9/30/2015 Trade Notice

The Full Model sold PWR and bought WEC with a 2% favorable gap.

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...

9/22/2015 Sector Change

The Sector Model whipsawed: selling XLV and buying XLI at the open.

9/21/2015 Sector Change (part 2)

Before the close the Sector Model sold XLE and bought XLV.

9/21/2015 Sector Change

The Sector Model corrected XLI to XLE with a favorable gap.

Will recalculate before the close.

9/21/2015 Trade Notice

The Full Model sold MTZ and bought NYT at the open.

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

9/18/2015 Sector Change

The Sector Model sold XLE and bought XLI in the final minute of trading.

9/17/2015 Trade Notice

The Full Model sold RES and bought ED.

9/16/2015 Trade Notice

The Full Model sold CBI and bought ARLP.

9/8/2015 Trade Notice

The Full Model sold JCOM and bought CPK at the open.

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

9/4/2015 Trade Notice

The full model sold FFIC and bought MMP.