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Jack Schannep’s Sweepstakes

| Last Updated: November 9, 2012 | Posted in: Individual Gurus

Guru Accuracy Rating
This is above average. Current guru average is 47%

We evaluate here the market commentary of Jack Schannep, previously available via Zacks.com (since removed) and currently available via MarketWatch since July 2002. Jack Schannep, editor of The DowTheory.com and author of Dow Theory for the 21st Century: Technical Indicators for Improving Your Investment Results, claims that “[o]ur interpretation of The Dow Theory…and our proprietary Timing Indicator have successfully timed and beaten the stock market over many years.” The table below quotes forecast highlights from the cited source and shows the performance of the S&P 500 Index over various numbers of trading days after the publication date for each item. Grading takes into account more detailed market behavior when appropriate. Red plus (minus) signs to the right of specific forecasts indicate those graded right (wrong) based on subsequent market behavior, while red zeros denote any complex forecasts graded both right and wrong. We conclude that:

  • As the title of his newsletter indicates, Jack Schannep is a Dow  Theory market timer who uses Exchange Traded Funds (DIA and SPY) as  trading vehicles.
  • He sometimes cites historical parallels with very small samples and therefore  low statistical significance. It is sometimes difficult to extract a testable  stock market forecast from his commentaries.
  • Jack Schannep’s forecast  sample size is small, so confidence in the measurement of his accuracy is low.

Here are additional notes to augment the tabular summary:

From Mark Hulbert in MarketWatch (11/9/12): “according to the Hulbert Financial Digest, Schannep’s version of the Dow Theory has had the best record of the three [comparing to Richard Russell and Richard Moroney] over the last decade.”

From Mark Hulbert in MarketWatch (5/30/12): “The HFD has data back to the beginning of 2002 for three hypothetical portfolios that traded between an index fund and cash on these three timers’ interpretation of the Dow Theory. Schannep is well in the lead for performance since then, followed by Moroney. Russell is solidly in third place.”

From Peter Brimelow in MarketWatch (5/3/10): “Over the last three years, the Hulbert Financial Digest shows him up 8.1% annualized compared to negative 3.83% annualized for the total return Wilshire 5000.”

From Peter  Brimelow in MarketWatch (10/8/08): “Over the past five years,  [TheDowTheory.com] has achieved a 7.31% annualized gain, vs. 6% annualized  for the total return DJ Wilshire 5000.”

Jack Schannep offers on his web site a head-to-head “Dow  Theorist’s Sweepstakes” pitting his timing calls against those of Richard  Russell and Richard  Moroney starting in August 1998. See “Dow Theory Long Dead?” for an analytic reconsideration of Dow Theory as a timing strategy by Stephen Brown, William Goetzmann and Alok Kumar.

This evaluation incorporates all adjustments described in exchanges with Jack Schannep.

See Mr. Schannep’s article “Market Timing and Current Market Conditions” for his own thoughts on forecasting.

See Guru Grades for a snapshot of the accuracy of various experts in predicting the direction of the U.S. stock market, including links to evaluations of the commentaries of other individual market pundits and gurus.

