01/26/2013 Rotation, and note on position sizes

Small Portfolio	XLU & IAU	19.69%
Sector	XLU	31.86%
Secular	IAU	7.53%
Large Portfolio	Date	Return	Days
RIMM	7/16/2012	141.93%	194
SEAC	9/25/2012	35.37%	123
CAJ	9/25/2012	7.56%	123
DDAIF	9/25/2012	13.70%	123
CFI	10/31/2012	41.17%	87
RE	11/26/2012	9.86%	61
CGX	12/12/2012	10.59%	45
OKE	12/28/2012	12.48%	29
HTSI	1/14/2013	12.16%	12
STRA	1/22/2013	1.19%	4
S&P	Annualized	6.91%
Small Portfolio	Annualized	11.44%
Sector Model	Annualized	18.14%
Large Portfolio	Annualized	38.21%

 

Rotation: selling STRA; buying NSC

This change is somewhat bullish, since NSC is in the railroad industry, and may indicate a pickup in transportation.

One caveat is the fact that the sector model is in XLU, which has a slight negative bias for the market.  Utilities could be responding to a search for dividend yields as an alternative to bonds.

There’s no way to know.  The market is wildly overbought, but such moves can last a while, and timing is almost a useless exercise for most folks now that Bernanke is pushing yet another round of QE through the end of this year.

My gut tells me to jump and run, but part of this open test is to see the performance of the model in all market environments – which will include a bear market whenever it does come.

So far the model is doing well, but doing well in a bull market is the easy part.  Holding your own against a bear is quite another.  We’ll find out one of these days.

Quick note on position sizes and holding periods.  The model is designed for positions no smaller than 2000 dollars in a taxable account, or 1000 dollars in an IRA.  Those are the EXTREME low ends for a position to withstand trading costs in short term trades.  Any position of lesser value should be held long term – and we have not yet found the endpoint on long positions, so it could be as long as two years a trade.

Tim