Mojena Market Timing

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14 January 2018

Model at 82.5

BUY Signal on 8 January 2017

Strategy

Current Position

YTD Returns

Cash

Money Market (T-Bills)

+0.1%

Buy and Hold

100% S&P 500 (SPX)

+4.3%

Standard Timing

100% S&P 500 (SPX)

+4.3%

Aggressive Timing

150% long S&P 500 (SPX)

+6.3%

 

 

The timing model issues buy and sell trades (signals) based on a mathematical/statistical score that ranges within 0 and 100.  While on a buy signal a sell trade is triggered at 44 or below; during a sell signal a buy trade is issued at 61 or above. Scores inside the range 44-61 should be interpreted as “hold current position.”  The standard and aggressive strategies determine what is bought or sold when timing signals are given.  Signal date is Sunday; trades are 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 (SPX) index, until the next sell signal.  At a sell signal this strategy places the entire portfolio in a Money Market (MM) 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 SPX.  In practice a portfolio would add to stock holdings (lower MM cash) when a buy trade is issued and would reduce stock holdings (raise MM cash) when implementing a sell trade.  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 SPX 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 SPX (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 for a buy trade and to a short fund for a sell trade.  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 trades 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, real estate, 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.

 

Operating strategy during buy signal for underweight stock portfolios is buy pullbacks, unless score is within 44-61, suggesting hold.

S&P 500 Index record high 2786 on 12 Jan 2018; pullback low 2085 on 4 Nov 2016.  Index now -0.0% under high and +33.6% above low.

Primary uptrend confirmed 15 Apr 2016 at 2081 from 1865 low on 12 Feb 2016; reconfirmed 98 weeks following low, at 2786 on 12 Jan 2018.  Now 0 week unconfirmed.

Trendlines constructive based on 50-500 day EMAs, each with positive slopes, and SPX greater than each.

The model for 2018 is now operational.

The revised model is more stable with slightly fewer trades (51 over 48 years or 1.1 trades per year, vs 53 over 47 years) and less switchbacks than last year’s model, with wider sell/buy limits of 44-61 vs 41-55.

It shows 8 losing years over its history since 1970, as did the previous model, the minimum standard-strategy loss -3.0% vs same for buy and hold and the maximum loss -6.7% vs -37.0 for buy and hold.  It shows a return of +21.8% for last year’s standard strategy, the same as buy and hold, and +30.3% for the aggressive strategy.  It has slightly lower risk, slightly lower Sharpe Ratio, and higher Sortino Ratio, the latter more desirable because its focus is downside risk-adjusted return.

Downloads are now available.

Revised writeups for 2018 are forthcoming.

 

YTD with dividends

Since switch signal, no dividends

Date

Model

Signal

SPX

Cash

Buy&Hold

Standard

Aggressive

DJI    

SPX  

Nasdaq   

Jan 14

82.5

Buy

2786

+0.1%

+4.3%

+4.3%

+6.3%

+29.7%

+22.8%

+31.3%

Jan 7*

81.4

Buy

2743

+0.0%

+2.6%

+2.6%

+3.9%

+27.2%

+20.9%

+29.0%

Dec 31*

74.8

Buy

2674

+0.9%

+21.8%

+20.2%

+26.0%

+24.3%

+17.8%

+24.8%

*Score from 2017 live model; Jan 14 is start of live 2018 model.

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 uses Rydex RYTNX (2x) rather than TimerTrac’s unavailable Rydex Nova RYNVX (1.5x) as used here for the aggressive strategy. 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 © 2018 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!

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