8/31/2017 Sector Trade

The Sector Model sold XLE and bought XLP before the close.

8/18/2017 Sector Trade

The Sector Model sold XLU and bought XLE before the close.

8/11/2017 Sector Trade

The Sector Model sold XLP and bought XLU before the close.

8/8/2017 Sector Trade

The Sector Model sold XLU and bought XLP before the close.

8/6/2017 End of July Metrics

Sector Model	XLU	0.66%
Full Model	Date	Return	Days
BT	8/11/2015	-39.30%	726
TMK	11/23/2015	32.65%	622
NVR	12/16/2015	61.30%	599
CMP	2/19/2016	3.43%	534
NVR	2/22/2016	68.10%	531
AMWD	3/17/2016	41.77%	507
CASY	5/12/2016	-3.37%	451
AEM	6/7/2016	-10.10%	425
ESRX	6/13/2016	-17.63%	419
AMED	6/16/2016	-3.61%	416
FRO	6/27/2016	-21.93%	405
ASTE	7/12/2016	-17.09%	390
MFC	9/1/2016	53.76%	339
SFM	9/8/2016	20.99%	332
CFFN	9/12/2016	4.67%	328
FIG	12/6/2016	60.88%	243
FOSL	5/11/2017	-19.39%	87
HIBB	7/25/2017	14.50%	12
FOSL	7/27/2017	5.43%	10
HZO	8/1/2017	4.71%	5
(Since 5/31/2011)
S&P	Annualized	10.35%
Sector Model	Annualized	16.63%
Full Model	Annualized	13.65%
S&P	Total	83.92%
Sector Model	Total	158.92%
Full Model	Total	120.59%
Sector Model	Advantage	6.27%
Full Model	Advantage	3.29%
	Previous	2017
S&P	66.43%	10.51%
Sector Model	120.54%	17.40%
Full Model	91.27%	15.33%

In the current metrics, the Full Model has still failed to find a maximum holding period, even after over 6 years of live testing:

Note on the “Taxed” line that the maximum annualized return rate continues to be the maximum recorded holding period.  Although the factor of taxes does indeed favor a longer holding period because of compound interest, I suspect that another factor is the effect of High Frequency Trading Algorithms eating away the potential profitability of short term trades.  Just as humans cannot compete with these black boxes, neither can my model.  But that’s the point of my model: I’m not trying to compete with the HFTs, but rather to get out of their way.

That said, I still ended up with three trades in the past few weeks, even though a 6 year holding period over 20 positions should have taken most of a year to trade that often.  There were two contributing factors: 1) I need to tighten up my gap threshold, and 2) some of my trades were forced by my companies being bought out for a nice profit.  Holding through the acquisition wasn’t even an option, and I needed to trade.

The Sector Model, on the other hand, has held the XLU position for an unusually long period of time, and the performance graph has become disturbingly quiet:

Note that such close hugging of a trend-line doesn’t always end well for the broad market, and in fact the sector ratios continue to favor defensive industries:

One can never time these things, but it remains a puzzle.  On the one hand, the recent slashing of regulations by the Trump administration typically helps the market for a few years, but on the other hand the failure of any sign of bipartisan healthcare reform bodes ill.

The dollar has been falling lately, which might explain why retail stocks are falling into my model.  But those are hardly bearish moves.

Will be interesting to watch.  As always, I’m happy I don’t have to worry about timing.

Tim

8/2/2017 Unscheduled Trade

Because PMC is being taken private, the model sold PMC and bought HZO with a 15% favorable gap.