SystemTrader's Account Talk

[SystemTrader]

Discuss SystemTrader's account and general approach of timing/fund selection based on tested, mechanical models. Thanks for the comments and encouragement, Rod and Chaplain!

[Safetyguy]

Right now you are 100% I --an interesting place to be. Wouldn't it be safer to spread the risk in the other stock funds?

[Rod]

Safetyguy wrote: Right now you are 100% I --an interesting place to be. Wouldn't it be safer to spread the risk in the other stock funds?

Well, days like today are an awesome time to be 100% I!:^

Please keep in mind, this is part of John's system he is testing.

[tsptalk]

Welcome SystemTrader!!

[Wheels]

"Kind regards,
John, AKA "SytemTrader," "SystemGeek" or whatever else (within reason) you want to call me. "

How 'bout my new best friend.

Welcome ST. I love the idea that your system always has you 100% in something. I guess that's the gambler in me. I have 2 questions for you. First, look at today as an example, where the I fund appears to be overachieving and the S fund appears to be underachieving (badly), would your system tell you to get into the one that's hot, or the one that's due? Second, there has been a ton of discussion on this board about the I fund and particularly to what extent the rising/falling dollareffects the price of the I fund. Does your system consider the effect of the dollar and to what extent?

Thanks in advance for your answers. I'll be watching (and perhaps mirroring) closely.

Dave

[SystemTrader]

I'm answering FundSurfer's questions/comments here. I'll try to answerother questions (such as why the system only invests in one fund) later. What I've written here and a few other places on the board is enough for one evening! I'm trying to address the concern that timing models may not work in the future and/or that they may be anticipated
by other investors.

First, thanks for your comments. Yes, it is true that backtested results could be faked orbe the result of data mining (this essentially means looking for something that “worked” in the past until you find something that's probably a statistical fluke). And you're right--no system or investing guru can guarantee future results.But because of this, I prefer to use something that has performedwell in many different market climates—in up, down and sideways markets including the '87 crash, the Gulf War, the roaring mid-late 90s, the subsequent bear market, etc.

While timing systems aren't perfect, you can take measures to increase the odds that they'll bereliable in the future. First,they should ideally be built/tested in one time frame then tested in an “out-of-sample” period andin real time. Most timing models I use were built by others and were subjected to this sort of rigorous testing. Some have been around since the 90s (and even a few since the 80s) and work just as welltoday as they did 10 years ago. Practically all of them avoided most/all of the 2000-2003 bear market though they were designed well before it—not in hindsight. To my knowledge, these models aren't known or used by many people. (We're not talking 200-day moving averages or VIX reversals.) And if you think about it, how many of the 3.5 million TSP participants,22+ million 401k participants, or ?? million IRA owners actually do this sort of thing? Very, very few. And if they use their local stock broker or financial planner's services, I can almost guaranteethey don't.

Timing systems should also "make sense" and have some theoretical basis, whether it be trend-following (crowd behavior), economic, market relations/comparisons (like how the NASDAQ usually leads blue chips heading into a rally...it happened yet again this fall!, etc.) I have designed several of the timing systems I use, but all are based on some sort of established relationship with a logical basis. I have just combined them in unique ways and added my own parameters. If I had just found some strange model that happened to work (like basing it on the score of the Super Bowl each year), that would be a different story.




Another way to bolster timing model reliability is to test for “parameter sensitivity.” If a model is too reliant on strict parameters, that's a danger sign. For example, if a 20-day moving average produces beautiful backtested results, but the 19-day and 21-day variations do terribly, you probably have a fluke. By optimizing (i.e., testing every possible combination and viewing the results), it's easy to see if a wide range of parameters outperformthe market. I've done this.




Finally, I use a composite model for both stocks and bonds. This assigns numerical “weights” to different timing models, and produces a buy signal when a certain weighted score is reached.




The beauty of composites is that they require multiple conditions (price, volume, oil prices, activities of professional investors, intermarket relationships, interest rates, seasonal trends, etc.) to enter or exit the market, and these conditions may be different each time a signal is given. As I mentioned, my composite contains 9 timing systems, a few of which I designed, and I've run optimizations that tested over 3 million combinations. If anyone thinks they can crack the code or anticipatemy next signal, then have at it! ;)




One of my favorite market researchers, Nelson Freeburg, who builds “composites” for big-time institutional money managers, said the following about them: “they combine the individual signals from a variety of components into a structured whole. The consensus of indicators includes a diverse mix of data--market breadth, sentiment, monetary and trend-sensitive inputs. All of our custom models have outperformed the S&P 500 in real-time in terms of risk and reward.” Since Nelson has a lot of experience and prominence in this field, I don't think most of us can afford his services. But hopefullyfolks can afford mine, especially now while you can follow them for free. :D


Well, I'd like to address a few other things, but I'll wait until later. The bottom line: I'm not some self-proclaimed "market genius" who claims to have found the flawless holy grail of market timing. The Internet is already full of such characters! I've simply compiled a diverse, "best of breed" set of timing models, add a few models/tweaks of my own, and customized it for the TSP. This has taken considerable time and expense but I'm finally satisfied with the results. My system may not be for everybody, and that's fine. I hope everyone here does great with whatever approach they use.




I will leave one question for some pondering, though, and it's what I ask myself about all trading/investing activities I do: willyour approachcontinue to work wellno matter how the market behaves? I startedinvesting byusing a combination of news events, chart reading, indicators, advice from others, hunches, etc. I quickly and painfully found out that I'm not a very good intuitive trader. I can't filter thenear infinite amountof market info we're bombarded with and consistently make good decisions with it. That's why I prefer systematic approaches. If done correctly, they filter the most important parts of this data and remove all of your emotions and second guessing. No, they're not perfect, but if done properly, they are,in my humble opinion, the best way to approach the future. My system is doing just as well (if not better) right now as it did in the early 90s, so Ihave no reason to doubt it will continue to perform well in the future.




Thanks again for your input.



John

[SystemTrader]

Oh, and re: other paid services, I'm aware of them. When I first thought about doing this, I thought I may be the first, but I soon discovered a few others. I don't subscribe to any others, so I can only judge them by what's on their websites. And in this highly litigious age, I'm a little gunshy about talking about them. I will say that one service uses some of the same concepts I do, but it uses a completely different framework to select the funds. (Again, this is based only on what I've read at their site.) I'm not very clear on the methodology used by the other services.




There are a couple of things that appear to bedifferent about my system. First, it's a top-down approach, meaning it selects the proper asset class (stocks, bonds, cash) from a macro-level first, and only then is it concerned with selecting the particular fund. Next, and related to this, is the fact that it analyzes stocks and bonds using completely different criteria. While there are some similarities between stocks and bonds (i.e., they both generally perform better when interest rates are low), they are really two different animals in the end. That's why I don't use a "relative strength" system to compare the C/S/I funds to the F or G fund.

~John

[Rod]

The I FUND is acting funny again...

The EAFE was UP 0.70%

YET

The I FUND was down 5 cents.:P

What's up with that, John???

Must have been those smalllosses within the Asian markets.

[Mike]

It's the dollar (went up yesterday).

[SystemTrader]

Since there have been a few questions about being in the I Fund with the uncertain Dollar situation, et. al., here are a few comments. First, I think Mike is right. Over time, the I Fund should track the EAFE closely, but the daily valuations can be quite different, as we saw yesterday. Rod's right, too...it'sa bummer to see a 0.7% gain on the EAFE yesterday and then find out the I Fund lost a nickel! :shock:

Re: concerns with the I Fund and the Dollar vs. other currencies, I don't consider this--at least not directly. I'm just not knowleable enough. If I could really forecast the Dollar vs. Yen, Dollar vs. Euro, etc., I'd be daytrading the currency markets and making a killing. :P Seriously,some ofthe best minds and trading systems in the world are employed on the currency markets.And even if I really couldtrade currencies well (very few people can), that would only help me understand a part of what makes the I Fund tick. There's more to it than just the Dollar vs. EAFE currencies.

Instead,themodel I use to select the C, S, or I fund issimply based on theirpricemovements.It's a little complex, and uses a lotof "smoothing"to detect the long-term trend, but it's solely based on price.It's a variation of a system that others have used to successfully switch among sector funds, value/growth funds, and even U.S. and international stocks. ButI only invest in C, S or I when theoverall stock model determinesstocks are theplace to be. If conditions are too risky, I stay out of stocks completely.

When you think about it, the price of a fundhas all the relevent information: it's what all investors, money managers, trading systems, etc., think the fundis worth based on future expectations, economic trends, currency projections, etc. That's why I stay in a fund as long as the overall price trend is strong, regardless of current events or daily market "noise." Looking back, even withthe dailyhubbub over what the Dollar will do next, I'm happy to have been in the I Fund since mid-Oct. It's appreciated about 11%. The S Fund hasdonea littlebetter, and my model may switch to the S Fund very soon. But this is all about trying to find something that works well (not perfectly) over time. I've found ifyou find something that works and then overtweak it, it almost always backfires on you.

Take care, and hope everyone has a great Christmas!

John

[FundSurfer]

I said it before and I'll say it again. I think that use of a systematic approach is the best way to "surf" the "funds". C-C-Cattcchh the wave... Ride each wave as long as you can and still avoid the undertoe.

I agree with everything you said systemtrader. I'd like nothing better than to see your system do really well.

