Predictor of Turns in Market Advises That Investors Sell

One of the mutual fund industry’s most widely followed market timers has issued a “sell” signal on the stock market--for the first time since August, 1990.

Dick Fabian’s Telephone Switch Newsletter, based in Huntington Beach, put the sell out early last week. Because Fabian has 44,000 subscribers, his words carry substantial weight on Wall Street.

The Fabian timing system is completely unemotional, says Tom Lydon, a vice president with the firm: Fabian tracks an index made up of shares of five big stock mutual funds. When the index falls under its 39-week moving average--a measure of the funds’ general trend--Fabian exits.

The rationale is that a break below the trend line indicates that the market is rapidly losing strength. Conversely, Fabian issues a “buy” on the market when his fund index climbs back above its 39-week trend line--a market gaining steam.

While the Fabian system has sometimes whipsawed its followers with buy and sell decisions within days, its goal is to keep investors from getting caught in major bear markets.

In that respect, Fabian’s recent record is pretty hot. He issued a sell signal on Oct. 16, 1987, three days before the market crash of that year. Another sell came on Aug. 7, 1990--just as that year’s bear market was beginning.

After the 1990 sell signal, Fabian bought back into the market on Jan. 25, 1991, as stocks rocketed during the Gulf War. His indicator has been bullish since--until last week.