Wednesday, September 30, 2015

Tuesday, September 29, 2015

9/29/2015 Sector Note

On Friday the Sector Model switched to XLV.  I was able to make the trade but was not able to access the blog remotely.

From what I've seen, that was a lucky break for anyone following the blog...

Tuesday, September 22, 2015

Monday, September 21, 2015

Sunday, September 20, 2015

9/20/2015 S.N.A.F.U. trading

Sector Model
XLE
-0.02%
Full Model
Date
Return
Days
PWR
3/9/2015
-13.24%
195
MTZ
4/9/2015
-8.07%
164
DRQ
5/15/2015
-17.90%
128
INT
7/7/2015
-21.68%
75
BT
8/11/2015
-10.74%
40
TM
8/12/2015
-7.90%
39
MMP
9/4/2015
-9.79%
16
CPK
9/8/2015
2.73%
12
ARLP
9/16/2015
0.77%
4
ED
9/17/2015
2.36%
3
(Since 5/31/2011)
S&P
Annualized
9.11%
Sector Model
Annualized
17.43%
Full Model
Annualized
12.15%
S&P
Total
45.56%
Sector Model
Total
99.78%
Full Model
Total
63.83%
Sector Model
Advantage
8.32%
Full Model
Advantage
3.04%
Previous
2015
S&P
53.06%
-4.90%
Sector Model
142.84%
-17.73%
Full Model
101.13%
-18.55%


NOTE on XLE – in live trading I moved to XLI at 3:59, with XLE swinging back into the lead by a hair after the close.  If there is a favorable gap on Monday, I’ll move back to XLE in the morning.

The last three selections of the Full Model with the corrected adaptive metrics is a positive start.  Hopefully there will be no more disasters in that model.  That said, the true role for the Full Model will start to shift to long term holding during 2016.

But no major changes at the moment.

The Sector Model is right on its long term trend-line:


 
And the Sector ratios are still bearish:




Both models have suffered bear market style losses, even though the market averages haven’t gone further than a “correction.”  Unless someone is holding SPY, market averages aren’t all that meaningful.  Sectors and Industries have to crash in sync in order to be fully reflected in the averages.  If they decline in sequence investors will feel the pain of a bear and wonder why they are doing worse than if they were completely passive.

Active trading exacerbates both returns, and losses. And this year has been a time for the latter.

This is both normal, and painful. More, likely, is to come.

Tim


Friday, September 18, 2015

Tuesday, September 8, 2015

Sunday, September 6, 2015

9/6/2015 Out of the Fed's Hands

Sector Model
XLE
-0.41%
Full Model
Date
Return
Days
PWR
3/9/2015
-16.38%
180
CBI
4/2/2015
-9.85%
156
MTZ
4/9/2015
-14.29%
149
DRQ
5/15/2015
-13.15%
113
RES
5/19/2015
-26.93%
109
INT
7/7/2015
-21.01%
60
BT
8/11/2015
-11.02%
25
TM
8/12/2015
-9.70%
24
JCOM
8/28/2015
-3.31%
8
MMP
9/4/2015
-1.37%
1
(Since 5/31/2011)
S&P
Annualized
8.71%
Sector Model
Annualized
17.73%
Full Model
Annualized
12.12%
S&P
Total
42.82%
Sector Model
Total
100.62%
Full Model
Total
62.91%
Sector Model
Advantage
9.01%
Full Model
Advantage
3.41%
Previous
2015
S&P
53.06%
-6.69%
Sector Model
142.84%
-17.39%
Full Model
101.13%
-19.00%


The market continues to progress through a bearish sector rotation:



 There isn’t much to be done other than to ride it out.  The sector model’s XLE position is as volatile as any sector position I’ve held.



The role of China is not a simple matter of directly related markets. Our relationship with them is not meaningful as a trade partner, since only 1% of our GDP is exported to China.  The entire country could disappear with no direct effect on our exports.

Instead, China influences our market because they need to sell our bonds, which threatens interest rates here. Schiff calls this Quantitative Tightening, “QE’s evil twin.”

Demographically this reversal of monetary easing is premature, as I’ve noted.

If Schiff is correct, this is out of the Fed’s hands.  If they don’t enact another round of easing, the foreign selling of American treasuries will have a tightening effect on its own.

And all this would overcome what I have written earlier about the market not being over-valued when divided by M1.  A contraction of M1 would require a proportional contraction of the S&P, just as QE led to the expansion of the S&P.

Just when you think you have the Fed figured out, reality takes its place…

Tim