My system is simple, I haven't had time to refine it. Not sure when I'd get the time. Which is why I've said in the past pay sites are good if the advice is good. I just can't help being a skeptic at heart. You'd think I grew up in Missouri, the Show-me state.

[Mike]

Here's a goodsystem: when you get nervous and scared, buy. When you feel comfortable and confident, sell! :^

[Rod]

Mike wrote: Here's a goodsystem: when you get nervous and scared, buy. When you feel comfortable and confident, sell! :^
LOL!:D Yep! Sometimes you just gotta go with that GUT!!!;)

Thanx for the comments, John!:^ And BTW, your grammar is excellent!

It shows you are an educated man, which goes a long way inbringing intelligence & trustto your posts. (I hope this came across the right way)

God Bless & Happy Christmas!:)

[SystemTrader]

FundSurfer,

I hope my system performs well, too! I realize I'mtaking a risk by posting "live signals" here, because it could perform poorly in the short term. In backtesting, there were a few lousy quarters and a fair number of mediocre quarters. It always seemed to correct itself and give a decent annual performance, however.I figureI have tostart giving real-time recommendations at some point, though, so why not be the first service to do this publicly before I ask for money?

Rod,

Thanks for your comments as well.



Hope everyone has agood week and greatnew year!

John

[Safetyguy]

SystemTrader wrote: I hope my system performs well, too! I realize I'mtaking a risk by posting "live signals" here, because it could perform poorly in the short term.I figureI have tostart giving real-time recommendations at some point, though, so why not be the first service to do this publicly before I ask for money?

Are you still staying 100 % I ??

[SystemTrader]

Safetyguy wrote: Are you still staying 100 % I ??




Yes. I posted a brief note in my "SystemTrader Account" folder last night to say I'm still 100% in the I Fund.

John

[Safetyguy]

Thanks -- I saw it there after I sent my post above.

[SystemTrader]

As I said in my "Account" folder, I'm still100% in the I Fund. I don't know if its streak will continue, but it's up about 3.89% since I first posted two weeks ago. It even jumped ahead of the S Fund as the top performer forthe year and4th quarter, so I'm glad my "fund selection model" has continued to favor it.Whenever the S Fund comes close to overtaking it in the model,it's like theI Fund starts hearing footsteps and really kicks itin for a few weeks.:D

Speaking of the stock market, I agree with Tom that there a few danger signs. The stock composite model I use is still on a buy signal, but themodels/indicators that compriseitdon't look quite as healthy as they did in November and early December. In addition, all 4 of the major surveys of investor optimism are at extremes according to SentimentTrader.com. Bulls outnumbered bears every week in 2004 in theoldest of thesesurveys (Investor's Intelligence), which is quite unusual.

In fact,this hasonly happened 7 times since Investor's Intelligence began, and 5 of those 7 years were followed by double-digit negative returns.

But I'll followthe system,of course, until I get a sell signal for stocks or a signal to switch to a different stock fund.

Happy new year,

John

[Rod]

Hey John, I bailed on (I).

Will you soon be doing the same?

[SystemTrader]

Hi, Rod.



Nope, I'm still 100% in the I Fund. If I switch among the 3 stock funds, it will only be on a weekly basis (based on each Friday's closing price). I'll post the recommendation before Monday's opening. However, I could pull out of stocks entirely and move to the F or G Fund during the week. If this happens I'llpost this before the next morning's opening.



Here's a brief recap of my method. I control risk through the stock timing model, the first "tier" of my system. When it says to sell, I'll pull out of stocks completely. Again, this could change during the middle of the week, as the model uses both daily and weekly data. The second tier of the system only comes into play on a stock "buy" signal. Its purpose is to determine the best performing stock fund over the long term. It gives more significance or "weight" to recent price changes, however, to prevent being "locked" into a deteriorating fund for too long.



I realize that following a system like this may seem difficult or counterintuitive at times. It can almost be like buy-and-hold investing, as it's not always easy to stick witha plan and ignore daily news and market fluctuations.However, an effectivemechanical system should get you outduring a significant downturn, unlike buy-and-hold. A buy-and-hold stock fund investor will stay fully invested no matter what, even through something like the '29 crash/Great Depression, the '73-74 bear market, or the 2000-2003 market. Historically, it can takeover adecade--or several decades in the case of the Great Depression--to recoup your losses in real (inflation-adjusted) terms if you hold through a major bear market. No thanks!



Hope that answers your question,

John

[lookywhatigot@yahoo.com]

This isn't a "significant downturn"? I hope you don't plan on charging too much.

[SystemTrader]

lookywhatigot wrote: This isn't a "significant downturn"? I hope you don't plan on charging too much.
Hi Look,

None of the 3 stock fundshave dropped more than 5% from their recent peak price. (This is also known as "maximum drawdown.")The S Fund has had the worse decline at a little under 4.7%.The I Fundand the C Fund have dropped somewhere inthe 2to 2.5% range.

No, I don't consider this significant. If you want to invest in stocks for the long-term (through buy-and-hold or market timing), you should expect drawdowns like this and worse. It's how you pay your dues to get higher returns.I've heard ofworld-class money managers whomake 10-12% annually with 3-5% max drawdowns, but they use all sorts of hedging techniques and instrumentsthat aren't available inthe TSP.

[lookywhatigot@yahoo.com]

SystemTrader wrote: lookywhatigot wrote: This isn't a "significant downturn"? I hope you don't plan on charging too much.
Hi Look,

None of the 3 stock fundshave dropped more than 5% from their recent peak price. (This is also known as "maximum drawdown.")The S Fund has had the worse decline at a little under 4.7%.The I Fundand the C Fund have dropped somewhere inthe 2to 2.5% range.

No, I don't consider this significant. If you want to invest in stocks for the long-term (through buy-and-hold or market timing), you should expect drawdowns like this and worse. It's how you pay your dues to get higher returns.I've heard ofworld-class money managers whomake 10-12% annually with 3-5% max drawdowns, but they use all sorts of hedging techniques and instrumentsthat aren't available inthe TSP.

But the S&P averages 10% a year by itself, why pay for that type of return? How much can you make?

Sorry, just trying to understand.

[coolhand]

SystemTrader wrote: I startedinvesting byusing a combination of news events, chart reading, indicators, advice from others, hunches, etc. I quickly and painfully found out that I'm not a very good intuitive trader. I can't filter thenear infinite amountof market info we're bombarded with and consistently make good decisions with it. That's why I prefer systematic approaches. If done correctly, they filter the most important parts of this data and remove all of your emotions and second guessing. No, they're not perfect, but if done properly, they are,in my humble opinion, the best way to approach the future. My system is doing just as well (if not better) right now as it did in the early 90s, so Ihave no reason to doubt it will continue to perform well in the future.




I guess I'm at that point in the learning curve where you once were some time ago. If nothing else I suppose it helps develop one's perspective and provides some measure of an education in ecomomics (the dismal science). I am intrigued with your system and look forward to your continued posts.

[SystemTrader]

Coolhand,

Thanks forthe comment.



Look,

Re: outperforming the S&P 500. Tom doesn't allow "Monday Morning Quarterbacking" (postingpast returns that can't be verified on this board). I respect that, so I can't giveany details here. I didn't read his rules of engagement close enough at first, though, and did post somebacktested results ofthe system in my "Account" folder. They may still bethere; I'm not sure. Suffice it to say that the system outpeformed theS&P 500 substantially in backtesting. I strongly expect it will continue to outperform in the long term, thoughit maynot do soevery quarter oreven every year.

If you were referring to my commentgetting 10-12% returns with extremelylow drawdowns, I wasreferring to certain professional money managers, not my system.I can't say for sure why their (very wealthy) clients prefer this to a stock index fund. My guess is these clients mostlylive off their investing income and don't want their capital subject to huge drawdowns like the 2000-2002 bear market.

Take care,

John

[Skip]

SystemTrader...

What indicators do you use as a system... I trade 85% by systems the other 15%

gets me in trouble....

Skip

[SystemTrader]

Skip,

Sorry, I can't give all the details since I plan to go commercial with the system. Buthere's thegeneral concept. It takes a weighted score of several types of indicators:

1) Intermarket (based on relationships between stocks, bonds, interest rates, commodity prices, etc.)

2) Overall stock market trends (price, volume, the # of advancing vs. declining stocks)

3) Seasonal patterns

4) A few other things, including measures of sentiment and comparisons ofhow different types of stocks are performing (ratio analysis)

When the weighted score reaches a certain level, it givesa buy signal. If it falls below this level, it gives a sell signal.

That's the stock timing system.When it's on a buy signal, I choose one of the stock fundsusing adifferentmodelthat's strictlybased on thelong-term trend.

If you were asking about the specific type of indicators (moving averages [MAs], stochastics, RSI, etc.), Iuse MAs more than anything else. Iuseseveral typesof MAs and sometimeseven do MAs of MAs!

John

[Spaf]

SystemTrader wrote: Skip,

Sorry, I can't give all the details since I plan to go commercial with the system.
OK. SystemTrader I'll buy, show me what you have got! Please don't tease us with systems and theories that we have listened to in the past. Other so called members have stated the same damn thing.

Give us the facts, evidence, etc., or shut up!

Don't theaten my friends! :? Spaf

[SystemTrader]

1) Re: "facts/evidence": I'm giving myreal-time(not after-the-fact) allocation recommendations. I've also said a good bitabout the rationale and general concepts of what I'm doing. Tom doesn't want historical/backtested results on this board, so I'm not givingthose any longer. Whatotherfacts/evidencecan I give?

