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Current
Signal Performance |
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Turbo Signal
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Trade Date
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Turbo Model Returns (Long & Short Strategy)
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Nasdaq 100
(QQQ)
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Russell 2000
(IWM)
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S&P 500
(SPY)
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Classic Signal
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Trade Date
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Classic Model Returns (Long & Short Strategy)
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World
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Nasdaq 100
(QQQ)
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Russell 2000
(IWM)
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S&P 500
(SPY)
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Stock market participants remained caught between Eurodebt fears and second half economic growth uncertainty with Washington's debt ceiling politics muddying investor psyches throughout the week. Investors fled Italian bank shares and Italian debt Monday morning sparking renewed fears of expanding Eurodebt contagion. Those fears pushed global stock investors back to a risk-on pose sending stocks down 1-2% on the day and pushing investors back to the perceived safe shore of U.S. Treasury bonds, which shot back to the upper end of their recent price range. Tuesday's turbulent session saw global stocks down sharply overnight on Eurodebt concerns. By the open of U.S. trading, domestic stocks had improved their tone and even moved positive mid-day. But the air came out of the market in the late afternoon as another downgrade of Irish debt and a weak outlook from a couple of semiconductor equipment companies hit tech stocks pushing the broader market to its 3rd consecutive losing day. Ben spoke and the markets were relieved Wednesday, with the Fed Chairman maintaining that he's still expecting a better second half economy and stands ready to help stimulate further if need be. As the day wore on, however, the bulls were unable to mount much of an attack and stocks drifted. Gold pushed to new highs with a drop in the U.S. dollar on some distant hope that the Fed Chair has QE3 at the ready. As Ben continued his testimony Thursday, he seemed to squash the notion of any near-term QE3 launch. Oil prices quickly dropped 3% as the dollar firmed and riskier small-cap and tech stocks gave up 1%+. JP Morgan and Chevron made positive earnings comments which helped blue chips hold up relatively well. A strong report from Google and a couple of buyout prospects set a positive tone for Friday trading. A weak consumer confidence report gave markets pause, but stocks rallied into the weekly close to recoup fractional pieces of a losing week.
The S&P 500 (SPY) gave up 2.02% over the week period with the Nasdaq 100 (QQQ) losing 2.00% and the Russell 2000 (IWM) donating 2.73% of its value. The Nasdaq 100 and Russell 2000 sit above their 50-day and 200-day moving averages while the S&P 500 parked just below its 50-day and above its 200-day moving average.
Our World portfolio was strongly correlated with domestic markets notching a 2.61% decline on the week. This week marks the end of our four-week period which means a new rebalance next week to this weekend's top five world ETFs.
Both our Classic and Turbo Models remain in Buy signals.
Timeframe and patience
 Earlier
this year, american baseball player Albert Pujols got off to a bad
start. Then, just when it looked like he was going to get on track,
he got hurt and had to sit out for awhile. At the midpoint of the
season, Mr. Pujols is substantially off his normal pace in almost
all measures of productivity. Is Albert Pujols finished? Are his
best years behind him? Coming into the season, there was intense
debate whether Mr. Pujols should receive a contract to make him
the highest paid player in baseball. He is a lock to be in the Hall
of Fame when he retires, and is considered by many to be the greatest
hitter of his generation. Yet, judging by his 2011 season performance,
Albert Pujols is a very good, but not great, player. How much attention
should we pay to this one half-season?
The same question often applies to investing. How long should we
stick with a strategy that is underperforming? How much patience
should we have? What is the proper timeframe to evaluate performance?
Looking at the performance history of our sister website, TradeGuru,
we see a sparkling overall record of 32%+ annual returns over a
9-year period.
Chart 1: Overall average annual return for theTradeGuru
Looking under the hood of that single number gives us performance
by year. We see that the TradeGuru generally tracks the direction
of the market, losing money in 2008 when the stock market badly
faltered, but also outperforming the broad stock market every year.
