Web tool The Wizard calls market ups, downs like magic
<!--googleoff: snippet-->[SIZE=-1]02:48 PM CST on Monday, February 22, 2010
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I've got a brand-new little toy in my toolbox of ideas, and I want to use it to inflict some agitation on the buy-and-hold crowd.
In case you don't know who you are, I'll remind you: You're the ones who sat by and dithered during the 2008 and early 2009 stock-market devastation as your retirement portfolio withered.
All the while, the only advice your broker or financial adviser could give was for you to just stay the course and everything would be fine. Well, everything was not fine, and it may take many years for you to get back square.
The point is that huge shifts in the stock market, either up or down, usually telegraph themselves – not always, but often enough. Investors don't have to sit by idly and be victimized by the market.
And that's where my new little toy comes in. It's called TheWizardNetwork.com. Think of it as an online investing newsletter. You have to subscribe to The Wizard, and it's kind of pricey – $299 to sign up and then $99 a month.
But boy, is it ever fun, informative and, as best as I can tell, deadly accurate in alerting subscribers to major up and down moves in individual stocks, in market sectors and in the market in general. It signals the best times to buy or sell stocks, exchange-traded funds, and even futures and currencies if you're into that sort of activity.
It will also help subscribers determine the price at which to sell their holdings.
"What we do better than anybody else is call market direction," said founder Gene Stunkel, 67. "I have back-tested this system back 20 years, and we never have missed a major market turn."
Stunkel, who lives in Nevada but is in the process of moving the company to Dallas, developed the software that runs The Wizard from 2003 to 2006. He began marketing it to subscribers in early 2008 and now boasts "thousands of customers in every state and 92 countries."
Space doesn't allow me to go into much detail about how the system works, but the Web site has an easy-to-follow free tutorial. Basically, Stunkel uses five computer servers to monitor 8,000 stocks and ETFs. The software tracks each stock's highs and lows for the day and the volume of shares traded.
Every stock has what technical analysts call a support level on the downside and a resistance level on the upside. It's the range in which a stock price typically moves.
The Wizard signals when a stock's price is about to break through one of those levels. If enough stocks start breaking through either support or resistance levels, it could mean a big move is coming in an entire sector or the entire market.
I checked out some of the big market turns in recent months to see if The Wizard made the right call. It did. For example, subscribers to The Wizard were correctly getting bearish signals through most of 2008 and early 2009.
It turned bullish in early April 2009, so subscribers caught most of last year's huge upswing. The Wizard correctly turned bearish again in late January, just as the market started selling off.
Subscriber Mike Shanley, 54, of Dallas is probably typical of many who use the service. He became disillusioned with the buy-and-hold philosophy during 2008 and decided he could do as good a job at managing his money as his broker could.
"I kept listening to the people at my brokerage company, and my account just kept going down," Shanley said. "I let my broker talk me out of going to cash in the fall of 2008, and I lost another 30 percent."
Shanley, who works for Real Workspaces, an online repository to organize documents for real estate transactions, is not some kind of raging day trader. He carefully analyzes market trends using The Wizard and then places the order at Fidelity, where he has a retirement account. (The Wizard doesn't handle subscriber money.)
His current positions in cash and stocks reflect The Wizard's bullish signal, which began flashing on Friday.
"I know I have done better over the past year using The Wizard than my broker would have," he said. "I have lost faith in buy-and-hold."
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