2) I haven't been involved in anypast disputes on this board and won't be involved infuture ones. I'vehad nothing to do with controversies involving other/former board members who alsodesignedtheir ownTSP systems. Please don't lump me in with all of that.

3)"Threaten"? No one is forced to read my posts or follow what I'm doing. I haven't insultedanybody. I haven't made negativeor degrading replies to other people's comments about their TSP allocations,investing approach,etc.

Peace,

John

[Wheels]

Spaf, where the hell did that come from.



John, I for one am watching with great interest.

Dave

[Spaf]

My apology to all, especially System Trader. Never more. Spaf

[SystemTrader]

Thanks, Dave!

No hard feelings, Spaf.



John

[Wheels]

Man ST Very nice move getting back into I today. Of course I got out of I today. It seems like I am frequently exactly one day off on my moves.

Dave

[pyriel]

Wheels wrote: Man ST Very nice move getting back into I today. Of course I got out of I today. It seems like I am frequently exactly one day off on my moves.

Dave


Dave, If you did your IFT today, you will receive today's closing before the transfer is made. Unless of course you were talking about yesterday, then you really missed out.

[SystemTrader]

One more day inthe I Fund...it hasbeen a nice ride the lastcouple ofdays!

The next week or twoshould be interesting with the Fed decision and Group of Seven meeting.

---------------------------------------------------------

New allocation:100%F Fund

IFT date:2Feb 05

Moving to 100% F Fund as of COBWednesday, 2 Feb.


Since Inception Returns (as of COB on 17 Dec):

SystemTrader: +3.60%

G Fund: +0.56%

F Fund: +0.77%

C Fund: -0.24%

S Fund: -0.97%

I Fund: +2.82%

20% in each fund: +0.61%

2005Returns (as of COB on31 Dec):

SystemTrader: -0.28%

G Fund: 0.37%

F Fund: 0.58%

C Fund: -1.78%

S Fund: -2.78%

I Fund: -1.03%

20% in each fund: -0.70%

Allocation History:
(Note:each date = the IFT date)

12/17/04 (start): 100% I Fund

1/18/05: 100% F Fund

1/25/05: 100% I Fund

2/02/05: 100% F Fund

~John

[tsptalk]

Real nice John. Good job!

[SystemTrader]

Thanks!

[Citizen]

When I guess that the market will go down, I park the money in the G fund as a safe place. When you move to the F fund, do you have some specific feeling that it will perform well, or is it a place to park like I consider the G?

I'm really new at this, if you couldn't tell.

[SystemTrader]

Citizen,

Yes to both questions. I considerbothFand G as"parking places," but Ialso analyzethe bond market (and related factors) to choose between them. This is important because the F Fund can decline (unlike the G). But it canalso outperform the G by asizeable margin. It was a great parking place duringmost of the 2000-2002 bear market. It was also a good performer in the summer/early fall of 2004 when the stock indices weregenerally choppy and directionless.

When I say "analyze" the bond market, here's what I mean. When my stock timingsystemgives a "sell signal," I check my bond system. If it says "buy,"I go for the F Fund. If it says "sell," I park in the G Fund.

The bond system is based on bond prices, bond yields, interest rates, commodity prices and a few other things. It's been on a buy signal since 6/15/2004. However, Iwent 100% in stocks whenthe stock system said to buyin October. Recently, I've been in a switching mode between stocks and bonds.

Regards,

John

[Skip]

ST I tried to get the 2 cents friday in the f fund It paid the 2cents friday the day I got in... Day late... If you look at the g and f funds... a good play when your not in stocks is to go back and forth in the g and f Get the penny in g and then go to the f fund...

My system told me to go to stocks your's to bonds ? And we both will make $$$$$

Skip

[Wheels]

OK ST, I'm a believer. Each time that you've jumped into the F Fund, I've thought there was no way for any money to be made there (10 year yields were down well below 4.2 each time) and yet each you have made money (today's gains should be impressive with the jobs report). I am currently divided in the stock funds. I am not sure what I am doing before the close today but I do know that I will be looking carefully for your next move and likely following it.

Dave

[SystemTrader]

Wheels wrote: OK ST, I'm a believer. Each time that you've jumped into the F Fund, I've thought there was no way for any money to be made there (10 year yields were down well below 4.2 each time) and yet each you have made money (today's gains should be impressive with the jobs report). I am currently divided in the stock funds. I am not sure what I am doing before the close today but I do know that I will be looking carefully for your next move and likely following it.

Dave



Thanks, Dave. The F Fund did great (a 4 pennyincrease in one day is a rarity), butthe C, S & I Funds were the real winners yesterday. It wasa wild day. Next week should really be interesting.

I checked my system last night and I'm staying 100% in the F Fund for now.

John

[sailor]

System trader, system trader where have you gone. I haven't seen any posts since february 5. What are you doing with your account. Looking for your system!!!! Speaking of systems do you know anything about one called timing 4 dollars. Claim high returns with only 4 moves per year.

sailor looking for system

[SystemTrader]

sailor wrote: System trader, system trader where have you gone. I haven't seen any posts since february 5. What are you doing with your account. Looking for your system!!!! Speaking of systems do you know anything about one called timing 4 dollars. Claim high returns with only 4 moves per year.

sailor looking for system

Sailor,

I'm still here. No new transactions until now (see below). My stock timing modelcame very, veryclose to givinga buy signalaweek or two ago, but it never happened. If I had received the signal, I would've gone 100% in the I Fund and enjoyed part of itsrecent run up. Oh well...

I still may receive a stockbuy signal soon. The market isvery choppy and sending a lot of mixedmessages right now, so it's hard to tell.People who day trade stock index futures hate this sort of action--the S&P500is stayingwithin a 4-5 point range on some days.

I looked at the website of the service you mentioned. Their resultslook quite spectacular. It's hard to believe they could perform like that with 4 trades a year, even using highly leveraged long/short funds. (That's what theirresults arebased on, BTW.) They're not tracked by any third-party services to verify their results, though. If they'reresults have been that good, I don't know why theythey don't let a market timing service verify their performance.

John



New allocation:100%G Fund

IFT date:22Feb 05

Moving to 100%G Fund as of COBTuesday, 22 Feb.


Since Inception Returns (as of COB on 17 Dec):

SystemTrader: +3.31%

G Fund: +0.75%

F Fund: +0.58%

C Fund: +0.94%

S Fund: +0.07%

I Fund: +5.03%

20% in each fund: +1.49%

2005Returns (as of COB on31 Dec):

SystemTrader: -0.56%

G Fund: +0.56%

F Fund: +0.38%

C Fund: -0.62%

S Fund: -1.77%

I Fund: +1.10%

20% in each fund: -0.07%

Allocation History:
(Note:each date = the IFT date)

12/17/04 (start): 100% I Fund

1/18/05: 100% F Fund

1/25/05: 100% I Fund

2/02/05: 100% F Fund

2/22/05: 100% G Fund

~John

[pyriel]

John,

I'm tracking you with a -0.63. I am attaching my excel worksheet on you. Can you tell me why mine differs with yours?

Pyriel

[SystemTrader]

pyriel wrote: John,

I'm tracking you with a -0.63. I am attaching my excel worksheet on you. Can you tell me why mine differs with yours?

Pyriel



Pyriel,

I don't have access to my spreadsheet right now. I'll take a look at it later, though.

Thanks,

John

[SystemTrader]

I still need to answer Pyriel's question re: why histally for my account is slightly different from mine. I think I know but I'll try to verify it tomorrow.

New allocation: 100% I Fund

IFT date: 24 Feb 05

Moving to 100% I Fund as of COB Thursday, 24 Feb.


Since Inception Returns (as of COB on 17 Dec):

SystemTrader: +3.21%

G Fund: +0.84%

F Fund: +0.58%

C Fund: +0.08%

S Fund: -1.18%

I Fund: +4.56%

20% in each fund: +1.00%

2005 Returns (as of COB on 31 Dec):

SystemTrader: -0.66%

G Fund: +0.66%

F Fund: +0.38%

C Fund: -1.47%

S Fund: -2.99%

I Fund: +0.65%

20% in each fund: -0.55%

Allocation History:
(Note: each date = the IFT date)

12/17/04 (start): 100% I Fund

1/18/05: 100% F Fund

1/25/05: 100% I Fund

2/02/05: 100% F Fund

2/22/05: 100% G Fund

2/24/05: 100% I Fund

~John

[SystemTrader]

Moving to the G Fund as of tomorrow's close. The futures look bleak tonight and the dollar is gaining strength.

After 5 days of winning or flat peformance, the I Fund looks like it could take a hit tomorrow. I'd be very happy just to get anotherflat day. ;)

Pyriel, I still need to find out why our calclulations aren't quite in synch. I thought it may be because I compound my returns (i.e., I start with $100 asan arbitrary initial amount andcompound each fund/allocation daily), but thatdoesn't appear to be the reason, either...



New allocation: 100%G Fund

IFT date: 2Mar 05

Moving to 100% I Fund as of COB Wednesday, 2 Mar.


