daq market at 1,801 on November 2, 1998, and rode the market to the
peak of 5,049 on March 10, 2000. After moving in and out of the market
several times, the market timer would have exited the Nasdaq market at
3,896 on September 11, 2000, and stayed out until December 5, 2001,
when the Nasdaq was at 2,046, almost 50 percent lower. For those 15
months the timing strategist in Nasdaq would have avoided the most
crushing bear market since the 1929 to 1932 stock market crash.Distribution of Gains and Losses
There is no question that the 200-day moving-average strategy, even
with transactions costs, avoids large losses, but it suffers many small de-
feats. In Figure 17-3 is shown the distribution of yearly gains and losses
in the timing strategy after transactions costs and the holding strategy
for the Dow Industrials from 1886 to 2006. As noted above, the timing
strategist participates in most of the winning markets and avoids most
of the losing markets but suffers many small losses. These losses occur
when the market does not follow a definite trend. Despite the use of the
1 percent band to reduce whipsawing, investors in a trendless marketCHAPTER 17 Technical Analysis and Investing with the Trend 301
FIGURE 17–3
Distribution of Yearly Gains and Losses: Dow Jones Industrials Timing Strategy versus Holding Strategy