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Current
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Turbo Signal
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Turbo Model Returns (Long & Short Strategy)
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Nasdaq 100
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Russell 2000
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S&P 500
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Classic Signal
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Classic Model Returns (Long & Short Strategy)
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World
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Nasdaq 100
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Russell 2000
(IWM)
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S&P 500
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Stocks embraced the "sell in May" philosophy through the first week of the new month. The week started in dramatically positive fashion with Sunday night's announcement of the killing of Osama Bin Laden providing an emotional lift to U.S. markets Monday morning. The rally was short-lived, however, as markets quickly began to drift lower with investors taking profits after a solid April. Indeed, long-time market darling, silver, gave up almost 10% Monday as investors began to cash in their winnings from the precious metal. Stocks continued to be under modest pressure Tuesday in what appeared to be more profit-taking/rebalancing mixed with some concern that hawkish announcements on inflation from China and India would stifle economic growth. Adding to silver's newfound woe was increased capital requirements from the CME on silver positions, forcing liquidation among some commodity investors. Partly as a result, the weakness in precious metals began to bleed over more heavily into the broader commodity complex Wednesday adding further pressure to stocks, which have benefitted from strength in commodities over the past few months. The larger shoe dropped Thursday when higher jobless claims compounded fears that oil demand was waning in the face of increasing supply. Commodities got crushed. Silver gave up yet another 10% on the day while oil fell almost 9%. Another part of the puzzle Thursday was a rather tepid response on interest rates from the European Central Bank chief. The suggestion that Euro rates might remain low shifted money out of Euros, pushing the U.S. dollar upward, and further damaging commodity prices. The earlier higher jobless number did not translate into a bad report on labor, however, as over 240k jobs were added in the month, the strongest report in quite some time. Stocks partied at the open rallying to a +1% gain midday Friday while commodities showed some bounce after Thursday's drubbing. By day's end though the rally fizzled on further dollar strength, resulting from a rumor, quickly denied, that Greece was leaving the Euro currency.
For the week, the Russell 2000 (IWM), S&P 500 (SPY) and Nasdaq 100 (QQQ) all lost ground, giving up 3.61%, 1.63% and 1.03%. All three ETFs remain above both their 50-day and 200-day exponential moving averages (EMAs).
With the late week surge in the U.S. dollar, it was no surprise our World portfolio suffered more than its U.S. counterparts with a 4.06% decline over the five-day span. The portfolio consists of the 5 top-ranked world ETFs as of April 21, which marked the beginning of the current 4-week holding period.
Both our Classic and Turbo Models remain on Buy signals.
Incorporating
Turbo into a broader portfolio
With our new Turbo Model now settled in, we thought it might be
useful to look at ways to incorporate Turbo into your broader portfolio.
To look at this, we turn to Don Lansing, Chief Investment Officer
at MTA Capital, home of MARKETTREND Advisors, and almost "in-house"
expert at implementing our research in portfolios. Don has worked
with us to develop a strategy called ALTAVISTA that utilizes the
power of Turbo. Take it away, Don!
"Thank you, TimingCube, for the opportunity to talk about ALTAVISTA and your Turbo Model. Most investors are familiar with asset
allocation. That's a typical investment approach whereby you allocate
some amount of your money to different asset classes, such as stocks,
bonds, real estate, cash, maybe commodities and/or gold, etc. That
allocation is determined by the intersection of your investment
objectives and willingness and ability to take on more or less risk.
In the traditional model, you would allocate more money to stocks
when you want more risk, for example when you are young and have
a long investing horizon. You would allocate more to bonds when
you want to take less risk, such as when you are nearing or in retirement.
Traditional asset allocation assumes a buy-and-hold approach to
investing, of course, with gradual changes being made after occasional
reviews and a subsequent rebalancing of the money to stay close
to the desired allocation.
That is a typical "strategic" asset allocation methodology.
A "tactical" asset allocation approach still seeks to
diversify investment across asset classes, but does so by incorporating
a more active mindset. That activity can be driven by views on the
economics or fundamentals of the markets, or by some other input.