Since Inception Returns (as of COB on 17 Dec):

SystemTrader: +5.00%

G Fund: +0.94%

F Fund: +0.19%

C Fund: +1.73%

S Fund: +1.04%

I Fund: +6.38%

20% in each fund: +2.07%

2005 Returns (as of COB on 31 Dec):

SystemTrader: +1.06%

G Fund: +0.75%

F Fund: +0.00%

C Fund: +0.15%

S Fund: -0.81%

I Fund: +2.39%

20% in each fund: +0.50%

Allocation History:
(Note: each date = the IFT date)

12/17/04 (start): 100% I Fund

1/18/05: 100% F Fund

1/25/05: 100% I Fund

2/02/05: 100% F Fund

2/22/05: 100% G Fund

2/24/05: 100% I Fund

3/2/2005: 100% G Fund

~John

[pyriel]

Now I am tracking you with 1.00% return. I started from scratch again and reinputted the data according to your IFT and we are still different. Now the difference is .06. I'm baffled.

[FundSurfer]

Pyriel, are you using my spreadsheet or Tom's? I've noticed that mine and Tom's have little differences like the one you mention. I've never tracked down the reason, but I would be interested in knowing which you are using.

[pyriel]

I am using Tom's. I'm still trying to decipher yours. I'm one of those people that once I learn a system, it get pretty hard for me to change. Eventually i'm gonna have to follow yours because it seems easier with one line entry for fund price and it automatically changes all of the participants trackers. ;) Thanks... I am going to try to learn it when I fly out to Alabama this Saturday.

[SystemTrader]

Still 100% in the G Fund.

While my stock timing system doesn't factor in support and resistance levels, I do think they're important. Today we breached the S&P 500 low set on 22 Feb of 1184.16. A continuation of this downward move may signal the first leg of a longer-term bearish trend.

[Spaf]

SystemTrader wrote: Today we breached the S&P 500 low set on 22 Feb of 1184.16. A continuation of this downward move may signal the first leg of a longer-term bearish trend.
On March 7th we set a new higher high of 1225.31 on the S&P 500. That false break out was shortly lived. Maybe the lower end break out of today will be shortly lived?

Who knows! But playing the market now is like ordering a Martini and trying to suck the olive through the straw!

[SystemTrader]

Spaf wrote: On March 7th we set a new higher high of 1225.31 on the S&P 500. That false break out was shortly lived. Maybe the lower end break out of today will be shortly lived?

Who knows! But playing the market now is like ordering a Martini and trying to suck the olive through the straw!



Well, Spaf, I was wondering if the break below 1184 would be a small/short,too, but wow, it broke, broke, and broke some more today!

My stock timing system has a very strong sell signal right now. The bond timing system does too. So it looks like 100% "G" for awhile. I've been short the S&P 500 via the Rydex Ursa fundsincemy stock sell signal on 2 March. So far, so good...we'll see if it remains profitable until the next buy signal.



John

[Spaf]

ST

The Big Chief let the horsemen out. Mayhem today!

The charts are looking rather bad.

This has been some what of a hard market so far this year.

Where is the bottom, reminds me of the Wendys commercial of where is the beef?

;)Spaf

[SystemTrader]

Since I believe in usingasystematic, tested, strategy-basedinvesting style, I thought I'd postthis excerpt from an email I received. It's from some site/service called www.financialmentor.com (http://www.financialmentor.com). I have no experience with this service, so this isn't a recommendationfor the site.

Thiswas the#1 entry on their list of the "Ten Commandments to
Profitable Investing."

1st Investment Strategy Commandment: Thou Shalt Not Gamble

If you follow hunches, guess, take tips, or "play the
market" then you are a gambler and not an investor. If you
put money at risk on "one-off" investments, special
situations, or economic forecasts then you are also a
gambler. What separates an investor from a gambler is the
principle of expectancy.

Expectancy is a formula that shows the average amount of
money you can expect to make per dollar risked if you follow
your investment strategy consistently enough to achieve
statistical validity.

Gamblers put money at risk on unknown or negative expectancy
situations. Investors only put money at risk on known,
positive expectancy situations.

Thorough and accurate research is required to know your
investment strategy's expectancy with confidence. You must
understand the assumptions underlying the research and know
when those assumptions may no longer be valid. Anything less
is gambling.

The principle of expectancy implies a systematic and
methodical investment strategy (an investment plan);
otherwise, you cannot have confidence that you will
ultimately profit. Your disciplined investment strategy
should include one or more of the following characteristics
to create positive expectation:

(1) A Positive Paying Attribute: For example,
positive expectancy results from certain value-based
strategies in the stock market such as Tobin's Q-
ratio and Graham's intrinsic value. Additionally,
well located and properly purchased investment real
estate is so well known for its positive expectancy
under most economic conditions (not all) that a myth
about "real estate never going down" resulted.

(2) An Exploitable Inefficiency: For example, many
bond mutual funds are mispriced during rapidly
moving interest rate markets because of the
infrequent trading of the underlying portfolio of
individual bonds and mark-to-market accounting
rules.

(3) A Competitive Edge: For example, in real estate
some people have a competitive edge in foreclosure
properties through their banking network and
marketing systems. In paper assets, some firms
have a competitive edge in computer systems to
exploit option pricing inefficiencies. Competitive
edge is usually the result of a business system or
specialized knowledge applied to investing.

Most people don't want the scientific rigor and discipline
of mathematical expectation. They prefer the fun and
adventure of "story" stocks, investing by the seat of the
pants, or trusting in an advisor. My only question is, "do
you invest for fun, or do you invest for profit?" Don't
confuse the issues. If you want financial security and
consistent profits then expectancy is a required investment
discipline.

Growing wealth is governed by mathematics. It is a science
based around the core principle of mathematical expectation.
Insurance companies don't gamble and neither do casino
owners ... only their customers do. Both types of
businesses rely on mathematical expectation to profit
reliably. You should do the same with your investment
strategy.

The reality is you are either investing scientifically with
the odds in your favor based on known, positive, expectation
strategies, or you are gambling with your financial future.
There is no other alternative.

[Rolo]

That is awesome!

[sailor]

System trader,

Whats the trading symbol for rydex ursa that you have shorted during this downturn. Seems like a good idea to make some money on the side while waiting to get out of the G.

[SystemTrader]

sailor wrote: System trader,

Whats the trading symbol for rydex ursa that you have shorted during this downturn. Seems like a good idea to make some money on the side while waiting to get out of the G.

Symbol = RYURX

A word of caution: personally, I wouldn't short the market at this point. I shorted it as soon asI had a sell signal. The S&P 500closed around1210 that day. The market hasdeclined a good bit since thenand Ihave a pretty nice "cushion" in case it moves back up.

As of today, it looks like marketis attempting to rally.If it ralliesback to the 1200+ range,but fails to take out the high of 1225 on March 7, then I think you'll have another good shorting opportunity...especially if you can short around the"signal level" at 1210.

Regards,

John

[SystemTrader]

Still 100% G.

For those who like reading this sort of thing, here's a link to an academic paper on the relationship between oil prices and stock market returns. It includes a simple market timing model that produced statistically significant positive returnsbased on the oil/stock price (inverse) relationship.

http://papers.ssrn.com/sol3/papers.cfm?abstract_id=460500

The papercame out a couple of years ago, before oil prices rose so much and before we heard so much about oil affecting the market and the economy.

~John

[Spaf]

Supply and demand: too many cars, to few dinosaurs. People would be driving less if they lowered the cost of Viagra!

Hey, a reality check! :D

[SystemTrader]

Still 100% in the G Fund. Been there since 2 March. I've added a little commentary below.

The Mini-Rally (Did it end Friday? We'll Have to See...)

It would've been nice to catch a small piece of the mini rally last week. However, my system isn't designed to jump in and out of all the small rallies we have in a longer-term downturn. As I've said before, trying to catch such small moves (known as "swing trading" or "position trading") is quite difficult with a 2-day lag.

I've tested short-term trend-following and countertrend (buying on dips) systems that attempt to profit from such smaller moves. Neither has outperformed buy-and-hold for an extended period. The two-day lag is the primary killer. I'd be much more willing to position trade with something like ETFs that can be traded intraday. But I don't expect the TSP folks to add intraday-traded ETFs to the mix anytime soon.

Having said that, I know others here are using systems to play these shorter-term moves. Maybe they'll prove me wrong. I certainly haven't tested all the possible ways of short-term trading the TSP. I guess time (and FundSurfer's tallies) will tell. It should be interesting.

Indicators

My overall stock timing system employs nine timing models. One of these modelsis based on the Nasdaq's volume.You may be thinking, "great, butwe don't have a Nasdaq-based fund in the TSP." That's true, butincreases in the Nasdaq's volumeoftenlead to a rise in thegeneral stockmarket--and vice versa for volume decreases andfalling markets.I mention this because this particular model flashed a sell signal in early March, andhasan extremely weak reading right now.Even during the uptrend fromMon-Thur of this week, Nasdaq volume was weak, and is a long way from showing any real conviction.

Incidentally, if you used this volume-based model asyour only timing tool for the S&P 500 since 1987, your annualized return would be over 3% higher than a buy-and-hold approach.

Oil, Interest Rates and the U.S. Dollar

I don't think I can improve upon Dr. John Hussman'sassement on thesethree market movers & shakers. (Published tonight in his weekly column at http://www.hussmanfunds.com/wmc/wmc050411.htm).

