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April continued to be dominated by two themes:

  1. None of the strategies I track did much – they’re all pretty much sideways in a market like this.  They have a month up and then a month down.  In terms of MOMO1, this is actually what I would expect – the system performs best in a bull market and despite the rally, we are not yet in a bull market in my view.  It could also be that we are in a very different market – closer to 1930 or 1970 rather than 2000-2008 – so the systems may simply not come back to life for a while.  As such I continue to monitor them and make changes as I see fit.
  2. The little time I have these days is split between my family and my job.

Despite all of this, I’ve been impressed with the rally in the market over the past two months although I have not been as invested as I should have been.

Also exciting this month: Amibroker update that makes doing this reporting much, much easier.  The other really nice feature about the new reporting is that it is customizable – so you can program new charts which is pretty darn neat and something that I used Tradersstudio for.  The individual strategy pages have been changed to reflect the new reporting.

MR1 was the bigger winner in April.  Stats are below.  Disappointing is that all the strategies significantly underperformed the market – I’m not really shocked at this given the huge change in trend during the past month – but it is disappointing nevertheless.

As normal, you’ll find the individual strategies pages (MOMO1, TREND1, MR1) have updated equity curves, statistics and current holdings. As was true of my last update – all the trading systems below assume an Interactive Broker‘s-like commission plan – for these, it is .01 cent per share with a $1 dollar minimum.  None of these system count dividends.

MOMO1:

  • Return for April-09: -0.3%
  • Return YTD: 3.1%
  • Current holdings: IGN, EWT, HHH

TREND1:

  • Return for April-09: -1.9%
  • Return YTD: -1.8% (includes some of May)
  • Current holdings: AGG, IWM

MR1:

  • Return for April-09: 5.1%
  • 2009: -3.9% (includes some of May)
  • Current holdings: See blog for updates.

Benchmarks (from March 31,2009 till April 30,2009):

  • S&P500:
    • April-09: 9.39%
    • 2009: 2.88% (through May 8th)
  • DOW:
    • April-09: 7.35%
    • 2009: -2.30% (through May 8th)
  • Nasdaq:
    • April-09: 12.72%
    • 2009: 15.06% (through May 8th)
  • IWM (proxy for the R2000):
    • March-09: 15.39%
    • 2009: 3.59% (through May 8th)
  • EFA (proxy for developed foreign markets):
    • March-09: 11.52%
    • 2009: 2.43% (through May 8th)
  • EEM (proxy for developing foreign markets):
    • March-09: 15.56%
    • 2009: 26.51% (through May 8th) – Wow!

As always – thanks for reading and I hope you have a good May!

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Wrapping up (184/365)
Image by Cellach via Flickr

I am sitting up here on a Friday night wrapping presents and waiting for some sign that my wife will go into labor (no sign yet – the baby is late!), and we’ve gotten about 5 inches of snow in the past 3-4 hours.  So I have had some time to focus on the state of the market.

One thing I like to look at to get a sense for how the overall market is doing is to look at different ratios.  I’ve setup a screen on my system that shows me a bunch of these different screens.

ratios

So what does this show?  A few things jump out at me: Small cap stocks (represented by IWM) are outperforming large cap stocks (represented by SPY).  And we’ve got the Nasdaq (represented by QQQQ) outperforming large cap (again represented by SPY).  Bonds (represented by TLT) continue to outperform stocks (SPY).  Finally, we’re seeing foreign developing markets (represented by EEM) outperforming large cap stocks (SPY).

What I would like to see, based on history, is small caps outperforming large cap stocks.  I would also like to see the Nasdaq outperforming large cap stocks.  So that’s two good aspects of the recent market activity.  But one aspect of this chart does give me pause.  I’ve been working on some studies of small cap growth (represented by IWO) vs. small cap value (represented by IWN).  In these studies, I have found that the market tends to do better (a lot better in many cases) when growth is outperforming value.  This, combined with the fact that Gold (represented by GLD) continues to outperform large cap stocks gives me some measure of pause.

skills-index

The Skills Index is still on a buy signal, and I have been making money on this by being in small cap stocks – particularly UWM.  I will be watching for growth to outperform value in the next week before committing more money to the market.

Other concerns: that sure looks like a rising wedge on lowering volume.

I have also almost completed work on the changes I outlined to my existing systems (MOMO1 and MR1) – I’ll be posting updates about those system very soon – although if the baby decides to come tonight (which would be perfect since the roads are problematic at the moment), it may take more than a few days.

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