    S&P 500 Index  
Date Comments from:  Jack Schannep via zacks.com           and MarketWatch.com 21-Day Return 63-Day Return 126-Day Return 254-Day Return  
11/9/12 …on his reading a Dow Theory sell signal was triggered on Nov. 7… 3.5% 9.9% 18.4% 29.1%
5/18/12 …according to Dow Theorists such as Schannep…, the Dow Theory remains on a buy signal today. 4.8% 9.3% 5.0% 27.4% +
2/7/12 …Schannep…believe[s] that the Dow Theory is solidly in the bullish camp… 1.4% 1.8% 3.5% 12.8% +
8/1/11 The crucial levels to watch…for both the Dow Jones Industrial Average DJIA and the Dow Jones Transportation Average DJT [are] at 11,897.27 and 5,060.59, respectively. If both averages fall below these levels, it would be quite bearish according to the Dow Theory… -5.8% -0.2% 2.0% 6.1%
3/18/11 …Schannep remains solidly in the bullish camp.  2.0% -0.9% -5.5% 9.7% +
12/13/10 …an “in the clear” signal for the bull market would require…the Dow to play catch-up. [Dow “caught up” at the close on 12/14/10.} 3.7% 4.5% 2.5% -2.3% +
7/26/10 …Jack Schannep…interpret[s] the Dow Theory as still being on a sell signal.  -5.7% 5.9% 15.1% 17.0% +
5/21/10 …the bull market’s fate rests with how stocks do in their first significant attempt to rally off of whatever low is set during this pullback. If they fail in that rally to surpass the April highs, and then close at new lows, a sell signal will indeed be triggered. But not until then.  0.7% -1.1% 8.4% 21.0% +
5/3/10 He thinks [the Dow Theory buy signal is] still in force… -8.6% -8.4% -1.5% 12.1%
10/16/09 …he issued a Dow Theory buy signal early last April, so he has been enjoying the market’s rally ever since.  2.0% 4.4% 10.1% 8.3% +
7/23/09 “…the Dow Jones Transportation Average finally moved above its May, June and July triple top, a very bullish pattern.”  5.1% 11.8% 14.4% 14.1% +
6/12/09 “The bear market lows are behind us, the bull market is upon us, and an economic expansion is ahead of us. …this is the ‘sweet spot’ in the stock market…” -4.3% 10.3% 15.8% 17.8% +
2/19/09 “We’ve been giving this stock market the benefit of the doubt this year, and all it’s given us back is grief … The Dow Theory returned to a Sell mode earlier this month, and reaffirmed that status at today’s close … I am therefore suggesting a further bailing out of the stock market to just a 33% invested position…” -1.3% 16.6% 27.1% 40.5% +
2/2/09 “…today the Dow Jones Industrials and the Transports closed below the January lows. That is a Dow Theory Sell signal … Therefore, I suggest lightening up.”  -13.6% 6.3% 19.6% 28.8% +
11/3/08 “From now on…we will want to be mostly in stocks for most of the time. …Next year, about the time the recession is over, the market should be 40 or 50% higher than now.” …he is looking for “a successful retest of the lows” before he goes back to 50% invested. -9.9% -13.2% -6.5% 10.4%
10/8/08 “Today’s [10/7/08] collapse in the stock market is what we have been looking forward to all year — the end of the bear market! … Yes, today we reached capitulation and that is the time to buy. I suggest investing 50% into the market now… The last time we had such a signal was on October 9th, 2002, the start of that 5 year bull market.” -8.1% -7.9% -16.2% 9.3%
6/23/08 …Jack Schannep…put out an alert Sunday night that he has just gone to 100% cash. -2.7% -4.8% -32.8% -30.2% +
4/9/08 With neither of the Dow Theory nor the Schannep Timing Indicator anywhere near changing to a buy, in the absence of capitulation, [the Composite Timing] Indicator remains firmly in the Sell mode. 2.5% -6.0% -22.0% -36.6% +
11/21/07 100% sell… 4.8% -4.5% -1.6% -39.9% +
10/26/07 …he still remains comfortable with a 50% in the market and 50% in cash position. -7.0% -11.8% -9.4% -39.4% 0
9/24/07 It’s kind of scary and that makes a 50%-50% investment/cash position all the more comfortable, right in line with the fifty-fifty odds of this market rising or falling. 0.1% -3.8% -10.9% -20.3% +
8/27/07 The Dow Theory gave a Sell signal… That points to selling one-half of your stock market exposure to a stance of ‘half IN, half OUT. That’s my ‘When in doubt’ posture. What does it mean – a bear market and a recession? Yes, that is the usual result. …it is not unlikely for one to occur in 2007 or perhaps not until 2008.” 4.0% -1.8% -5.8% -11.3% +
8/15/07 Jack Schannep…turned bearish 5.5% 2.3% -2.8% -9.1%
3/15/07 …not all Dow Theorists are currently bullish…two of the three Dow Theory services…are — Moroney’s as well as Jack Schannep’s TheDowTheory.com… 5.1% 8.9% 5.7% -4.4% +
12/22/06  Schannep…had warned subscribers…sell advice might be forthcoming, when in his most recent issue he wrote “If the Transports do not make new highs shortly, I will begin scaling out at or near these highs. First, by selling 10% and then more. I will let you know when I start.” He has now started.  0.8% 1.3% 5.8% 4.8%
11/7/06  If there were nothing to worry about the market would be at 16,000 or thereabouts, and one day it will be, but in the meantime expect a bear market and recession to occur first. A 25% rise from here just does not seem to be in the cards… 1.8% 4.7% 8.9% 4.1% +
8/12/06 …the 2002-2006(?) bull market…be cautious… 3.9% 8.7% 13.9% 14.0%
7/5/06 …not expecting a sell signal and a bear market and a recession…just yet… 0.7% 4.8% 11.5% 18.8% +
5/5/06 Interest rates are rising, but not too much to disturb the stock market. -4.7% -3.4% 3.2% 13.6%
4/7/06 …he expects this bull market to continue…stay fully invested. 2.3% -2.3% 4.5% 12.1% +