In our world, we are trend-following investors using mechanical
model inputs to drive either a long or short view of a given asset
class. Thus, we might be long (on a Buy signal) in U.S. stocks while
short (on a Sell signal) in real estate, all based on what our Model
is telling us. Our ALTAVISTA strategy is driven by these independent
asset class signals as a way to drive how to invest in each asset
class. That is the way we make our strategy "tactical".
In ALTAVISTA, we take the ideas that TimingCube has long promoted
- viewing markets from the perspective of the intermediate trend,
and investing WITH that trend, either long (Buy) or short (Sell).
(Of course, you can also choose to be in Cash.) We apply that idea
to domestic and international stocks, commodities, bonds, and real
estate to create a highly diversified approach to investing. This
strategy works very well as a way to participate in a broad range
of markets with minimal risk. Just a TimingCube's Sell signals keeps
subscribers away from damaging bear market periods and corrections,
so to do the signals behind ALTAVISTA prevent us from experiencing
a serious bear market in real estate, or bonds, in addition to stocks.
In the broad menu of investment strategies, ALTAVISTA is a pretty
conservative to moderate strategy targeting 10-12% returns with
drawdowns (the loss from an account's peak value) of 5-10%.
So what does this have to do with the Turbo Model? Well, it turns
out that the Turbo Model has similar performance criteria to our
ALTAVISTA strategy, but with even better returns. When we performed
our tests, we found that the Turbo Model actually enhances our ALTAVISTA strategy - adding MORE performance without upsetting our desire
for low volatility and drawdown. While some people will be content
to just invest directly under the guidance of the Turbo Model, our
approach using ALTAVISTA gives us the best of both worlds - the
power of Turbo within the context of broad asset class diversification.
It Turbo-charges ALTAVISTA, if you'll allow a silly metaphor, while
keeping the ride smooth for our clients.
Somewhat similar benefits to what we experience in ALTAVISTA can
be had by anyone. For example, someone who might want to dabble
in the Turbo Model, but is not ready for a full embrace could marry
an allocation to a Turbo Model-driven investment with a core asset
allocation fund, such as Fidelity's Balanced Fund, for one example,
or with a broader palette of funds and/or ETFs to create a sort
of "fund" of their own design. At MTA Capital and MARKETTREND Advisors, we are forever intrigued and enthused by the vast number
of ways to invest. The introduction of the Turbo Model adds another
powerful tool to our kit, and one that we are already using in our
most sophisticated strategy, ALTAVISTA."
Thanks, Don, for that overview of your strategy, ALTAVISTA, and
how the Turbo Model helps out. For subscribers who are interested
in learning more about ALTAVISTA, your firm, or who just want ideas
about how to leverage your knowledge of long/short trend-following
investing, what do you recommend?
"As a firm who specializes in the TimingCube style of investing,
we are naturally interested and willing to help other investors
and advisors join us in what we believe is the best way to build
wealth. We have worked with TimingCube to develop an array of compelling
investment strategies, some of which take advantage of your published
signals, such as Turbo and Classic, as well as others that are not,
such as ALTAVISTA. Anyone can contact me directly at lansing@altavistafund.com
or dlansing@markettrendadvisors.com with questions.
Question:
have you considered creating a signal on precious metals?
With gold and silver's powerful rally over the past few months investing
in precious metals has become a topic du jour for many investment
publications. As mentioned in the weekly above, we have worked with
firms to develop signals on other asset classes. However, we have
found generating signals on specific commodities to be more difficult
than other asset classes. The extreme volatility that often occurs
in commodity markets makes it problematic. For example, our ETFTide
portfolio has held silver (in the form of the SLV ETF) since it's
breakout last August. However, ETFTide will not recognize the parabolic
nature of the silver run, and will probably be subject to the inherent
volatility increase that comes with such a move. Obviously, some
model developers have tried and succeeded well enough to publish
signals on gold, in particular.
Though we find gold and silver to be interesting quasi-investments
or trading vehicles, we have not made any recent attempts to try
and build any models around them. We have successfully built models
on real estate (REITs), broad commodities, certain bonds, and subsectors
of stocks. Those signals are unpublished but are available as part
of broader portfolio solutions to advisors and brokers by license.
Warm wishes and until next week.
The TimingCube
Staff
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