The Madison Letter


What happens when the buy/sell is close, but misses the signal by a few points?

With the Madison timing signals, we need to see the Madison score move to extremes before committing our capital. Through years of fine-tuning and development, we have determined that a score of -20.00 on our unique scoring system is where we want to start initiating long positions.

Our market philosophy is based entirely on discipline and patience. We want to take on market risk when we know the odds of success are greatly skewed in our favor. Our ultimate goal is to pinpoint 4 to 6 times a year when you want to be a buyer or seller of major indexes, sectors, groups and ETFs. An added benefit of our process is that you may not only outperform the market, but according to our current track record you will probably have achieved that gain with significantly less time spent exposed to market risk and really ramp exposure when those unique buy opportunities present themselves.

Our timing signals have been in practice here for almost 3 years and we have found that sticking to the precise scoring system and trigger points insures the highest probability of success with the least amount of risk. It should be noted that our system is dynamic and we have made several improvements to the systems as time moves forward. A static model that does not recognize the changes to the market is doomed to failure.

Why does the number move from day to day?

The system is dynamic, taking into account each day's market activity. Each day we are adding in the most recent trading day and dropping a day "off the back" So each day there is a new trigger point. It moves up or down according to the system's dynamic inputs. The exact price points that dictate the buy and sell zones represent our view of the highest probability for winning trades.

What if the Madison buy zone levels get hit intraday -- does this put us in the buy zone?

The answer is no-- a buy signal is triggered if the specific level is greater than +20 or less than -20 at the end of the trading day.

If the buy zone is hit intra-day, we will point it out in the following day's commentary. However, the best signals are always activated on an end of day close. As we develop our new website and move beyond just being inside of the morning briefing expect to see the creation of flash alerts.

Any downturn that takes a turn for the worse always has the distinct possibility that our score could go to a -35. Usually this is triggered by a geopolitical event, or washout of negative sentiment. This occurs on average about once a year, but there have been several years where the -35 never occurred.

As we enter the buy zone, we will be diligent in watching our intraday indicators to confirm that a bottom is forming, and whether the likelihood of a -35 score is decreasing. If such a scenario occurs, we will then suggest putting the remainder of your capital to work in a more aggressive fashion.

Gold and Energy Advisor interviews The Madison Letter