My name is John Lennox, I was born with an entrepreneurial streak and a passion for learning. I began studying stocks in 1998 with my father, while in high school; and opened my first brokerage account in 2000. As a business major in college, my coursework included economics, accounting, finance and investment analysis. It was there I learned how to evaluate the macroeconomic environment, contraction and expansion of the money supply, banking, and institutional finance. My investment analysis coursework was solely focused on determining investment objectives, acceptable rates of return vs risk free rate of return and the time value of money. Stock and bond return potential was based on fundamental analysis of the business’s earnings prospects and underlying conditions of its industry. I learned about asset allocation, risk management, diversification, SEC reporting requirements and tax strategies. The extent of my education on technical analysis was limited to a paragraph noting its existence whereby investors analyze price patterns to forecast price movement (amateur’s view of technical analysis).

I was fortunate in my young adult life to have the opportunity to manage several high net worth portfolios near seven figures. I was the good student/manager.My investment theses were sound, I assessed macroeconomic conditions as a measure of systemic risk. I analyzed company financial statements, 10-Q Quarterly Reports, 10-K Annual Reports, and listened to all the conference calls. I was a believer in the “random walk” theory of price behavior, and spent all day, every day watching price action, news, tracking economic calendar events, earnings announcements, and constantly re-calculating forward price-to-earnings ratios of companies and industry competitors to determine solid investment entry points for excellent businesses. This all sounds good to well-intentioned people willing and able to do the hard work of finding great investment opportunities. I mean, of course irrational exuberance exists, but the stock market is an efficient valuing mechanism based on underlying conditions of the business and economy; RIGHT?

John Lennox – Market Timer & Trading Mentor

That’s what I used to think. Especially in a bull market whereas they say, “A rising tide lifts all boats”. In a bull market, it’s easy to succumb to confirmation bias, but even then, I would be surprised at times to how stock prices would react to certain news or earnings announcements. Any difficulty rationalizing price movement was attributed to old stock market colloquialisms “Buy the rumor, sell the news”, or hedge funds closing positions at the end of quarter to lock in gains, or I would just attribute it to the random walk theory playing out; after all, this is why you can’t time the market!

My wake up call came in late 2008, early 2009 in the aftershocks of the housing bubble and ensuing financial crisis. I knew the Federal Reserve’s failure to save Lehman Brothers was a fundamental game changer and the morning after it was announced, I closed all positions in the premarket and moved to cash. The following trading day I was completely perplexed how prices could gain more than half of the previous day’s losses and was second guessing myself. The expected watershed ensued in the days that followed, in historical fashion. Prices were at rock bottom levels I never thought I would see in my lifetime.

I was unable to wrap my head around the numerous false bottoms, leading to even lower prices for strong sound businesses, when economic conditions were improving. For months I watched stock prices be indifferent to the fundamental factors of the underlying businesses. It was impossible to make heads or tails of price behavior. It was clear; fear, greed, and other forces were at work for months. I questioned everything I learned and knew to be true. This desire to understand what was happening led me into investigating the merits of technical analysis.

I started with a list of 50 technical indicators. I spent months and months charting each indicator, analyzing each one for its ability to provide insight and clarity into price behavior, as well as predictability to near term and future price behavior. I was determined to identify ways to spot near-term and long-term tops and bottoms, when I should remain invested and when I should exit. An indicator may give context to current price action, but if it does not provide valuable insight into price direction, I threw it out as worthless.

I threw out 47 indicators and ended up with three that I use to this day, that have stood the test of time, through bull and bear markets, corrections, stability and volatility. Using these three indicators, along with principles and a few sure-fire signals; that while in-frequent, are always bankable, took my trading and investing prowess to a whole new level, enhancing my decision making and clarity in seeing risk vs reward at any point in time.

Don’t be seduced into learning someone else’s trading system. Learning a system pre-canned for a broad audience is a recipe for disaster. Instead of teaching a system, I focus on expanding your awareness of market mechanics. I teach how to anticipate opportunities and identify risks. My objective is to improve your decision making, increase your accuracy in predicting price behavior; and ultimately significantly improve your trading outcomes.

John Lennox
Market Timer & Trading Mentor
jlennox@ucantimethemarket.com