"a number of key concerns for the market – interest rates, oil prices, the U.S. dollar – all improved, but broad market action failed to respond. Financials, bank stocks, corporate bonds and other interest-sensitives failed to improve in response to the rally in Treasuries, transportation stocks fell apart despite the pullback in oil prices, neither market breadth, leadership or other internals have exhibited strength, and so on...Given that these measures have been among the most important concerns for investors in recent months, the failure of stocks to respond to their improvement implies that there is more negative information than meets the eye. A clearer, but slightly improper way of saying this is 'if stocks can't rally on lower rates, lower oil and a stronger dollar, what happens if they deteriorate again?'.

Seasonality

A popular andeasymarket timing strategy is to buy at the beginning of November and sell at the end of April. This is also known as "sell in May and go away" (until November, that is). For thesecond half of the 20th Century, almost allthe market's gainsoccured in the Nov-Apr time frame. As Yale Hirsch of the Stock Trader's Almanacfame put it:

"A compounding investment of $10,000 in the S&P 500 Index from November through April, starting Nov. 1, 1950, and ending April 30, 2000, yielded a whopping $363,353 gain over almost 50 years. From May through October over that same period, the investment returned a "puny" $11,574 gain."

Interestingly, the folks who've really popularizedthis method (Hirsch and market timer/newsletter writerSy Harding) now use modified versions. Both require a secondary technical indicator to confirm market entry/exit and may invest within a longer/shorter time frame (e.g., from October to May if their technical indicator "signals" them to do this.) This may be because the simpler"Sell in May"system has been rather off and on since it got so much attention in 2000-2001.

I've heard one analysttheorize thatinvestors now anticipate the November buy and1 Maysell by buying early (mid-October) and selling early (mid-April). There's notenough evidenceyet to make a strong case for this yet, but we did seethe market decline rather severely at the end ofApril 2004. It will be interesting to see if this plays out again towards the end of this month.

Until next time,

John

[coolhand]

Thanks for the great post ST. I hear ya and I'm onboard with those thoughts. I expect to be mostly G by Thursday (or sooner). Hopefully on a positive note :?.

[SystemTrader]

Another quote from Dr. Hussman's article (linked in my comments from Sunday below). This quote isfrom the legendary Richard Russell of Dow Theory fame. (http://www.dowtheoryletters.com/)

"...in a bear market, whatever can go wrong will go wrong."

Very appropriate quote for the market actionthis week...especially as several stock indices fell below their yearly lows earlier today.

ST


[/b]
Still 100% in the G Fund. Been there since 2 March. I've added a little commentary below.

The Mini-Rally (Did it end Friday? We'll Have to See...)

It would've been nice to catch a small piece of the mini rally last week. However, my system isn't designed to jump in and out of all the small rallies we have in a longer-term downturn. As I've said before, trying to catch such small moves (known as "swing trading" or "position trading") is quite difficult with a 2-day lag.

I've tested short-term trend-following and countertrend (buying on dips) systems that attempt to profit from such smaller moves. Neither has outperformed buy-and-hold for an extended period. The two-day lag is the primary killer. I'd be much more willing to position trade with something like ETFs that can be traded intraday. But I don't expect the TSP folks to add intraday-traded ETFs to the mix anytime soon.

Having said that, I know others here are using systems to play these shorter-term moves. Maybe they'll prove me wrong. I certainly haven't tested all the possible ways of short-term trading the TSP. I guess time (and FundSurfer's tallies) will tell. It should be interesting.

Indicators

My overall stock timing system employs nine timing models. One of these modelsis based on the Nasdaq's volume.You may be thinking, "great, butwe don't have a Nasdaq-based fund in the TSP." That's true, butincreases in the Nasdaq's volumeoftenlead to a rise in thegeneral stockmarket--and vice versa for volume decreases andfalling markets.I mention this because this particular model flashed a sell signal in early March, andhasan extremely weak reading right now.Even during the uptrend fromMon-Thur of this week, Nasdaq volume was weak, and is a long way from showing any real conviction.

Incidentally, if you used this volume-based model asyour only timing tool for the S&P 500 since 1987, your annualized return would be over 3% higher than a buy-and-hold approach.

Oil, Interest Rates and the U.S. Dollar

I don't think I can improve upon Dr. John Hussman'sassement on thesethree market movers & shakers. (Published tonight in his weekly column at http://www.hussmanfunds.com/wmc/wmc050411.htm).

"a number of key concerns for the market – interest rates, oil prices, the U.S. dollar – all improved, but broad market action failed to respond. Financials, bank stocks, corporate bonds and other interest-sensitives failed to improve in response to the rally in Treasuries, transportation stocks fell apart despite the pullback in oil prices, neither market breadth, leadership or other internals have exhibited strength, and so on...Given that these measures have been among the most important concerns for investors in recent months, the failure of stocks to respond to their improvement implies that there is more negative information than meets the eye. A clearer, but slightly improper way of saying this is 'if stocks can't rally on lower rates, lower oil and a stronger dollar, what happens if they deteriorate again?'.

Seasonality

A popular andeasymarket timing strategy is to buy at the beginning of November and sell at the end of April. This is also known as "sell in May and go away" (until November, that is). For thesecond half of the 20th Century, almost allthe market's gainsoccured in the Nov-Apr time frame. As Yale Hirsch of the Stock Trader's Almanacfame put it:

"A compounding investment of $10,000 in the S&P 500 Index from November through April, starting Nov. 1, 1950, and ending April 30, 2000, yielded a whopping $363,353 gain over almost 50 years. From May through October over that same period, the investment returned a "puny" $11,574 gain."

Interestingly, the folks who've really popularizedthis method (Hirsch and market timer/newsletter writerSy Harding) now use modified versions. Both require a secondary technical indicator to confirm market entry/exit and may invest within a longer/shorter time frame (e.g., from October to May if their technical indicator "signals" them to do this.) This may be because the simpler"Sell in May"system has been rather off and on since it got so much attention in 2000-2001.

I've heard one analysttheorize thatinvestors now anticipate the November buy and1 Maysell by buying early (mid-October) and selling early (mid-April). There's notenough evidenceyet to make a strong case for this yet, but we did seethe market decline rather severely at the end ofApril 2004. It will be interesting to see if this plays out again towards the end of this month.

Until next time,

John

[SystemTrader]

(I wrote most of this earlier today, when the Dow was down about 60-100 points…but I didn't have a chance to send it. Boy was I shocked to see how much more the market dropped in the afternoon!)

I'll repeat Richard Russell's quote from my post yesterday: "...in a bear market, whatever can go wrong will go wrong." I may sound like a lonely Old Testament prophet--or maybe just a broken record--but I'll offer my $0.02 again today:

Trying to find the bottom in a market like this is very dangerous. Being highly invested in stock funds at this point is playing with fire, IMHO. Trying to guess where the bottom of a market will be is like trying to catch a falling knife.

While I've been out of stocks since early March, I'll admit we had a consolidating (though declining) period where you may have been able to buy on dips--if that's your style. We're past that now. We've taken out the yearly low, and it's much safer to let the market tell us when the bottom has set in and when the tide is turning back up.

While I follow a completely systematic, rule-based method, I know many folks use discretionary approaches (i.e., they look at indicators, charts, the news, etc., then use their judgement to make decisions.) If you do this, I'd recommend carefully noting high and low points in the stock market. These can be high/low points for the month, quarter, year, etc. Move out of stock funds--or at least reduce your allocations in them--when the market drops past a significant low point. Do the same when it can't move beyond a significant high point (e.g., in mid-March and early April). If you don't think the market will drop any lower, just remember what happened from 2000-2002.

Don't get me wrong--I'm not a perma-bear or a doom and gloomer.But I don't think I'll be in stocks any time soon--my timing system is very biased against stocks right now. I expect to beback in stocks some time during the year, but it will probably be much later. I'm sure I'll miss some mini-rallies, but Idon't think they're worth playing in the current market climate.



Regards,

ST

[coolhand]

John,

You've had my attention all along since you've been on this board and I've learned quite a bit from you as well as others. Your advice is quite sound. Without experiencing these last 6 months for myself however, I would have found it impossible to fully appreciate anyone's investing opinion. The experience has given me a valuable frame of reference from which I canmore accurately judge the value and soundness of any opinion offered.

Although you've only been posting a relatively short time,I understand enough now that I would have no problem blindly following your moves (or Spaf (I know that makes him nervous ;))). Tom is more bullish, but his reasoning is very good.

I have to wonder at this point, what the "right" move would beon Monday. If we are near the bottom and I get out now, I take a loss and perhaps miss a significant upward move. Or, as you've pointed out, we could be in a similar downward spiral like 2000-2002. But the way I see it, the market can't keep falling day after day without some movements back up. I think that is where I am at right now. Watching and waiting.

Interest rates are dropping again, which means easier access to money for Joe Sixpack. We may get another mini housing boom as well. The fed can't very well allow this economy to tank, not with the deficits we are currently running. That means the fed may back off interest rate hikes, which could inject some positive sentiment back into this market (some more liquidity wouldn't hurt either and I expect that to happen). Also, oil and commodities in general are now falling as the perceptionis that theeconomy is slowing, which translates intoa declining risk of inflation moving forward.

I don't know where all this is going, but there is a lot of market manipulation going on. I think it may take a little while for things to get back on track, but I do believe there are many reasons for the market to reverse coursewithin a couple of months.

Thanks for your .02. Please don't stop giving it.

[SystemTrader]

Sidenote: Thanks for the comments, Coolhand. I'll try toreply sometime this weekend.

New allocation: 100%F Fund

IFT date:18Apr 05

Moving to 100%F Fund as of COBMonday,18 Apr 05.


