Mojena Market Timing

 Front Page      Timing Model      Reality Check      FAQ      Downloads      About      Mea culpa?

January 3, 2016

 

Model at 49.0

 

BUY Signal on December 27, 2015

 

Strategy

Current Position

2015 Returns

Cash

Money Market (T-Bills)

+0.1%

Buy and Hold

100% S&P 500

+1.4%

Standard Timing

100% S&P 500

-1.0%

Aggressive Timing

150% long S&P 500

-4.9%

 

 

The timing model issues buy and sell signals based on a mathematical/statistical score that ranges between 0 and 100.  While on a buy signal a sell signal is triggered at 41 or below; during a sell signal a buy signal is issued at 74 or above. Scores inside the range 41-74 should be interpreted as “hold current position.”  The standard and aggressive strategies determine the trades when timing signals are given.  Signal date is Sunday; trades based on next-day closing price, to conform to mutual fund mark to market rulesReturns include reinvested dividends.

Standard timing strategy… At a buy signal this strategy invests100 percent in the S&P 500 index, until the next sell signal.  At a sell signal this strategy places the entire portfolio in a money market based on Treasury Bills, until the next buy signal.  This “all-or-nothing” buy-sell strategy is uncommon in practice, as most stock portfolios would be diversified across several stock classes while invested and would be reluctant to move all holdings; it’s used  here to give a proper comparison to buying and holding the S&P 500.  In practice a portfolio would add to stock holdings while following a buy signal and would reduce stock holdings when following a sell signal.  The percentages in these changes would depend on individual preferences based on factors such as age, risk profile, net worth, tax consequences, and so on. In other words, do whatever you’re comfortable with given the information that the model has changed its signal… and to what extent you have confidence in the model. 

Aggressive timing strategy… At a buy signal this strategy leverages the S&P 500 index 150% long (1.5x), until the next sell signal.  At a sell signal this strategy places the entire stock portfolio in an inverse of the S&P 500 (100% short or -1x), until the next buy signal.  In practice this approach would shift a portion of the stock portfolio to an ultra long fund during a buy signal and to a short fund during a sell signal.  See this CAUTION.  Please note: The aggressive strategy is very risky and should be practiced, if at all, with a small portion of the overall portfolio.

Keep in mind that any strategy that follows the model’s signals applies only to the stock portion of a portfolio.  Moreover, the model’s focus is the S&P 500, the benchmark index for performance.  Its exclusive use by the model’s portfolios is for comparative purposes, to judge the model’s performance.  Investment portfolios normally include various domestic and international combinations of stock size and investment style categories, as well as other asset classes such as bonds, precious metals, and commodities.  See a more detailed explanation of these options in the three FAQs starting with this one.

Click here for my own investments during buy and sell signals.

 

Everyone has a plan until you punch them in the face. Then they don't have a plan anymore.

Mike Tyson

Fear and greed? Just look at the masses that buy high and sell low.

What plan? Buy and hold you say?  Hah!  Lemmings over a cliff as the bear growls. Then fear trumps greed. And near the bottom it’s… sell Sell SELL.

And then… as the bull rumbles, greed overcomes fear, oh so slowly and oh so late. And near the top it’s… buy Buy BUY.

A good timing model? Controls risk. Stills panic attacks. Ditches the Valium.  Helps us stick to the plan [sorry, Mike].

Harvey CORE

S&P 500 Index record high 2131 on May 21, 2015; pullback low 1868 (12.4%) on Aug 25.  Index now 4.1% under high and 9.4% above low.

Operating strategy during buy signal for underweight stock portfolios: Buy the pullbacks, unless stated otherwise based on near-sell model scores.

It was a tough year to make money, including total returns across investment alternatives.  Of our three major indexes, only the Nasdaq managed to log a gain; both the Dow Industrials and S&P 500 indexes ended underwater, not counting dividends.  It was the worse year since 2008, for the model’s strategies as well.  Still, buying-n-holding the “500” inched its head above water for the year, with a 1.4% total gain (including dividends), versus disappointing losses of 1.0% and 4.9% for the model’s portfolios.

The narrow, range-bound, choppy, schizophrenic behavior of the “500” gave this model cluster headaches.  About 85% of the time our benchmark index fluctuated between 1990 and 2130, a 7% range top to bottom.  The model looks for the start of persistent trend changes greater than 8%, which don’t emerge in trendless markets that last as long as this one.  The sharp sell-off from July into September took the index out of its flat trend, but its short seven-week duration was followed by a return to trend by mid-October.

Remarkably, the 2015 model issued 10 switch signals this year, for a model that averages just 1.4 signals per year, never more than 6 switches (1978) in any of the previous 45 years, 4 during an unstable 2007, and no more than 3 during several other volatile years. This year’s model is either out of its mind (like the market) or seriously looking to catch early a sustained change in market direction… or both. 

The instability in 2015 marked a dramatic increase in the number of 1% daily changes in the S&P 500 index, along with many short-lived trends that crisscrossed the flat line, classic random behavior in a market that can’t make up its mind.  Clearly, the current model is overly sensitive to this market’s persistent random-like behavior, results that will not be lost for the 2016 revision sometime in January. 

