jackmack
334 posts
msg #103123
- Ignore jackmack |
10/28/2011 8:29:19 AM
Kevin
Looking at your last two filters (401K and IRA variants) it would appear a change should be coming up for a rotation out of bonds and into equities - correct?
Please advise when you have a chance.
Thank you
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Kevin_in_GA
4,599 posts
msg #103127
- Ignore Kevin_in_GA |
10/28/2011 10:17:05 AM
Possibly. The gap between BND and the nearest equity class (SPY) is still about 5.75%, which would mean that the SPY would have to move up at least 5% and bonds down about 1% for the change in leadership to occur. Historically this is unlikely, but more probable in Nov-May then May-Nov so we'll need to wait and see.
Since 5/20 BND is up 2.2% (from 81.32 to 83.14) while the SPY is down 4.2% (from 133.61 to 127.95). For the 14 week ROC to be above BND, next week the SPY will need to close above 136, which would give it a 14 week ROC of 2%. I doubt this would happen, but if the SPY closes above 132 by two weeks from today it will likely take the lead (nice thing about this filter is that you can reliably predict what key values will need to be for the leaders to change hands).
I tend to be a little more cautious, so if I see a cross over from bonds to equities that is not fairly big in gap (maybe 2% or more) I might wait a week to see a follow through. This just recognizes the movement from low-risk to higher risk. In the converse I would move immediately to lock in profit.
In short, it will happen when it happens. For me, I moved into bonds on 5/20, and ignored a short signal to move into EFA because I simply did not trust the European situation. Good thing I did as that trade lasted one week and lost 5%.
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jackmack
334 posts
msg #103129
- Ignore jackmack |
10/28/2011 10:42:28 AM
As always you explain with great care and detail and I thank you for that.
This by far the best thread on SF.
Have a great weekend.
jackmack
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davesaint86
726 posts
msg #103155
- Ignore davesaint86 |
10/30/2011 12:42:56 PM
My 401k portfolio that I trade contains IWM, EFA, SHY and AGG. I left SPY out of the mix based on the backtesting results returned from ETF Replay since 2003. Currently using the 50/50 weighting ETF Replay is signaling a move to IWM on October 31st using the 50/50 weighting and its still showing AGG as the pick using the 40/30/30 weighting.
Thanks,
Dave
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jackmack
334 posts
msg #103181
- Ignore jackmack |
11/1/2011 10:05:05 AM
Kevin
Quick question on this model - if the SPY moves up and replaces BND (this is hypothetical here - just asking) - wouldn't the gains in BND be wiped out as the SPY moved up (2% down in BND vs. 4-5% up in SPY) or is it the 14 ROC that makes the move from one asset class to the other therefore you could still possibly exit BND with a small profit once entering into SPY?
Sorry just trying to get my head around this in a present day manner (not back test results but how it would play out in real time).
Thank you
jackmack
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Kevin_in_GA
4,599 posts
msg #103183
- Ignore Kevin_in_GA |
11/1/2011 10:44:00 AM
Honestly it is unlikely that BND will drop 2% - it's volatility is very low, which means slow gains and slow losses. The SPY volatility is much greater, so I would expect that if a change in leadership occurs between BND and SPY it will be because SPY moves up fast, and BND stays about where it is.
Translation - if a change occurs, you'll have made a few percent in BND with low volatility and many good night's sleep. Remember that no system gaurantees a profit on any trade. If you are trading in an IRA, you could set a stop loss at 82.50 or 83.00 and be sure of making a profit on the current BND trade.
As of this writing (about 10:30 AM) the difference in 14 week ROC betwen BND and SPY is about 6.5%. That is a lot of ground to make up under the current circumstances.
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jackmack
334 posts
msg #103188
- Ignore jackmack |
11/1/2011 4:15:20 PM
I honestly jumped the system and live and learn - I went into SPY and have been spanked (live and learn) that being said do you think it would be wise to move out of SPY now and into BND since it is still showing that should have been the fund to move into?
Not asking for advise - just thoughts on how the model "should" be used and if a position should be taken in BND regardless of my carelessness :-(.
Thank you
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Kevin_in_GA
4,599 posts
msg #103220
- Ignore Kevin_in_GA |
11/3/2011 4:07:00 PM
Heads up on something - if one looks back 14 weeks as this filter does, you'll notice that NEXT week the SPY and other equity indices will zoom past BND.
Why? Because 14 weeks ago next week those markets took a phenomenal hit (the SPY closed at 120). I'm not sure if this really means that equities are suddenly the place to be, but if one follows the system RIGOROUSLY one would move into whatever ETF is the new leader next Friday.
The gap will be large, not based so much on recent good performance but rather on prior bad performance. Caveat emptor on this.
Kevin
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Kevin_in_GA
4,599 posts
msg #103247
- Ignore Kevin_in_GA |
11/7/2011 10:23:53 AM
No surprise - SPY and IWM are now leading, not so much on recent performance (which has been good) but basically on past poor performance as the baseline for calculating ROC. Bonds now rank 3rd, EFA still has a negative ROC and is lagging the rest of the pack.
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jackmack
334 posts
msg #103256
- Ignore jackmack |
11/8/2011 8:50:33 AM
Kevin
Just wondering if one would be reviewing the 401K format on a weekly basis (vs. monthly as set out in model).
I know with the IRA version weekly review is advisable do to greater flexibility but I thought the 401K model was
end of month review and move into the newest leader.
Thank you
jackmack
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