Since Inception Returns (starting atfunds' closing prices on 17 Dec 04):

SystemTrader: +5.11%

G Fund: +1.50%

F Fund: +0.67%

C Fund: -3.70%

S Fund: -5.53%

I Fund: +1.88%

20% in each fund: -1.04%

2005 Returns (starting atfunds' closing prices on31 Dec 04):

SystemTrader: +1.18%

G Fund: +1.31%

F Fund: +0.48%

C Fund: -5.19%

S Fund: -7.26%

I Fund: -1.94%

20% in each fund: -2.52%


Allocation History:
(Note: each date = the IFT date)

12/17/04 (start): 100% I Fund

1/18/05: 100% F Fund

1/25/05: 100% I Fund

2/02/05: 100% F Fund

2/22/05: 100% G Fund

2/24/05: 100% I Fund

3/2/2005: 100% G Fund

4/18/2005: 100% F Fund

~John

[SystemTrader]

coolhand wrote: I have to wonder at this point, what the "right" move would beon Monday. If we are near the bottom and I get out now, I take a loss and perhaps miss a significant upward move. Or, as you've pointed out, we could be in a similar downward spiral like 2000-2002. But the way I see it, the market can't keep falling day after day without some movements back up. I think that is where I am at right now. Watching and waiting.




Hi Coolhand,

There will have toa rally--and itmay come soon. However, my system just isn't designed to jump in and out of upswings in very bearish conditions like we have now. When you design a market timing/asset allocation system, you have to first decide the time frame and types of moves you want to "catch": either long/intermediate term like mine, or short-term.

I think a longer term system works better considering the TSP's two-day lag. But there's another reason to be very careful if you're trying to catch a rally in a bearish market. Large, consecutive dailydrops (and gains)in the market happen much more often than they should, statistically speaking. This is known as the"fat tails" effect. Remember the bell curve from Stats 101? Well, if you plot a curve like that for a financial market, it will have an unusual number of extreme events,producing"fat tails" at each end of the curve. And these extremely bearish (or bullish) days tend to "cluster" together, meaning there are often multiple days ofvery bearish (or bullish) behavior.

Traders have known this for years. That'swhy they want to be on the right side of the trend. But this is now being recognized by the academic finance community, too.I did a quick search on Googleand found a paperthat makes this point with some terribly awkward academic language:

Therefore, the anomalously large amplitude of the drawdowns can only be explained by invoking the emergence of rare but sudden persistences of successive daily drops, with in addition correlated amplification of the drops. Why such successions of correlated daily moves occur is a very important question with consequences for portfolio management and systemic risk, to cite only two applications. (Source: http://alf.nbi.dk/~johansen/Papers/outlier5revised.pdf)

We don't know when these "daily drops" will end, or if they'll reemerge after a short "relief" rally. Therefore, Ithinkit's risky to try to catch a rally right now.

John

[coolhand]

Thanks for the reply ST. I'm liking your investing strategy (system) a whole lot about now...:^.

[SystemTrader]

We hit another yearly low today. The gains fromlast fall are all but gone for abuy-and-hold approach.

I did a little checking, and the S&P 500 was 1118.15 at the 20 April 2004 close...exactly one year ago. It's had a whopping 1.73% gain since. The real kicker is that the S&P 500 closed at 1434.54 on 20 April 2000...exactly five years ago. It will take more than a 26% gain to reach that point again, and more than 30% to hit the S&P's peak in March 2000. Ouch.

ST

[SystemTrader]

Still 100% in the F Fund.

[coolhand]

You know John, when you went 100% "F" fund on 4/18 Ihad a hard timeseeingbond yields drop by very much.I mean, how canbond prices rise again given the market data in the last month or so? Two weeks ago I was pretty sure the 10yr note was going to stay above 4.4% and slowly start to rise. Right now it sits at 4.14%. It's dropped almost a half percent inshort order. How crazy is that?

Asof today you are up a nickle in a week and a half. Considering how ugly this market is I am impressed.

[MR CARLO]

http://www.behaviouralfinance.net/

Hello, sys trader

Above is a Link I think you might find interesting. Also I have been looking into a system type approach to investing. A Very complicated task. Being an un-experienced investor I have much to learn. So in the near future I hope you may help me by answering some questions. Happy investing, and keep up the good work.

[SystemTrader]

carloc wrote: [/b]

http://www.behaviouralfinance.net/

Hello, sys trader

Above is a Link I think you might find interesting. Also I have been looking into a system type approach to investing. A Very complicated task. Being an un-experienced investor I have much to learn. So in the near future I hope you may help me by answering some questions. Happy investing, and keep up the good work.

Hi Carloc,

Interesting link: lots of information at that site. Actually, systematic trading doesn't have to be complicated. Some systems are very simple, while others are truly complex. What makes systematic trading unique is that you have precise rules for buying and selling, and you follow them 100% of the time. I wrote a good bit earlier tonight on systematic trading here (check the lastfew posts):

http://www.tsptalk.com/mb/forum11/1578.html

[SystemTrader]

I'm responding to Timer's question (posted in my Account folder) here. Yes, I'm still 100% in the F Fund. I know we're having something of a rally right now, but my system hasn't given a "buy stocks" signal, so I'm staying put.

Thanks,

John

[Timer]

Sorry about the mis-post. I knew better. Thanks John for the clarification.I know you are following a system.

[SystemTrader]

Still 100% in the F Fund. It was going very well until Friday...Ouch!

The bond timingsystem still has a "buy" signal, but it's weakening. Itcouldmove toa sell signal soon.

As I ran the numbers after Friday's close, I wassurprised to see that the stock timing system isclose to a buy signal. It could even happen this week...or not. The market appears to be at an important phase. It couldcontinue up and re-challenge the early April highs--and then the yearly highs after that. Or maybe this is just an unusually strong mini-rally and we'll soon sink back into the doldrums. We should find out soon.

ST

[SystemTrader]

Well...it happened. The stock timing system said to buy after today's close.

New allocation: 100%I Fund

IFT date:10May 05

Moving to 100%I Fund as of COBTuesday,10May 05.


Since Inception Returns (starting atfunds' closing prices on 17 Dec 04):

SystemTrader: +5.22%

G Fund: +1.78%

F Fund: +0.87%

C Fund: -0.63%

S Fund: -2.14%

I Fund: +2.62%

20% in each fund: +0.50%

2005 Returns (starting atfunds' closing prices on31 Dec 04):

SystemTrader: +1.27%

G Fund: +1.59%

F Fund: +0.67%

C Fund: -2.17%

S Fund: -3.94%

I Fund: -1.23%

20% in each fund: -1.01%


Allocation History:
(Note: each date = the IFT date)

12/17/04 (start): 100% I Fund

1/18/05: 100% F Fund

1/25/05: 100% I Fund

2/02/05: 100% F Fund

2/22/05: 100% G Fund

2/24/05: 100% I Fund

3/2/2005: 100% G Fund

4/18/2005: 100% F Fund

5/10/2005: 100% I Fund

~John

[pyriel]

Good timing...

[coolhand]

Yeah, here I am thinking he's getting ready to jump into the "C" fund and he plunges into the "I"...LOL

Makes some sense though. Dollar is hitting resistance and it seems we've found a bottom. Trade report tomorrow. Doubt it's good news, especially with the 10-Yr note back to a low level again.Just don't seethe dollarmaking much more headway. Back down it goes.

[FundSurfer]

Yes, nice trade...

System wise, what makes I more attractive than C-fund right now?

[SystemTrader]

I hope you don't mind if I do a modified cut & paste from an older post...

When I get a "buy" signal for stocks,I move tothesecond tier of thesystem.This tierdeterminesthe best performing stock fund. While it's long-term in nature (based on end-of-weekprices), it gives more significance or "weight" to recentprice changes.TheIFund hasremained the top-ranked fund in this model for quite some time. However, it's not dominating theothers quite as much as it was1-2 months ago.

Warning: tomorrow may not be nice for the I Fund, unless our friend the U.S. Dollar really tanks against the other major currencies. However, since the system is primarily designed for intermediate-to-long-term moves, I'm not too worried about one day's results.

Thanks,

John

John



FundSurfer wrote:
Yes, nice trade...

System wise, what makes I more attractive than C-fund right now?

[SystemTrader]

Still 100% I Fund.

Wow, a rough week. I wish I could list 101 reasons why the market will move up this week, but I'm not in the business of cheerleading for the market or predicting its direction. When you follow a systematic approach, your comfort is in knowing that you should have more profitable trades than losing trades, and your winning trades should gain more (on average) than your losers.

The stock timing system has had 8 winning trades in a row. This includes one that was made during a backtesting period, but I've made all the others in real time. I hate to say it, but winning streaks like that don't go on forever. I certainly hope it extends through this trade though, and even reaches double digits! But I need warn those who may be following along: this system, like any other, will have some losing trades. That'sinevitable. The good news is that it's a pretty risk averse, so if we run into some huge downturn, I expect to get out before most of the damage is done.

One thing that's hurt the I Fund is the recent stength of the U.S. Dollar (USD). The USD has reached yearly highs against some of the other currencies. It will be interesting to see if this continues or if the USD snaps back like a stretched rubber band.

I watch the financial markets very closely. So far tonight,not much has changed. S&P 500 overnight futures aredown by a fraction. The Nikkei is down. Foreign exchange (FOREX) markets haven'tchanged much.However, the FOREX is trulya market that doesn't sleep. It runs 24/5, andthere are often big movesduring the Londontrading session (3 AM EST), so thingsmaybe different by tomorrow morning.

