non-financial disaster (like the 9/11 attack) can drive markets sharply lower and there’s no way my model can anticipate this sort of event.

How do I use the Nogales Market Alert?
I recommend that you open a brokerage account and buy exchange traded SPY shares that exactly track the S&P 500 index.  Or, use an S&P500 index fund. You can use tax-deferred money in an IRA account.  When in cash, use a short-term bond fund because the rates are higher. 

It’s important to act promptly (within several days) of a buy or sell signal. Markets often move very quickly.

The greatest obstacle to using Market Alert is psychology. The model will usually announce a buy or sell signal that contradicts the prevailing market mood of fear or euphoria.  Going against the grain can be emotionally difficult for some people but it is essential for success.  Fortunately, Market Alert only changes its position, at most, twice a year.

When a buy or sell condition is detected TNF will send you an email.  There’s no need for you to watch the market every day.  In 25 years, the Nogales Market Alert has only made 12 round-trip trades and 4 have been in the risky market of the last few years.  The results have been very profitable. 

What drives stock prices?
The stock market’s general trend is based primarily on changes to corporate earnings. Earnings drive capital investment and dividend payouts. That’s why the shares of individual companies will soar or slump based on news. The stock market churns in a constant flux due to political issues, tax concerns, economic variables, and other issues that can affect corporate profits. The underlying economy grows based on fundamentals like jobs, credit, and other measures. Investor reaction to information drives market valuations up and down. When the valuation gets too high the market “corrects”. If valuation is too low it “rallies”. Over time, the extremes always return to the historical trend.  The ebb and flow of stock prices is a natural process.

Why do most investors lose money in the stock market?
Investor psychology causes many people to enter or leave the market at the wrong time and these timing mistakes can devastate investments.  People usually invest based on news and large market players manipulate much of it.  Also, most financial magazines and web sites are staffed by inexperienced people under the age of 30. Investors listen to this garbage and sell into rapidly falling markets based on negative news or buy only to see their shares fall even lower.  Buy and sell points need to be based on indicators that closely correlate with long-term actions soon to be taken by the large institutions.  The Nogales Market Alert model indicates a buy or sell very close to market turning points thus lowering risk.

Can Market Alert be used to time the purchase of sector funds or stocks?
The model buys when the market is unlikely to go down.  It sells when the market is at risk. Clearly, if the general trend is up then some sectors will do better than others.  TNF doesn't offer a sector strategy. Sector funds can be risky and are only suitable for the most enterprising investors.

Can I subscribe and get notification when the Market Alert changes its position?
Yes. Sign up for free Alerts on our main page. Your address will be kept totally private and will not used for any purpose except to send you alerts. I also send a monthly update newsletter about once a month - it contains no ads and I sell nothing. In the meantime please do not trade based on the web site.  The model sometimes is only in the market for a month and I may not update the web site in a timely manner. Get on the Alert list.

Copyright 2005, Thomas Nogales Financial, LLC