- The Trailing Twelve Months Income Available to Common Stocks (TTMIACS) of the S&P500 is tightly correlated to the S&P 500.
- 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.
- According to this indicator, a downwards potential remains in the S&P 500 with a possible low of 1660 in the next three months.
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How Much More Will The Market Decline? The Trailing 12-Month Income Available Could Provide An Answer.
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.
Is the Stock Market Overvalued? — Update Dec-2015 — Estimating Returns to 2020 and Beyond
- Based on its historic trend, the stock market appears to be marginally overvalued.
- The historic trend suggests a probable real gain of about 20% over the next five years.
- Analysts’ long-term forecasts of stock returns made 4 years ago appear to have been unrealistically low.
- The Shiller Cyclically Adjusted Price to Earnings Ratio is relatively high (but not extremely high), and a market correction is possible.
Evaluating Actively Managed Stock Funds With iM’s Terminal Value Rating System
- This rating system identifies funds which may provide better returns than a benchmark index-fund by measuring fund performance from the perspective of savers who make regular monthly contributions to funds.
- It compares the terminal value from periodic $1.00 monthly contributions to a fund with the terminal value from the same contributions to a benchmark index-fund over the same time period.
- Specifically, the system calculates 1-year and 5-year rolling terminal values from $1.00 monthly contributions to the fund and the benchmark index-fund.
- Predictive information comes from the relationship between the fund and the benchmark rolling terminal values, allowing an estimate of future fund performance relative to the benchmark index-fund.
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.
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The Unemployment Rate is Not Signaling a Recession: Update November 6, 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 October figure of 5.0%, does not signal a recession now.
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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.
iM-Combo3b: A Model Combining the Best(SPY-SH), Best1(Sector SPDR) and BESTOGA3
- This model is similar to Combo3, but replaces Best(SSO-TLT) with BESTOGA3 which invests periodically in three of the so called “Vice” stocks of the S&P500.
- It combines equal weighted the two ETF models, Best(SPY-SH) and Best1(Select SPDR), with BESTOGA3.
- We demonstrate that this combination would have produced high annualized returns of about 28% with low drawdowns of about -12%. Also over any one year period it showed a minimum return of 10.9%.
- Additionally, due to the very high liquidity of its component ETFs and stocks, this combo can support a large dollar portfolio value.
- It has five positions, holding two ETFs, one from each ETF component model, and the three stocks from BESTOGA3.
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%.
With reference to Section 202(a)(11)(D) of the Investment Advisers Act:
We are Engineers and not Investment Advisers,
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