Elaine Garzarelli: It's All in the Timing

Bloomberg Businessweek
March 24, 2003

Elaine Garzarelli rocketed to stock market fame when she called the 1987 crash within weeks of Black Monday. These days she foresees not sharp, sudden moves but a stock market stuck in a holding pattern for years.

How do you make money in a so-called sideways market where stocks trade in a narrow range? Try to buy stocks at low points and sell after they've moved up 10% to 30% in rallies that can span a few weeks or several months. "You've got to catch the wave and get out or you'll lose it all again and be right back where you started from," says Garzarelli, who has run her own research firm, Garzarelli Capital, since 1995. (It's on the Web at www.garzarelli.com.)

We've had such markets before. A similar horizontal pattern prevailed from 1937 to 1949, says Garzarelli, as stocks struggled to recover from the Great Depression. Today, a similar process is at work as the economy and the market wring out the excesses of the 1990s.

Of course, market timing is tricky. To figure out the right time to buy and sell, Garzarelli relies on a quantitative model that weighs 14 factors such as economic trends, interest rates, investor sentiment, and stock valuations. Now, even with the market's war rally, the model is still bullish.

This article was originally published in Bloomberg Businessweek

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