7/28/2015 Trade Notice

The Full Model sold CAJ and bought AHC with a 1% favorable gap.

7/26/2015 Nothing in the Tea Leaves

Sector Model	XLU	2.10%
Full Model	Date	Return	Days
PWR	3/9/2015	-4.69%	139
CBI	4/2/2015	2.10%	115
MTZ	4/9/2015	-11.02%	108
DRQ	5/15/2015	-20.26%	72
RES	5/19/2015	-18.02%	68
SPN	5/28/2015	-21.28%	59
NOV	6/23/2015	-14.12%	33
INT	7/7/2015	-0.29%	19
CAJ	7/14/2015	-1.99%	12
GAS	7/21/2015	-1.17%	5
(Since 5/31/2011)
S&P	Annualized	11.06%
Sector Model	Annualized	17.87%
Full Model	Annualized	14.32%
S&P	Total	54.60%
Sector Model	Total	97.96%
Full Model	Total	74.32%
Sector Model	Advantage	6.81%
Full Model	Advantage	3.26%
	Previous	2015
S&P	53.06%	1.01%
Sector Model	122.60%	-11.07%
Full Model	101.13%	-13.33%

 

Not much to comment: the mean reversion continues.

 

The Sector Model is still slightly above benchmark, which isn’t comforting in the least.

The sector ratios are continuing to indicate a likely bear or correction in the broad market.

The full model is also showing the beginnings of defense in its industry selections:

ADVERT	Bull
CHEMDIV	Bull
HEAVYTRK	Bull
PIPEMLP	Bull
COAL	Top
OILGAS	Top
INSLIFE	Bear
NWSPAPER	Bear
POWER	Bear
TELESERV	Bear
WATER	Bear

 

Meanwhile, my OILFIELD stocks have all been slammed hard.

No guidance from the Fed, and I wouldn’t trust it if we had it. There are just too many variables out there for anyone to say for sure what the near term will bring.

Wish I could say more, but all I can do it update my numbers and grit my teeth while this storm passes.

Tim

 

 

 

7/21/2015 Trade Notice

The Full Model sold PKX and bought GAS with a 2% favorable gap.

7/14/2015 Trade Notice

The Full Model sold CRR and bought CAJ with a 4% favorable gap.

7/12/2015 Summary of the Model

Strategy Description

The “Mousetrap” selects industries that appear to be experiencing panic washouts, which would cause their representative stocks or ETFs to be selling at a discount to their growth potential.

Rather than timing market momentum, then, the model looks for mean reversion. It is primarily a defensive model which performs with greater alpha in bear markets than in bull markets.

The one weakness appears to be at the end of a major market trend, when mean reversion gives way to euphoria at a market top or despair at a market bottom. There can be no exit strategy for these events, since the terminal ranges for trends are far shorter than the typical lifetime of the trend itself. In other words, by the time someone would exit, the model would be ready to recover.

Methodology

Breadth, Volume, and Price tend to work in parallel.  The technical aspects of the model measure long term discrepancies between volume, breadth, and price. When the median return rate of an industry is significantly underperforming breadth and volume, the model selects an ETF or stock that is likely to track that industry.

Since stock selection cannot be back-tested, the technical ETF version will be used to compare back-test and live trade returns (since 5/31/2011).

Yearly Returns
	Sector	S&P	Alpha
2014	36.12%	11.39%	24.73%
2013	42.36%	29.60%	12.75%
2012	28.95%	13.41%	15.54%
2011	6.23%	0.00%	6.23%
2010	17.54%	12.78%	4.75%
2009	58.07%	23.45%	34.62%
2008	-16.37%	-38.49%	22.12%
2007	21.85%	3.53%	18.32%
2006	17.82%	13.62%	4.20%
2005	-0.49%	3.00%	-3.49%
2004	30.96%	8.99%	21.96%
2003	36.48%	26.38%	10.10%
2002	-7.58%	-23.37%	15.79%
2001	25.68%	-13.04%	38.72%
2000	18.47%	-10.14%	28.61%
1999	35.30%	19.53%	15.78%
Trailing Returns
	Sector	S&P	Alpha
YTD	-9.72%	0.86%	-10.58%
1 Year	0.00%	5.70%	-5.70%
3 Years	103.02%	54.80%	48.22%
5 Years	203.88%	92.64%	111.23%
10 Years	443.16%	69.91%	373.25%