Until next time,

ST

[smine]

a good buying op, systemtrader?

[SystemTrader]

Hi Smine,

I'm not quite sure what your question is...are you asking if this is a good opportunity to buy stocks/stock funds/etc.?



smine wrote:
a good buying op, systemtrader?

[smine]

Right. The world markets are nearly all in red, so buy low and wait. Anyhow, did ask for 30% and the rest in F.

[Rod]

You held out and it's finally beginning to pay.:^

[SystemTrader]

Yep. It was a painful wait, but today was nice and hopefully tomorrow will be, too!

ST



Rod wrote:
You held out and it's finally beginning to pay.:^

[SystemTrader]

New allocation: 100%F Fund

IFT date:31May 05

Moving to 100%F Fund as of COBTuesday,31May 05.

The stock timing system gave a sell signal as of27 May 05.

This past move was frustrating. The timing signal to re-enter stock funds at the close of 10 May was good. Unfortunately,the I Fund didn't cooperate. The C and S Fundshave donewell, as did most other stock funds. In fact, other EAFE-based funds such as the EFAand the Scudder EAFE mutual fund (BTAEX) have even had slight gainsduring this last signal. We do have one more day before the IFT,and a positive return for this signal is still possible. (The loss has been small so far, and the I Fund could certainly swing strongly eitherdirection on Tuesday.)

Some people question investing in the I Fund at all since its daily valuations seem so quirky. The folks at Barclays do these strange valuations to prevent"time zone arbitrage." Most (all?) other fund companiesdo this, too. At leastBarclays doesn'tadd redemption fees like Vanguard:

http://www.ifa.com/archives/articles/staff_20030508_vanguard_moves_to_stop_arbitrage_tr ading.asp (http://www.ifa.com/archives/articles/staff_20030508_vanguard_moves_to_stop_arbitrage_tr ading.asp)

A few otherthoughts:

1) Despite the unpredictable daily (and perhaps even weeklyand monthly) valuations, the I Fund has been the top performing TSP Fundfor the lasttwo years. This isn't surprising, since international funds badly underperformed U.S. funds during most of the 1990s. When one asset class outperforms another for a long time, the tendency is for the classes to"revert to the mean," as statisticians say. This just means the underperforming class is likely to play catch up for awhile,bringing its relative returns back to normal. If you ignore the I Fund, you may continue missing out on a"mean reversion" period of strong performance.

2) The I Fund's unusual valuations should "wash out." Sometimes you'll get burned like I just did.Other times you'll catch the I Fund in an unusually strong period where valuationsseem to go your way. We've seen a few such periods already this year. Over the long-term,the times you get "burned" and the times you get "lucky" should be about the same if you invest with a consistent plan.

3) I did some backtesting of my system with a blend of the 3 stock funds instead of100% allocations to the strongest fund. The "100%" version I usehad higher returns over time, so that's why I use it. There were times when a 3-fund blend worked better, but the 100% concentration had enough strong periods to warrant its use. This was especially true in the late 1990s, when the C Fund dominated. (Too bad there wasn't a NASDAQ index fund back then!). It has also been trueduring thelast 4-5 years when the S and I have taken turns in the top seat and consistently outperformed the C.


Since Inception Returns (starting atfunds' closing prices on 17 Dec 04):

SystemTrader: +5.22%*

G Fund: +1.97%

F Fund: +1.83%

C Fund: +1.26%

S Fund: +0.55%

I Fund: +2.01%

20% in each fund: +1.52%

* I had this same figure for the last allocation, but it should've been 5.42% last time.

2005 Returns (starting atfunds' closing prices on31 Dec 04):

SystemTrader: +1.27%

G Fund: +1.78%

F Fund: +1.63%

C Fund: -0.31%

S Fund: -1.81%

I Fund: -1.23%

20% in each fund: +0.00%


Allocation History:
(Note: each date = the IFT date)

12/17/04 (start): 100% I Fund

1/18/05: 100% F Fund

1/25/05: 100% I Fund

2/02/05: 100% F Fund

2/22/05: 100% G Fund

2/24/05: 100% I Fund

3/2/2005: 100% G Fund

4/18/2005: 100% F Fund

5/10/2005: 100% I Fund

5/31/2005: 100% F Fund



~John




(http://www.ifa.com/archives/articles/staff_20030508_vanguard_moves_to_stop_arbitrage_tr ading.asp)

[SystemTrader]

New allocation: 100%G Fund

IFT date:14Jun 05

Moving from 100% F Fund to 100%G Fund as of COBTuesday,14Jun 05.

Sorry, I try to post these the night before, and I usually include a history of returns and fund allocations. I'm a little short on time right now.

I'm working on an update/improvement to the system. I'm using a new model to rotate among C/S/I when the stock timing system is on, and it invests in two funds at a time (50%/50% ratio). I need to test it a little further, but so far it definitelylooks like an improvement.The system will definitely be in its final state after I backtest it with the new fund switching model.

ST

Thank you for sharing your thoughts.

I find you are very insightful.

Happy trading.

[vectorman]

Missed hearing from you Systemtrader. How's the new system coming along? Just curious to why you hadn't made an I fund move as of late, especially with it trending up now?. Do you think it's a good time to put some in the F fund. Thanks.

[SystemTrader]

vectorman wrote:

Missed hearing from you Systemtrader. How's the new system coming along? Just curious to why you hadn't made an I fund move as of late, especially with it trending up now?. Do you think it's a good time to put some in the F fund. Thanks.

Hi Vector,

Sorry for the belated reply. The new system is looking good, but I need to do a little more extensive testing. The only change will be how I select the stock funds. I'll use the same models to determine the asset class: either100% stocks (C, S and/or I Fund), 100% bonds (F Fund) or 100% cash (G Fund). When I'm in stocks, though, I'll use a different model that picks the top 2 funds for a 50/50 allocation.

My old "fund selection" model performed well overall, butwas somewhat lagging and a few times it stayed in a deteriorating fund for too long. My venture with the I Fundthis May was a good example. However, my biggest concern was in March of 2000. (Since the TSP funds didn't have daily valuations then,Ibacktested using funds/indicessimilar to the TSP funds.)

During this time, my old system would've stayed in the S Fund untilthe overall stock timing model gave a signal to sell during the first week in April 2000. This 100% S Fund allocationworked great in early 2000, gaining nearly 20%, but backfired as the S Fundgave back much of its gainsduring the last fewweeks of March 2000. My new system would've switched tothe C and IFunds duringmid-March,preserving most of the gains before exiting stocks altogether.

The new system would've also bought the C and S Funds when I went to a 100% stock allocation from the close of 10 May to the close of 31 May this year. Instead of losing allmy 2005 gains as the I Fund tanked,it would've gained somewhere in the +2.5 to 3% range. Woulda, coulda, shoulda, I know, but I'll be ready next time. ;)

I'm still 100% in theG Fund. Bothmy stock and bond timing modelhavesell signals.And while I use systems, and not charts, to determine my allocations, I prepared a chart of the S&P 500 here:

http://charts.dacharts.com/2005-06-26/SystemTrader07.png

Last week was a big test for the S&P 500. It was close to surpassing its March high..which was actually the high for the last few years. Breaching this would've been very bullish. Instead, it failedmiserably. While I neverpredict where or how farthe market will go, I will say that things aren't looking up for now.

ST

[SystemTrader]

An update to the chart I posted Sunday, in case anyone is interested.

http://charts.dacharts.com/2005-06-30/SystemTrader09.png

I believe Spaf has posted this before, but for a good primer on understanding the primary trend and basic price action, see this link:

http://www.stockcharts.com/education/MarketAnalysis/dowtheory1.html

Have a great 4th,

ST

[SystemTrader]

I try to post my changes the evening (or weekend) beforehand, but this one is a little "last minute." I realized my bond timing model moved back to a "buy" signal after Friday's close.

New allocation: 100%F Fund

IFT date:5Jul 05

Moving from 100%G Fund to 100%F Fund as of COBTuesday,5Jul 05.

ST

[SystemTrader]

I posted this earlier in my "Account" folder, before the cutoff time. Sorry,a little late in posting to my "Account Talk" folder.

As I typewe're within a hair of exceeding thehighs of last March...hard to believe!

-------------------------------------------------------------------------

New allocation: 100%G Fund

IFT date:12Jul 05

Moving from 100%F Fund to 100%G Fund as of COBTuesday,12Jul 05.

ST

[SystemTrader]

New allocation: 100%F Fund

IFT date:15Aug 05

Moving from 100%G Fund to 100%F Fund as of COBMonday,15Aug 05.

ST

[SystemTrader]

A heads-up: I'm going to add a little tweakwhenever I'm in theF Fund, as I am right now.

I've noticed the F Fund almost always gets slammed on days when theNon-Farm Payroll (NFP) numbers are announced. NFP numbersalways seem to be better than expected and this drives up bond yields temporarily.

So, whenever I'm in the F Fundand the monthly NFP dayis approaching, I'll allocate 100% to the G Fund for that one day, then switch back to the F. If I'd done this for the whole year, my return would probably be 1-2% higher. The modest gains I've made in the F Fund have pretty much been erased by NFP days so far.