Meanwhile, few worries previously cited have gone away, such as sluggish global growth, weak commodity prices, high corporate and public debts, the eventual unwinding of gargantuan central bank assets, lukewarm corporate revenues and profits, and the real and psychological market effects from terrorist events, suggesting continued volatility into the new year.  Caution is warranted, as we’re about to leave the seventh year of this bull market that in May would become the second longest in history.

A negative (& entertaining) year-in review.

It can’t be all bad.  See this and this and this.

▼▼▼

Here’s wishing you a happy, healthy, and prosperous 2016

 

YTD with dividends

Since switch signal, no dividends

Date

Model

Signal

S&P

Cash

Buy&Hold

Standard

Aggressive

Dow    

S&P  

Nasdaq   

Jan 3

49.0

Buy

2044

+0.1%

+1.4%

-1.0%

-4.9%

-0.6%

-0.6%

-0.7%

Dec 27

84.3

Buy

2061

+0.1%

+2.0%

-0.4%

-4.0%

+0.3%

+0.2%

+1.1%

Dec 20

31.2

Sell

2006

+0.0%

-0.6%

-0.4%

-1.5%

-2.0%

-2.3%

-1.2%

Dec 13

25.9

Sell

2012

+0.0%

-0.3%

-0.4%

-1.8%

-1.2%

-2.0%

-1.0%

Dec 6

58.7

Sell

2092

+0.0%

+3.6%

-0.4%

-5.4%

+2.1%

+1.9%

+3.2%

Nov 29

64.5

Sell

2090

+0.0%

+3.5%

-0.4%

-5.3%

+1.8%

+1.8%

+2.9%

Nov 22

69.0

Sell

2089

+0.0%

+3.4%

-0.4%

-5.3%

+1.9%

+1.8%

+2.4%

Nov 15

35.7

Sell

2023

+0.0%

+0.1%

-1.9%

-5.7%

+2.0%

+1.8%

+3.0%

Nov 8

84.5

Buy

2099

+0.0%

+3.8%

+1.8%

-0.3%

+4.5%

+4.1%

+6.4%

Nov 1

89.1

Buy

2079

+0.0%

+2.8%

+0.8%

-1.7%

+3.1%

+3.1%

+4.4%

Oct 25

93.5

Buy

2075

+0.0%

+2.5%

+0.5%

-2.0%

+3.0%

+2.9%

+4.0%

Oct 18

92.6

Buy

2033

+0.0%

+0.4%

-1.5%

-5.0%

+0.5%

+0.8%

+1.0%

Oct 11

81.2

Buy

2015

+0.0%

-0.5%

-2.3%

-5.9%

-3.6%

-3.0%

-3.6%

Oct 4

44.6

Sell

1951

+0.0%

-3.7%

-2.3%

-2.8%

-7.3%

-6.2%

-6.2%

Sep 27

28.7

Sell

1931

+0.0%

-4.7%

-2.3%

-1.7%

-8.2%

-7.1%

-6.7%

Sep 20

29.3

Sell

1958

+0.0%

-3.5%

-2.3%

-3.1%

-7.8%

-5.8%

-3.9%

Sep 13

25.3

Sell

1961

+0.0%

-3.4%

-2.3%

-3.2%

-7.5%

-5.7%

-4.0%

Sep 6

13.8

Sell

1921

+0.0%

-5.4%

-2.3%

-1.2%

-9.4%

-7.6%

-6.7%

Aug 30

15.7

Sell

1989

+0.0%

-2.1%

-2.3%

-4.4%

-6.3%

-4.3%

-3.8%

Aug 23

12.1

Sell

1971

+0.0%

-3.0%

-2.3%

-3.5%

-7.4%

-5.2%

-6.3%

Aug 16

34.4

Sell

2092

+0.0%

+2.9%

-2.4%

-8.8%

-1.6%

+0.6%

+0.5%

Aug 9

27.0

Sell

2078

+0.0%

+2.2%

-2.4%

-8.2%

-2.2%

-0.1%

+0.4%

Aug 2

54.0

Sell

2104

+0.0%

+3.4%

-2.4%

-9.3%

-0.4%

+1.2%

+2.1%

Jul 26

26.3

Sell

2080

+0.0%

+2.2%

-2.4%

-8.2%

-1.1%

+0.0%

+1.3%

Jul 19

59.0

Sell

2127

+0.0%

+4.5%

-2.4%

-10.2%

+1.8%

+2.3%

+3.8%

Jul 12

24.9

Sell

2077

+0.0%

+2.0%

-2.4%

-8.0%

-0.0%

-0.1%

-0.5%

Jul 5

22.7

Sell

2077

+0.0%

+1.9%

-2.4%

-8.0%

-0.2%

-0.1%

-0.2%

Jun 28

23.3

Sell

2101

+0.0%

+3.1%

-2.4%

-9.1%

+1.0%

+1.1%

+1.2%

Jun 21

31.2

Sell

2110

+0.0%

+3.5%

-2.4%

-9.5%

+1.4%

+1.5%

+1.9%

Jun 14

22.4

Sell

2094

+0.0%

+2.7%

-2.4%

-8.8%

+0.7%

+0.7%

+0.6%

Jun 7

26.8

Sell

2093

+0.0%

+2.6%

-1.7%

-7.2%

-1.2%

-0.6%

+0.7%

May 31

54.7

Buy

2107

+0.0%

+3.2%

-1.1%

-6.2%

+0.2%

+0.7%

+1.6%

May 24

76.0

Buy

2126

+0.0%

+4.1%

-0.2%

-5.0%

+1.4%

+1.6%

+2.0%

May 17

77.7

Buy

2123

