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January 27, 2008

Timing Still Risk-Averse
by Bill Rempel

Timing attempts to provide market equivalent returns over the long term, with a substantial reduction in variability of returns. The two components of the Timing program are EZ+Macro and Fear/Greed. This system trades rarely and splits its allocations between ETFs tracking the S&P 500, the intermediate-term U.S. Treasuries, and cash.

Information is as of the close on January 25, 2008.

EZ+Macro

My charts are relatively wide, and this site is best viewed at 1280×1024. If the chart is truncated in your browser, click on it to view it in full size.

EZ Trend is now down.

Macro Trend is bullish for Treasuries. This comes into play only if the EZ Trend is not up.

Fear/Greed

The Fear/Greed model signaled a buy for the U.S. stock market in early November, and a sell in December, as the $VIX relative to actual volatility fell to a historically low level. The current level of sentiment, despite current events, is still only about halfway between complacency and fear. This is a tough model to follow, as it demands a buy and hold when fear is high and most people would like to sell. In the scale of the chart, 80% of the readings since 1990 have been between the red and green lines.

Model Allocation

Based on beginning with a $100,000 portfolio at inception.

S&P 500 SPDRs (SPY) - 25.0%
iShares 7-10 Year Treasury Bond Fund (IEF) - 24.9%
Cash - 50.1%

Returns

Based on beginning with a $100,000 portfolio at inception.

Equity: $97,250.26
Gain, Last 4 weeks: -4.38%
Gain, Year to Date: -4.03%
Gain, Since Inception: -2.75%

Changes To Model Allocation

There are no changes to the model allocation since this previous message. It is listed below:

S&P 500 SPDRs (SPY) - 25.0%
iShares 7-10 Year Treasury Bond Fund (IEF) - 25.0%
Cash - 50.0%

Tracking

There are no changes to track.

Commentary

As mentioned earlier in the week, I believe a trade-able capitulation bottom has been reached. However, my intention with this site is to track mechanical systems, therefore the system will continue to follow its own signals and disregard my intuition and personal opinions.

My personal trading is disclosed on this site, and is currently most in line with the Rotational system.

I reserve, and confine, the right to exercise my opinion to my personal portfolio, and not to the system portfolios which I track here. They shall remain 100% mechanical.

Bill Rempel
The Rempel Report

Disclaimer: Nothing at The Rempel Report, or any communication from The Rempel Report or its author, should be construed as personal advice, on investing or anything else, and at all times you are responsible for your own actions and you should perform your own due diligence. I'm not an investment professional, and you should probably consult with one, in addition to doing your own due diligence, before making any investment decisions.

I may have a beneficial position in any potential investment I mention. My positions in, and opinions of, those potential investments may change over time. I have no obligation to reveal those positions, and if I should reveal those positions, I am under no obligation to notify you, though this site or through any other means, if I change those positions.

While I do try to verify much of the data presented, I can make mistakes. I rely on third party vendors for data, and sometimes that data could be incorrect. Therefore, I cannot and will not be held liable for incorrect or erroneous data presented in text, table, chart, or other format. This is one more reason why you should consult with an investment professional, in addition to doing your own due diligence, before making any investment decisions.

Modeling is prone to error, and no statistical model is perfect. The output from statistical or predictive modeling should be viewed with skepticism.

Fundamental analysis is based on examinations of company filings such as income and cash flow statements, balance sheets, quarterly and annual filings, proxies, and other such items. Even though a company appears fundamentally sound today, that doesn't imply they actually are, or will remain, fundamentally sound. Fundamentals can change over time, and there is always the possibility that the company filed information that was either fraudulent or incorrect. I might make an oversight or error when examining company filings. In many cases, I will rely on a third party's presentation of filing data, such as a stock screening program's output, without actually reviewing the filings personally.

Technical analysis is based on the study of historical price, volume, and sentiment data over time. Past performance is no guarantee, and there are no certainties hidden in patterns, charts, indicators, or formulae.

FundaTechnical analysis involves those items which mix elements of Fundamental and Technical analysis, including valuation metrics such as the Price/Book or Price/Earnings ratios. Therefore all the warnings for both Fundamental and Technical analysis apply.

Take responsibility for your own actions. You should consult with an investment professional, in addition to doing your own due diligence, before making any investment decisions.

Copyright © 2005-2008 Bill Rempel

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