Thursday, July 19, 2018

7/19/2018 Sector Whipsaw

The Sector Model has changed its call from XLP to XLI.  Since it is less than the 3 day window in my account I'll be staying in XLP.


Wednesday, July 18, 2018

Tuesday, July 17, 2018

7/17/2018 Potential Sector Trade

Unless there is an unfavorable gap, the Sector Model will sell XLI and buy XLP tomorrow.

**a gap is between the sell and the buy.  In a positive gap the sell is up relative to the buy.  So if XLI is down 2% but XLP down 3% that is a 1% favorable gap.

Sunday, July 15, 2018

7/15/2018 The Market is Waterlogged


Sector Model
XLI
-0.08%
Full Model
Date
Return
Days
BT
8/11/2015
-54.10%
1069
TMK
11/23/2015
41.28%
965
NVR
12/16/2015
87.06%
942
CMP
2/19/2016
5.42%
877
NVR
2/22/2016
94.94%
874
AMWD
3/17/2016
34.16%
850
CASY
5/12/2016
-2.70%
794
AEM
6/7/2016
-7.76%
768
ESRX
6/13/2016
7.34%
762
AMED
6/16/2016
86.56%
759
FRO
6/27/2016
-25.88%
748
ASTE
7/12/2016
6.01%
733
MFC
9/1/2016
41.55%
682
SFM
9/8/2016
13.26%
675
CFFN
9/12/2016
2.40%
671
FOSL
5/11/2017
76.66%
430
HIBB
7/25/2017
78.24%
355
FOSL
7/27/2017
131.07%
353
HZO
8/1/2017
39.73%
348
BCE
5/31/2018
8.05%
45
(Since 5/31/2011)
S&P
Annualized
10.82%
Sector Model
Annualized
13.49%
Full Model
Annualized
15.68%
S&P
Total
107.84%
Sector Model
Total
146.37%
Full Model
Total
182.23%
Sector Model
Advantage
2.68%
Full Model
Advantage
4.86%
Previous
2018
S&P
98.38%
4.77%
Sector Model
172.95%
-2.39%
Full Model
145.63%
14.90%



Lots of motion sickness in the market.  Given the five year holding period for each stock on the model, so far it’s mostly noise.



The industries in the buy-zone, however, tell a bleak picture:



ADVERT
ENGCON
FUNL SVC
FURNITUR
GROCERY
HLTHSYS
NWSPAPER
REINSUR
TELEQUIP
TELUTIL
WATER



Nothing exciting?  It gets worse: the most interesting stock I would buy today (if I were due for a rotation), is AWK, American Water Works.



When the best stock in the universe appears to be a water company, we aren’t looking at good times ahead.



Tim






Tuesday, July 10, 2018

Thursday, July 5, 2018

7/5/2018 Probable Sector Trade Tomorrow

Unless there's a negative gap, the Sector Model is calling to sell XLI and buy XLP.

A negative gap would be XLI down relative to XLP.  If that happens I'll wait until the gap closes.

Sunday, July 1, 2018

7/1/2018 Corrections create opportunities


Sector Model
XLI
-1.54%
Full Model
Date
Return
Days
BT
8/11/2015
-55.09%
1055
TMK
11/23/2015
37.59%
951
NVR
12/16/2015
79.08%
928
CMP
2/19/2016
4.63%
863
NVR
2/22/2016
86.62%
860
AMWD
3/17/2016
33.94%
836
CASY
5/12/2016
-6.34%
780
AEM
6/7/2016
-7.13%
754
ESRX
6/13/2016
1.71%
748
AMED
6/16/2016
69.63%
745
FRO
6/27/2016
-17.70%
734
ASTE
7/12/2016
3.10%
719
MFC
9/1/2016
41.40%
668
SFM
9/8/2016
12.14%
661
CFFN
9/12/2016
4.22%
657
FOSL
5/11/2017
86.08%
416
HIBB
7/25/2017
74.81%
341
FOSL
7/27/2017
143.39%
339
HZO
8/1/2017
27.61%
334
BCE
5/31/2018
3.76%
31
(Since 5/31/2011)
S&P
Annualized
10.41%
Sector Model
Annualized
13.65%
Full Model
Annualized
15.45%
S&P
Total
101.67%
Sector Model
Total
147.64%
Full Model
Total
176.76%
Sector Model
Advantage
3.25%
Full Model
Advantage
5.04%
Previous
2018
S&P
98.38%
1.66%
Sector Model
172.95%
-1.89%
Full Model
145.63%
12.68%





The Full Model took a huge hit, falling from 19% up for the year to less than 13%.  It’s heavily invested in retail stocks, and the Sector Model is heavily invested in Industrials.  One WOULD think from the selections that the economy should be in a bullish phase, but it’s important to note the nature of the model: mean reversion instead of momentum.



In a momentum based model, the current trends are being followed.  In a mean reversion model, the previous trends are analyzed to see which trend is most likely to exhaust itself and reverse.



Although the model is normally better than a passive index stock, a true correction can still cause temporary losses.  In fact, the most bearish sector on the model is XLI, and I always grit my teeth when I see it show up.  I even tried to find ways to short the market when that sector showed up, but shorting is ultimately a losing proposition.



The general market does not like chaos, but chaos creates opportunities for selective (i.e. value) investing.  The strategy isn’t to avoid loss, but to gain more after a correction than is lost by the correction.



Tim