+0.0%

+3.9%

-0.4%

-5.2%

+1.6%

+1.4%

+1.2%

May 10

73.0

Buy

2116

+0.0%

+3.5%

-0.8%

-5.6%

+1.2%

+1.1%

+0.3%

May 3

69.3

Buy

2108

+0.0%

+3.1%

-1.2%

-6.2%

+0.3%

+0.8%

+0.3%

Apr 26

83.0

Buy

2118

+0.0%

+3.5%

-0.8%

-5.5%

+0.6%

+1.2%

+2.1%

Apr 19

55.3

Buy

2081

+0.0%

+1.7%

-2.5%

-8.0%

-0.8%

-0.5%

-1.1%

Apr 12

75.2

Buy

2102

+0.0%

+2.7%

-2.0%

-7.7%

+0.0%

+0.3%

+0.8%

Apr 5

67.3

Sell

2067

+0.0%

+0.9%

-2.0%

-6.1%

-1.2%

-0.9%

-1.2%

Mar 29

36.2

Sell

2061

+0.0%

+0.6%

-3.2%

-8.6%

-0.8%

-0.9%

-1.3%

Mar 22

76.1

Buy

2108

+0.0%

+2.9%

-1.2%

-5.9%

+0.8%

+1.1%

+1.6%

Mar 15

33.3

Sell

2053

+0.0%

+0.2%

-2.6%

-6.6%

-0.8%

-1.4%

-0.6%

Mar 8

58.3

Buy

2071

+0.0%

+1.0%

-1.7%

-5.3%

-1.4%

-1.8%

-0.7%

Mar 1

79.4

Buy

2105

+0.0%

+2.6%

-0.2%

-3.0%

+0.1%

-0.2%

+0.1%

Feb 22

77.9

Buy

2110

+0.0%

+2.8%

+0.0%

-2.7%

+5.4%

+6.0%

+7.7%

Feb 15

65.7

Sell

2097

+0.0%

+2.1%

+0.0%

-2.1%

+4.9%

+5.4%

+6.3%

Feb 8

35.1

Sell

2055

+0.0%

+0.1%

+0.0%

-0.0%

+3.7%

+3.3%

+3.0%

Feb 1

10.5

Sell

1995

+0.0%

-2.9%

+0.0%

+3.1%

-0.1%

+0.3%

+0.7%

Jan 25

33.1

Sell

2052

+0.0%

-0.2%

+0.0%

+0.3%

+2.9%

+3.1%

+3.3%

Jan 18

13.6

Sell

2019

+0.0%

-1.8%

+0.0%

+1.9%

+1.9%

+1.5%

+0.6%

Jan 11

42.3

Sell

2045

+0.0%

-0.6%

+0.0%

+0.7%

+3.2%

+2.8%

+2.1%

Jan 4

46.6

Sell

2058

+0.0%

-0.0%

+0.0%

+0.0%

+3.8%

+3.4%

+2.6%

 

ARCHIVE

2014

2013

2012

2011

2010

NOTE

The TimerTrac link at left is a free report provided by an independent company that tracks the performance of market timers. Note that the report does not account for dividends and their reinvestment, as we do, and as would be the case for reported returns in the media, thus showing lower returns for both buy-and-hold and the standard strategy during buy signals than those seen under the live performance table in our Reality Check page.  The difference over long time horizons can be significant, as reinvested dividends make up about 30% to 50% of total S&P 500 returns, depending on the chosen time period. 

 

Distribution
Copyright © 2015 Richard Mojena. All rights reserved. All materials contained on this site are protected by United States copyright law and may not be reproduced, distributed, transmitted, displayed, published or broadcast without the prior written permission of Richard Mojena at mojena.com. You may not alter or remove any graphics, copyright or other notice from copies of the content.  You may download or print one machine readable copy and one print copy per page from this site for your personal, noncommercial use only.

 

Disclaimer

Specific and personalized investment advice is not intended by this communication. Its contents are for the public record as a free public service. Information is based on the analysis of past data and assessments by the models. Future performance may not reflect past performance. Profitable trades are not guaranteed. No system or methodology ensures stock market profits. No guarantee is made regarding the reliability or accuracy of data. In other words, use this stuff at your own risk!

Front Page      Timing Model      Reality Check      FAQ      Downloads      About      Mea culpa?

mojena.com

As is, no spin