Chart 2: TradeGuru performance by year
The TradeGuru looks good. We can invest confidently in this system
knowing that, as long as the stock market is not in a bear phase,
we should reap solid gains. Reading the TimingCube Weekly Update
would alert us to a bear market by explaining the signals given
from the Classic Model. Thus, coupling the macro information received
from TimingCube with the TradeGuru would prevent us from experiencing
the bad TradeGuru periods while reaping the rewards from the good
periods - which is the vast majority of years, even in a secular
bear market.
Imagine you came into 2010 with this as your strategy - investing
in TradeGuru stock picks (Folio A) while using the TimingCube signal
and Weekly Update information to broadly guide what the market was
doing at a high level. What would have happened? Midway through
the year you would be losing money, would have underperformed the
S&P 500
in almost every month, and would be behind the S&P
500 by almost 10%. Would you have even made it to the middle of
the year 2010 with TradeGuru? Or would you have thrown in the towel,
cursed the Mr. Guru, and moved on to seek other, greener looking
investment strategies believing the TradeGuru had lost its way,
or your particular timing was off, or whatever rationale investors
come up with when they don't have the patience to stick with a strategy.
Of course, once the market turned higher in the latter part of 2010,
the TradeGuru handily beat the S&P 500 almost every month, ending
the year better than the S&P 500 by 10% and
delivering another year of solid gains.
Chart 3: GuruFolios deliver a solid 2010 performance
(returns from 12/25/2009 to 12/24/2010)
Chart 4: Folio A surges in second half 2010 to handily
beat the market
(Folio A yearly equity curve from 12/25/2209 to 12/24/2010)
Investors are known for their inability to stick with investments
when they are not performing up to expectations. It's impossible
to know how long to wait for an investment to come around to delivering
results consistent with its history. All we know is that studies
frequently confirm that individuals have a tendency to make emotional
decisions about investing leading to a buy high-sell low result.
They are too quick to abandon ship and would benefit by being a
bit more patient.
Just as most baseball observers expect Albert Pujols to return to
a form more consistent with his history, we expect our Models to
also perform consistent with their history over time. They will
go through slumps, have steller years, and bad years. We provide
a long historical record as a way to help you understand how the
Model performs and adjust your expectations accordingly. It's important
to do that homework, understand the range of performance the Model
can have, how it performed in different market conditions, and expect
that the historical performance will ultimately be achieved. One
way to help with that process emotionally is to shade your investment
allocation by starting with a fraction of the total amount you intend
to give to that investment. As you gain confidence, add a little
more. If confidence wanes, take a little off. Diversify across Models.
We offer four completely different strategies - Classic, Turbo,
ETFTide, TradeGuru - for you to mix and match as you choose. We
also partner with expert money managers at MARKETTREND Advisors
who can further suggest ways for you to achieve your investment
objectives.
As for Albert Pujols, his contract ends this year. The next 2-3
months could be worth tens of millions of dollars to him. Will he
continue to underperform his own history? Or will he come back to
his own "mean/average" performance and remind his bosses
that he's worth being the highest paid player in all of baseball?
Unlike athletes whose physical skills diminish as they age, our
Models have no such physical attributes. Markets will certainly
change. We will continue to offer Models and strategies that help
you navigate those markets. And we look forward to helping you profit
as a result. As investors, we must occasionally step back to consider
a bigger picture. Just as it was tempting to abandon the TradeGuru
after underperforming the market month-after-month, we recognize
now that doing so would have missed the point - that TradeGuru came
roaring back to deliver performance consistent with its history.
Patience is a virtue.
Question:
Can someone trade the Turbo Model for me?
We are pleased to announce that our friends at MARKETTREND Advisors have recently begun offering to trade the Turbo Model signals
in client accounts. MARKETTREND Advisors serves accounts primarily at Fidelity,
and is a long-time investment advisor and money manager well-versed
in how to implement our strategies as well as offering a full menu
of investment options. You can find information about their new
Turbo offering as well as how to open an account at their website: www.markettrendadvisors.com.
Warm wishes and until next week.
The TimingCube
Staff
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Turbo Model
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Classic Model
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