Timing Model = .5
60% long, 40% cash
10 day moving average: 42% long, 58% cash
Global allocation of long positions
MSCI EAFE Index 30%
MCCI Emerging Markets Index 10%
Russell 3000 Index - U.S. 60%
Top U.S. Sectors
Precious Metals 5.0
U.S. Oil & Gas 5.0
U.S. Biotechnology 4.5
U.S. Basic Materials 4.0
U.S. Oil Equipment, Services & Distribution 3.5
U.S. Health Care 3.0
U.S. Consumer Services 2.5
U.S. Technology 2.5
U.S. Semiconductor 2.5
Top Intl. ETFs
MSCI Malaysia Index Fund 3
MSCI Brazil Index Fund 2
MSCI Hong Kong Index Fund 2
S&P Latin America 40 Index Fund 2
FTSE/Xinhua China 25 Index Fund 2
Strategy 3
Money Market 33.3%
Agriculture 33.3%
Precious Metals 33.3%
Emerging Markets 0.0%
Industrial Materials 0.0%
EAFE 0.0%
U.S. Large Cap 0.0%
U.S. Small Cap 0.0%
U.S. Long Bonds 0.0%
U.S. REITs 0.0%
Saturday, February 9, 2008
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6 comments:
thanks for the updates Tom.
I have a question that you may have answered in the past. What ETFs do you use to play the different sectors? For example, would DBA be your instrument for the Ag sector?
in that case do you take into account how extended a sector/ETF is before you allocate money to it?
Again, DBA would be my specific example. With its semi vertical ascent do you hesitate before you put money in it?
thanks.
All good questions:
I'm currently using DBA for Ag but I'm growing more interested in RJA. DBA is essentially Corn, Sugar, Wheat, and Soybeans - roughly quarter allocation. RJA is much more diversified: http://www.elementsetn.com/pdfs/ELEMENTS-RJA.pdf
Strategy 3 takes no account of how extended an asset class is from a trailing mean. The current system is trend-based only.
However, my U.S. Sector ranking model weights short term OB/OS measures. I use 2 timeframes for trix: http://tinyurl.com/35jyno
I also use Rydex/Proshares asset flows to gauge sentiment for each sector. For example, if a sector is one of the top performers over the past 30/90 days, it's rank can be reduce to a degree if it is in a very overbought condition.
That said, momentum is a powerful force. Human nature tricks us into believing if a price goes parabolic it has to come crashing down. That isn't necessarily the case.
I've read a lot of the academic articles about stock momentum and there seems to be very consistent results. In the short term (e.g. <30 days)out/under performing equities tend to revert to their mean. The same goes for equities over the long term (3 to 5 years). But stocks/sectors/countries that outperform over the previous 3 to 12 months continue to outperform.
My general philosophy is to weight heavily based on 3-12 month momentum but moderate the overall score/rank if a sector is out of bounds short term.
Tom,
I went to rja...and quite satisfied, fwiw. Great liquidity.
Slow and fast trix lines have been helpful...but I recently switched to an indicator by Martin Pring...KST/daily. I use it alongside rsi much as I do the trix. Really takes out the noise and helps me to relax. Many years ago I had kst when I used metastock and wealth lab pro software at fido has allowed me to return to it. Basic rule: at extremes go with the crossover; at more moderate levels wait for zero cross over and confirmation of rsi cross over of its own 10ema. At this point the simplicity is working for me to decide trend of broad asset classes and safety of entry with a specific narrower asset. eg. yesterday went long EWZ./jasper
I'm sure KST works just as well as a OB/OS barometer. The system you describe is very similar to what Pring wrote about in one of his books - I think it's called Breaking the Black Box.
http://tinyurl.com/ytwl7y
Tom,
Here's a link on how kst can be considered better than the macd for avoiding the whipsaw.
I'm far from a TA expert; tried that and found that I do better with simple. Question....As you use trix...and I think of the KST as another veresion of trix (an assumption)...do you that these indicators are valid and viable in both ranging and trending markets?
..I'm going to read more about your reference to Pring. I'm feeling a little enthusiastic that I might have re-discovered something that fits the keep-it-simple model.
Oscillators need to be viewed within the context of the larger trend. For example, in a bear market OB/OS levels are going to be much lower.
Keep in mind I don't use tape oscillators for timing purposes. Trix is only a small component of my sector model used to identify sectors that are OS short term. And even if a sector is short term OS, it can (most likely will) rank high.
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