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General Market Commentary
In Chart #1 (AlphaDow), add up the numbers in the boxes. A BULLISH state first occurs when the count reaches 5 out of 5. A BEARISH state occurs when any 3 of the 5 turn negative. You can use this as a %27regime filter%27 to signal when the odds are in your favour of going long stocks or as a system to go long SPY vs. a move to cash/bonds (SHY/AGG).
The essence of portfolio management is the management of RISKS not the management of RETURNS. All good portfolio management begins and ends with this premise. -- Benjamin Graham
The Call For The Week of Jan 20th:
The climb in equities continues as Trump inks phase one of a trade deal with China and the "fear of missing out" rises to fever pitch. Safe havens like gold and bonds were flat while oil dipped on easing tensions in the Middle East. Continue to hold off on new stock purchases for now.
Summary: Our "Sleep Well At Night" (SWAN) Portfolio uses a carefully measured suite of systems for stocks, bonds and gold.
Chart #1. 30% SPY (vs. SHY) [or Chart #2. 20% HXT.TO (for Canadians)].
Chart #3. 20% TLT (vs. SHY -- AlphaBond)
Chart #4. 20% GLD (AlphaGold)
Chart #5. 30% SPY (Fabian Wealth Builder)
Each position is managed by a unique system, namely 1. and 2. AlphaDow, 3. AlphaBond, 4. AlphaGold, 5. FWB respectively.
Bullish when 5 out of 5 are true (+1) for each condition:
1. $SPX is above 65wk MA
2. Advance/Decline Line is trending up (buying power)
3. $TRAN is trending up (Dow Theory confirmation)
4. Utility Average MA rises (interest rate sensitive Utilities lead)
5. Bonds are trending up (interest rates are low)
Average holding period 392.3 days. 0.58 round trip trades per year. Longest drawdown duration 50 months vs. 73 for buy & hold.
64% winning trades since 1980. Beats buy and hold with less volatility (0.53 MAR Ratio).
Past performance is no guarantee of future results. This is not investment advice, but is for educational purposes only. Consult your investment advisor for additional information regarding suitability, fees, expenses and short term trading costs.
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