DecisionPoint recently commented on their market timing model and its performance over various time frames. Also commented on what the recent "whipsaw" signals might mean re: current market conditions. I chose DecisionPoint to provide my market timing model because of its long term track record and its consistent, math driven approach. Enjoy.
"2010 TIMER DIGEST RANKINGS FOR DECISION POINT
#16 Intermediate-Term Stocks (52-Weeks) (TD Index 105.07 Vs. SPX 112.78)
#6 Intermediate-Term Stocks (3 Years) (TD Index 152.31 Vs. SPX 85.65)
#7 Intermediate-Term Stocks (5 Years) (TD Index 156.44 Vs. SPX 100.75)
#10 Intermediate-Term Stocks (10 Years) (TD Index 135.84 Vs. SPX 95.26)
#26 Long-Term Timer (2 Years) Stocks (TD Index 91.9 Vs. SPX 139.23)
#8 Long-Term Timer (3 Years) Stocks (TD Index 124.30 Vs. SPX 85.65)
#4 Long-Term Timer (5 Years) Stocks (TD Index 146.21 Vs. SPX 100.75)
#4 Long-Term Timer (10 Years) Stocks (TD Index 177.64 Vs. SPX 95.26)
As you can see, 2010 was an unusually bad year for our intermediate-term (52-week) and long-term (2-year) timing. But if you look at the longer periods shown, you can see we have a very good record that is consistent over time. As usual, past performance does not guarantee future results.
As for politics dominating the market, just remember "it's always somethin'." Our models are focused solely on price, and nothing else. Whatever is going on in the world is reflected in prices. Our timing models aim at a specific time frame and respond to price movement in a predetermined way. The models are not always correct, but they usually stick with the longer-term trend and limit losses/drawdowns.
Recently we have begun to experience whipsaw signals, which I believe are associated with long-term topping activity. I recommend that you read the documentation on the models so that you have an understanding of why a signal changes. This would allow you to use discretion as to how you should respond to any signal."
Saturday, July 30, 2011
Returns for week ending 7/29/11
Returns for the past week:
Model portfolio: -8.1%
Actual managed account: -7.6%
NOTE: The DecisionPoint timing model switched to a NEUTRAL signal on Friday.
While the model portfolio moves to a 50% invested / 50% cash allocation, I intend to move my managed accounts to ALL cash until another Window of Opportunity (WOO) opens up giving us an improved return vs. risk scenario.
The model portfolio's return was -8.6% for the 4-week BUY period just ended. Most of that loss came last week, the final week of the BUY period. This loss nearly equals the maximum interim loss of -8.8% for any of the 16 previous BUY periods since the model's inception. (see chart)
In addition to the very short 4-week duration of the most recent BUY signal, there are other signs that the Market may be in the process of putting in a long term top. This would lead the Market into a correction or possibly even a bear market. This is no time to be a BUY-and-HOLD (BUY-and-HOPE) investor.
Saturday, July 23, 2011
Monday, July 18, 2011
Friday, July 8, 2011
Returns for week ending 7/8/11
Returns for the past week:
Model portfolio: +2.1%
Actual managed account: +1.6%
Value of $10,000 invested in model portfolio at inception in 2003: $294,593
The gap between the actual managed account's returns and the model portfolio's hypothetical returns is mainly due to tracking error. Because the hypothetical returns are based on Friday's closing prices, while the actual managed account executed its trades early Monday morning after the market had already made some gains, the actual managed account was able to capture about 75% of the hypothetical gains this week.
The Window of Opportunity (WOO) is still open. This remains an opportune time to put capital to work in the model portfolio if you haven't already done so. History shows that last week's BUY signal ushers in a short period where the probability of significant gains is high, while the risk of a significant periodic loss is lower than usual.
Sunday, July 3, 2011
Returns for week ending 7/1/11
Returns for the past week:
Model portfolio: +1.2%
Actual managed account: +0.4%
Value of $10,000 invested in model portfolio at inception in 2003: $277,131
Note: The model portfolio and my managed accounts were holding a high amount of cash going into this week, while awaiting a fresh DecisionPoint BUY signal. This explains the lower-than-market returns shown above.
The DecisionPoint timing model threw a fresh BUY signal on Friday, indicating favorable market conditions for holding stocks. The model portfolio's target allocation for a new BUY period is 100% invested. History shows that a DecisionPoint BUY signal marks an opportune time to put capital to work and invest in the model portfolio ...providing an improved return vs. risk. While a BUY signal is no guarantee of gains, it DOES historically indicate a reduced risk of a significant periodic loss before the model portoflio goes on to make a new equity high water mark.
In my managed accounts, I will now be ahering closely to the target allocations.
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