1/6/06 …Schannep is expecting the 8.7% gain needed to attain new highs, but the surprise in 2006 may be the extent of the upside. …if you are not fully invested, as recommended in this letter throughout 2005, it would be appropriate to do so now on the first trading day of 2006. -2.4% 1.8% -1.6% 10.8% +
12/2/05 …we have been in a bull market since…October 9th, 2002…, but there is still a group of advisors who see the current situation as a bear market [because] the market…is still below the all-time high of 11,722.98 on January 14th, 2000 and is therefore in a bear market…Schannep DOES expect [10,940.55 and 11,722.98] to be attained, the first this month, the next next year. 0.7% 1.0% 0.0% 11.7% +
9/2/05 This economic expansion looks like it will continue well into next year at least, and that augers well for the stock market. -0.3% 3.8% 4.9% 6.2% +
8/5/05 Some years there is an August-October dip in the market. If it happens this year Schannep would use it to add to positions. 0.6% -1.0% 3.1% 3.2% +
7/8/05 [The stock market is] boring, but we’ve seen boring before (nearly every summer), and that alone is not a reason to abandon the market. Time is on the side of this market, and timing is on your side, so let’s let it play itself out. 0.9% -1.3% 5.1% 3.9%
6/10/05 …continue to watch from the vantage point of being fully invested…, and “listen to the market” for a clue as to whether this year will be a winner or a loser. The former is probable but the later is possible… 2.0% 2.8% 4.9% 2.7% +
5/6/05 …price to earnings ratios around 15 ½ and yields about 2 ½ % are not outrageously attractive, but neither are they outrageously out of line. Could the market just be going through yet a third secondary reaction in the ongoing bull market on its way to a typical third year’s gain of just 9% to 10,960 by October 9th? Well, yes it could… 2.2% 5.5% 3.7% 12.9% +
4/8/05 New record volume speaks favorably for the stock market’s peak being further ahead of us…this is a time to “keep the faith”, hold investment positions, and hope for and expect a better prospect as we move forward. -0.2% 1.4% 1.3% 8.9% +
3/4/05 Stay fully invested and enjoy the ride… -3.3% -1.5% -0.1% 4.6%
2/4/05 …the outlook for the market this year is…reasonable…one should continue with a favorable attitude until and unless there are reasons to change. 1.4% -2.5% 2.7% 5.2% +
1/7/05 [Expect] an all-time high for the Dow Jones, but not for the S&P 500 or the NASDAQ. 1.4% -0.4% 2.2% 9.1%
12/3/04 …2005 will be an up year. -0.3% 2.6% 0.4% 6.1% +
11/5/04 …2004 will be positive. 0.9% 3.2% 0.4% 4.5% +
10/8/04 The market is hanging within 6 to 8% of the highs which is encouraging and points to merely being a correction and/or consolidation in a Bull market. …this is a pretty good time to keep “some powder dry” with 75% invested and 25% ‘in cash’… 3.8% 5.9% 5.3% 5.6%
8/6/04 The Dow Theory could be forming a Sell signal and the Schannep Timing Indicator is also apparently forming a Sell signal. …Caution would seem to be the best approach for the moment. 5.4% 7.4% 11.8% 15.7%
7/9/04 …the second half of the year will see even more highs. -4.3% 2.6% 6.4% 9.8% +
6/4/04 …strong earnings growth is more of a positive factor than higher interest rates is a negative one. -0.4% -0.4% 6.0% 6.4%
5/6/04 …the markets will not be impacted by interest rates until they are quite a bit higher. 2.4% -3.0% 2.6% 4.7%
4/8/04 …history is on the side of the bulls moving forward…we are still in a bull market… -4.6% -2.3% -0.8% 3.0%
3/9/04 …stick with the major [bullish] trend. 0.0% 0.0% -1.7% 5.2%
2/5/04 [The Dow will] reach the all-time high of 11,722 by year end… Reasons to buy are all around, but excuses to sell are few and far between… 1.6% -0.6% -4.2% 6.5%
1/9/04 …some consolidation around the 2002 highs would be logical, before moving higher…the economic prospects do look good for the ‘foreseeable future’. 2.1% 1.6% -0.7% 5.9% +
12/11/03 …[expect] the Bull market to continue. 4.7% 4.6% 5.0% 12.6% +
11/14/03 The market continues to zig/zag its way upward. The keyword is upward! 2.4% 10.2% 3.2% 12.7% +
10/3/03 [No] market top is…is in sight 2.8% 7.6% 10.9% 9.8% +
9/3/03 …this Bull market that started last October has “a ways to go.” All…indicators are in a full BUY mode. -0.6% 4.3% 12.2% 9.3% +
8/1/03 …the market is poised for a very nice long-term bounce. 4.3% 6.9% 15.4% 10.3% +
7/3/03 There are short term indicators that suggest a consolidation or even a setback, but not the end of the Bull market… Indicators are in Buy modes… -0.3% 3.3% 12.8% 12.5% +
6/6/03 With all…indicators in a Buy mode…10,000 on the Dow Jones looks like a ‘done deal’. 2.0% 4.1% 7.8% 14.5% +
2/13/03 …with world events so incredibly precarious it seems prudent to be half in and half out, waiting to see what happens next. 5.6% 14.9% 20.4% 40.9%
11/13/02 At the two lows this year…the market was in total capitulation both times. That’s only the third time in the last 50 years that such a double capitulation has occurred…take a position now… 0.8% -7.4% 7.3% 18.3% +
8/16/02 “…cover short positions and even perhaps make commitments for long account”…is exactly what Mr. Schannep recommended to his subscribers by e-mail last month just before the markets bottomed out and turned up from the 7702 low. -5.9% -5.0% -10.1% 7.7%
7/17/02 How and when this Bear market will end…is still an open question… The markets are approaching capitulation at this time… 2.7% -7.1% 2.8% 8.0% +
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