Well, the model score today has finally moved…to -88. This means that the market is deteriorating internally with price. Nothing has changed in the spreads. Quite simply all the spread prices are so far below the relevant moving averages that small rallies just do nothing to improve the score. It is still correct, in my opinion, to avoid risk assets.
Unless the market now rallies very hard, the asset spreads utilized in the model suggest this will be a temporary reprieve, with much worse to come eventually.
Owners of AFL, A & NEM should examine whether it is worth holding these stocks, as the position is rapidly deteriorating in those names.
We are in full Risk Off, invested in TLT.
I would still advise extreme caution and lightening up of individual names which are underperforming the market into rallies.
Hi Nick,
Merry Xmas from the far-east! Really impressed by the site and clearly a lot of work has gone into the back-end algos to generate what is very easy interface and concept to the masses. I had a few questions if I may:
* Once a signal is generated what assumptions do you use for execution. EOD auction?
* Performance is measured since 07. Is this back tested or real pnl %. I am wondering about slippage/ commissions assumptions and over fitting, not to suggest you have done such though.
* Is this total return, incl divs reinvested?
* Assume CGT liability is zero?
Look forward to following the model. Best James
Hi James,
Merry Xmas to you. Answers:
1. Yes, EOD prices.
2. It is not “real” P/L as I do not have a separate account which does just this. I have explained before here somewhere (could not be bothered to try to find it, sorry) that I use the model for my own investments and positioning. Which does not mean that I am simplistically 100% in SPY or in TLT. I naturally try to enhance the model via options, leverage, market sector positioning, etc. The models are there to tell you when to have more and when to have less risk on board. And the performance is what you would have achieved had you done it mechanically, without any enhancements, anticipation, leverage or finesses. The only point I am trying to prove is that their timing is pretty damn good and beats a buy-and-hold strategy or a 60-40 allocation hands down. How you use it, in the real world, is up to you.
3. No dividends. Which actually means it slightly understates performance but not really bothered by that. The compounded difference is minute and perfectly good enough for what I am trying to prove.
4. It is what I pay. Hint: I live in the Bahamas. So, yes, zero CGT. 🙂
Hi Nick.
Thanks for the prompt reply and all clear especially the risk indication/ spy as a proxy part.
CGT. How nice,very similar to another former colony over where I reside (HK) albeit a rather different ex pat proposition! Best James