10/21/2012 selling AF; buying WMK

Small Portfolio	XLF & IAU	18.53%
Position	Date	Return	Days
DECK	6/15/2012	-22.73%	128
RIMM	7/16/2012	7.03%	97
OKE	9/25/2012	-0.40%	26
SEAC	9/25/2012	2.33%	26
CAJ	9/25/2012	-5.15%	26
DDAIF	9/25/2012	-2.31%	26
SSD	9/25/2012	0.00%	26
AF	9/25/2012	-4.11%	26
AM	9/25/2012	15.42%	26
NSC	10/8/2012	-1.88%	13
S&P	Annualized	4.69%
Small Portfolio	Annualized	13.30%
Large Portfolio	Annualized	17.12%

 

Scheduled rotation: selling AF; buying WMK.

AF is in the Thrift industry, which is losing breadth and money-flow relative to other industries.  WMK is in the Grocery industry, which is showing technical strength.

This is a net negative for the broad market, since Grocery is a defensive industry.

In any case, WMK is the last selection to be made on a pure Benjamin Graham style fundamental filter.  The model now has enough data to begin a self-adjusting fundamental selection process.  Fundamentals will progressively fine tune to best perform in the specific technical environment selected by the model.  Rotation periods and fundamentals will each self-adjust to the other until they reach long term equilibrium.

Don’t really have much to say about the broad market.  It’s under obvious pressure, but the most pressure is on defensive sectors like utilities.  So far it’s a healthy pause.  We’ll see how long that continues.

As always, a negative gap between AF and WMK will prevent the trade.

Tim