- Due to inconsistencies in SPEPCY (SP500 Current Year EPS Estimate) data at the beginning of the calendar year we have amended Combo3.
- Going forward we will not replicate the signals from the P123 subscription models anymore as the P123 models can only be revised every six months. We have set up new component models for Combo3.R! which incorporate rule changes.
Blog Archives
Model Revision: Combo3.R1 Replaces Combo3
Market Timing with Vanguard’s Market Neutral Fund VMNFX
- The Vanguard Market Neutral Fund Investor Shares (VMNFX) aims to “neutralize”, or limit the effect of stock market movement on returns.
- We calculate 26-week rolling returns for VMNFX and for benchmark SPY (the ETF tracking the S&P500), which provide a measure of over- or under performance of VMNFX relative to SPY.
- Predictive information comes from the relationship between the fund and the benchmark rolling returns. If VMNFX performs better than the stock market then one should be out of the market.
- Conversely, if VMNFX under performs SPY then it should be relatively safe to be invested in stocks.
- Our analysis generated a sell signal for the stock market on Nov-2-2015.
The Best(SPY-SH) model has been revised.
Portfolio123 data changes can affect more recent model performance. We monitor our models to see whether there are any negative effects from data revisions.
Read more >
Posted in blogs
Death Cross of Trailing 12-Month Income Signals An Overdue Market Decline
- A warning of a major stock market decline from the death cross of the Trailing Twelve Months Income Available to Common Stocks (TTMIACS) of the S&P500
- The TTMIACS of the S&P500 has historically provided a good indication of market tops.
- TTMIACS has been declining since Feb-2015 when its 10-week moving average crossed its 40-week moving average to the downside.
- Exiting the stock market according to this indicator would have avoided major losses in 2001 and 2008.
Getting the Most from the iM-Best(SPY-IEF) Market Timer
The iM-Best(SPY-IEF) MarketTimer incorporates three market timing models which provide signals which indicate the percentage of funds to allocate to stock market investment in 25% increments, from 0% to 100%, also referred to as signal strength.
Alternatively, instead of allocating a percentage of funds to stocks and bonds, one can be fully invested in stocks or bond funds according to the signal strength, as shown in the tables below.
Trading the Beer-, Spirits-, Tobacco-, & Gambling-Stocks of the S&P500 With the iM-BESTOGA-3 System
- Holding continuously the so called “Vice” stocks of the S&P500 would have been very profitable; it would have provided an average annualized return of about 20% from Jan-2000 to Oct-2015.
- The iM-BESTOGA-3, named after the first few letters of: beer, spirits, tobacco, and gambling, holds three stocks from the GICS sub-industries: Distillers & Vintners, Brewers, Tobacco, and Casinos & Gaming.
- Backtesting the model from Jan-2000 to Oct-2015 produced a simulated annualized return of about 24.3% with a maximum drawdown of only -18%, and low annual turnover of about 130%.
The S&P 500 Death Cross – Time to Panic?
- At the end of August 2015 the 50-day moving average of the S&P500 crossed its 200-day moving average to the downside – the 33rd occurrence of a “Death Cross” since 1950.
- The performance of the S&P500 was investigated for periods ranging from one year before to two years after a Death Cross.
- During the last 65 years there were ten recessions. A Death Cross preceded six recessions and occurred early in four recessions.
- After a Death Cross the probability of S&P500 being lower than for any other point in time increases for periods from one- to eighteen months.
Better Returns from Exchange Traded Funds with iM’s Market Climate Grader
- The Market Climate Grader divides the environment for investment returns into four market climate zones.
- For better returns one should adjust asset allocation according to market climate. As an example, three models were analyzed to highlight the better performance when investing according to market climate.
- Performance for three models which use ETFs with varying risk characteristics are shown. Interestingly, risk measurements for the models are very similar, better than for the benchmarks and component ETFs.
- The simulated performance for all models is much higher than for buy-and-hold of the S&P500 or for the Vanguard LifeStrategy Moderate Growth Fund which holds 60% stocks and 40% bonds.
The Unemployment Rate is Not Signaling a Recession: Update September 4, 2015
A reliable source for recession forecasting is the unemployment rate, which can provide signals for the beginnings and ends of recessions. The unemployment rate model (article link), updated with the August figure of 5.1%, does not signal a recession now.
Read more >
Assessing Market Climate with iM’s Market Climate Grader (Update 9/6/15)
- The market environment for investment returns is divided into four climate zones.
- Market climate zones were determined by combining fundamental and technical indicators.
- A performance analysis of SPY shows that the probability of stock market gains is highest for climate Zone-1 and lowest for Zone-4.
With reference to Section 202(a)(11)(D) of the Investment Advisers Act:
We are Engineers and not Investment Advisers,
read more ...
By the mere act of reading this page and navigating this site you acknowledge, agree to, and abide by the
Terms of Use / Disclaimer