06/07/2012 new realtime feature

Condition	Bear Market
S&P Target	1220
Small Portfolio	IAU & XLF	3.87%
Margin (short)	XLK	6.68%
Position	Date	Return	Days
GCI	7/14/2011	-3.79%	329
CSGS	10/3/2011	30.78%	248
NLY	10/25/2011	8.42%	226
KBR	10/27/2011	-11.84%	224
VG	10/27/2011	-45.90%	224
BT	1/4/2012	2.47%	155
PDLI	3/7/2012	5.55%	92
CLF	3/19/2012	-31.65%	80
SAI	5/30/2012	3.52%	8
XEC	6/5/2012	-0.16%	2
S&P	Annualized	-2.20%
Small Portfolio	Annualized	3.79%
Mousetrap	Annualized	3.73%
Margin	Annualized	10.27%

After a bit of work, I’ve developed a real time version of the sector model that can alert me during the day of a change in position.

Today was the first trade, and it worked rather well: the XLU short was covered (with a 7.3% loss) and replaced with a short position in XLK – the technology sector.

At the end of the day XLU had gone up another .5% and XLK had gone down .95%, for a 1.45% advantage.

The only drawback on all of this is that I’m a normal person who doesn’t have time during the day to devote to the stock market.  But I CAN devote two minutes to a quick update on the blog for anyone subscribed to blog email alerts.

These trades will not happen that often.  Perhaps an average of one every month (several in some months and none in others).  But it is generally more profitable to trade after the market has shifted during the day, rather than having to trade at the open.  If anyone wants these you are welcome to post your email in the blog alert box.

The market is a dangerous place for long or short positions at the moment.  China, Europe, the Fed are tossing the market in conflicting directions.

The political machinations will have an effect as well.  In 2008 the better President Obama did in the polls the worse the stock market did.  The worse the stock market did the better President Obama did in the polls.  It was a perfect tailwind in his favor.

Now it will be the opposite.  The better the stock market does, the better Obama will do in the polls; the better Obama will do in the polls the worse the stock market will do.

The stock market and the polls between Romney and Obama will therefore quick likely be range bound.

That’s not a political observation.  Both sides agree that Obama and Wall Street don’t like each other – and Obama will say so himself.  My observation is not related to who will be a better (or worse) President.  It’s simply an observation regarding investor perceptions and the relationship between stocks and Presidential re-election campaigns.

Historically stocks do best when there is a Democrat President and a Republican Congress.  My own theory is that Republicans like to spend money on foreign policy and Democrats like to spend it on domestic policy.  Since the presidency controls foreign policy and congress controls domestic policy, the combination of a President who doesn’t like to spend in his arena and a Congress that doesn’t like to spend in its arena will collectively waste less money.

We only really get in trouble when one party controls the whole shebang and can spend as much as they want on their pet projects.

Gridlock is your friend.  I believe the framers of the constitution called it something like… “checks and balances…”

So much for politics.  I do have my own preferred candidate and party (or shall I say, slightly less disliked candidate and party), but this is not a political blog.

It’s an investment blog.

The direction of the market is anyone’s guess.  My friend Len called an uptick in the market at the end of last week and nailed this uptick.  My own model is less sensitive and is still bearish, with an S&P target of 1220. 

In these days of great danger and great intervention, the market is less about the economy than it should be.

Finally, those on the email list will find attached the report of the Beta Test period from 5/31/2011 to 5/30/2012.  It has the history of the trades, their dates, returns, and comparison with several control sets.  I’ll be happy to answer any questions that might come up.

Good luck out there!

Tim