Note: I'm not going to comment on the accuracy of theemployment numbers. There's been some discussion elsewhere on this board about the "hedonic" adjustments. Or you can read one person's view here:


http://www.financialsense.com/fsu/editorials/kirby/2005/0304.html

[tennisguy]

When are the Non-Farm Payroll (NFP) numbers being announced? Thanks
Tennisguy

[grandma]

tennisguy wrote: When are the Non-Farm Payroll (NFP) numbers being announced? Thanks
Tennisguy
I don't see them listed as such in W_W's economic indicators fo this week.

[SystemTrader]

tennisguy wrote: [/b]
When are the Non-Farm Payroll (NFP) numbers being announced? Thanks
Tennisguy

The first Friday ofeach month. I believe it may occasionally get pushed back to Thursday if there's a holiday. You can find it and many other news releases here:

http://www.bloomberg.com/markets/ecalendar/index.html

[SystemTrader]

Sorry, I didn't think this uploaded so it's a duplicate post. See the next one.

[SystemTrader]

The buy-and-hold crowd (especially those in the financial services industry) often discourage market timing by claiming that you may miss the best performing days, thereby drastically reducing your return. They often show figures and charts like this.

The average S&P 500 return from January 1984 through December 1998 was 17.80%. Here's what it (annual return) would look like if you missed the best days during that period:

If you missed the BEST:

0 days (this is buy-and-hold)
17.80%

10 days
14.24%

20 days
11.99%

30 days
10.01%

40 days
8.23%



The chart and textright above it is from an email from D.R. Barton, Jr at Traders U. Barton goes on to demonstrate what buy-and-holders don't tell you...(Note: allof the notes in italics are fromBarton; the restare from me.)


And now, here's what happened if you missed the worst days for the same period (the numbers buy-and-holders never let us see):

If you missed the WORST:

0 days (this is buy-and-hold)
17.80%

10 days
24.17%

20 days
27.04%

30 days
29.45%

40 days
31.66%


Cue the Suspense Music: Here's the Shocker

What happens if we combine the data? What would happen if you sat out the best AND worst days? Here are the results:


If you missed the BEST and WORST:

0 days (this is buy-and-hold)
17.80%

10 days
20.31%

20 days
20.68%

30 days
20.80%

40 days
20.87%


This gives us a rather startling conclusion: If you miss an equal amount of the best and worst days, you outperform buy and hold regardless of how many days you miss!

Some food for thought...Of course, no one can predict the best or worst days in advance. But highly volatile days in the markets are often clustered closely together (think recently to early Nov 04, early Jan 05 and mid-Apr 05).

ST

[rokid]

ST,

Therefore, if you missed the 40 best days out of the estimated 3,750 trading days during the period 1988-1994 (easy) and avoided the 40 worst days (very hard), you could have averaged 3.07% a year over buy-and-hold. Correct?

Did DR Barton mentionwhat return you'd receive formissing all of the best days and hitting all of the worst days? I've always assumed that the 8.23% quoted for missing the 40 best days didn't depend on what you did on the other days, i.e. once you missed the 40 best days the maximum you could earn was 8.23%.

Regardless, you convinced me to stay buy-and-hold. I'm not that smart,lucky, or good looking. :D

[SystemTrader]

To me, the point of it is that the "best days" argument doesn't hold any water. No one, not even the world's worst timer, will only miss the best 40 days and be fully invested the rest of the time. So this hypothetical return that subtracts the 40 best days is just plain silly.

Let's assume your market timing is random and you end up missing abouthalf the best days and half the worst days. According to this study (and several others I've seen), it won't hurt you and will probably help you. This is surely not enough to settle the timing vs. buy-and-debate, but it does debunk the "best days" argument in my book.

ST



rokid wrote:
ST,

Therefore, if you missed the 40 best days out of the estimated 3,750 trading days during the period 1988-1994 (easy) and avoided the 40 worst days (very hard), you could have averaged 3.07% a year over buy-and-hold. Correct?

Did DR Barton mentionwhat return you'd receive formissing all of the best days and hitting all of the worst days? I've always assumed that the 8.23% quoted for missing the 40 best days didn't depend on what you did on the other days, i.e. once you missed the 40 best days the maximum you could earn was 8.23%.

Regardless, you convinced me to stay buy-and-hold. I'm not that smart,lucky, or good looking. :D

[rokid]

SystemTrader wrote: To me, the point of it is that the "best days" argument doesn't hold any water. No one, not even the world's worst timer, will only miss the best 40 days and be fully invested the rest of the time. So this hypothetical return that subtracts the 40 best days is just plain silly.


ST,

I've seen this argument made. However, I haven't been able to locate it in any of my references. Which study/article/book is DR Barton referencing? I'd like to review it.;)

[SystemTrader]

rokid wrote:
ST,

I've seen this argument made. However, I haven't been able to locate it in any of my references. Which study/article/book is DR Barton referencing? I'd like to review it.;)








Rokid,

I'm not sure where this idea originated, but it seems to propagated mostly by mutual fund companies and brokerage houses. That's not surprising, since buy-and-hold investing keeps their administrative fees down. I'm not sure if any serious analysts or academic finance types have used this argument.

Below are a couple of links. The first is an article by Franklin Templeton that uses this argument (near end of the article). It lists the Standard & Poor's (S&P) Corporation as the source of its study. The next is an article from Motley Fool that approaches this from a "value investing" angle, which is interesting since it'ssort of a third party perspective: neither market timing nor buy & hold.

Regards,

ST

http://www.franklintempleton.com/retail/jsp_cm/education/fund_basic/types/us_stock_funds.jsp

http://www.fool.com/news/commentary/2005/commentary05030404.htm

[rokid]

ST,

Thanks.

It's also mentioned at http://indexfunds.com/. However, they don't cite a specific study.

Now, I'm curious about the origins and validity of this argument.

[SystemTrader]

Update: Earlier, I said Iwould pull out of the F Fund for one day whenever the Non-Farm Payroll numbers are released. This wasn't intended to be a permanent strategy, justsomething to try during the next fewNFP releases, oruntilthe strategyquits working.(Since April of this year, the F Fund has taken a big hit during each NFP release.)

The NFP numbers will be released tomorrow morning. However, due tothe Philadelphia Fed's comments yesterday, which hinted at a possible change in interest rate policy, I've decided to stick with the F Fund. The Philly Fed based their comments on the Katrina tragedy and how it may impact the economy. In addition to this, the markets may not react to news and economic reports as they "normally" would during a time like this.

ST



SystemTrader wrote:
A heads-up: I'm going to add a little tweakwhenever I'm in theF Fund, as I am right now.

I've noticed the F Fund almost always gets slammed on days when theNon-Farm Payroll (NFP) numbers are announced. NFP numbersalways seem to be better than expected and this drives up bond yields temporarily.

So, whenever I'm in the F Fundand the monthly NFP dayis approaching, I'll allocate 100% to the G Fund for that one day, then switch back to the F. If I'd done this for the whole year, my return would probably be 1-2% higher. The modest gains I've made in the F Fund have pretty much been erased by NFP days so far.

Note: I'm not going to comment on the accuracy of theemployment numbers. There's been some discussion elsewhere on this board about the "hedonic" adjustments. Or you can read one person's view here:


http://www.financialsense.com/fsu/editorials/kirby/2005/0304.html

[SystemTrader]

New allocation: 50%C Fund & 50% I Fund

IFT date:22Sep 05

Moving from 100%G Fund to 50%C Fund and 50% I fund as of COBThursday,22Sep 05.

A few notes:

1) I've revised the system moderately, and itnow has a component that will sometimesbuy when the stock market dips. This doesn't happen too frequently, however, and will only happen if certain other conditions are in place. Overall, the system is still mostly trend-following in nature.

2) When the system is in the "buy stock funds" mode, I have a new way of determining which funds to purchase. Unlike the old method, which always held a 100% allocation, this new method always holds 2 of the funds in a 50/50 ratio.

ST

[Citizen]

:DThank you System Trader! After a long time Bunkered down in G and F, I stepped out aggressively (40S 30C 30I) and it seems like everybody stepped back. At least there are afew of us left in the stock market, so I can feel a little validated.

I hope that this next hurricane isn't as bad as Katrina. Good luck out there.

[SystemTrader]

Thanks! Several components of my system went from bearish to bullish last week, even before Rita touched down. Some people think we'll have a "relief rally" this week, and the overnight stock index futures are up strongly already. Should be an interesting week...



Citizen wrote:
:DThank you System Trader! After a long time Bunkered down in G and F, I stepped out aggressively (40S 30C 30I) and it seems like everybody stepped back. At least there are afew of us left in the stock market, so I can feel a little validated.

I hope that this next hurricane isn't as bad as Katrina. Good luck out there.

[SystemTrader]

New allocation: 50%S Fund & 50% I Fund at COB of the next trading day

Happy Thanksgivingeveryone!

ST

[SystemTrader]

In my Account folder, I posted a change to 100% F Fund yesterday.I just posted a note in there toignore that transaction, and thought I'd mention it here, too.The system is still in the same holdings until further notice: 50% S and 50% I Fund.

ST

[SystemTrader]

No allocation change yet, but I'm expecting to be out of stocks soon. I'll update my allocations when and if this happens. The system is (barely) hanging on to its buy signal, but this could change very soon--maybe even after today's close.

There are several reasons for this. One is that larger, blue-chip stock indices such as the Dow and S&P 500 have started outperforming small-cap and technology indices like the NASDAQ and Russell 2000. This indicates that traders are looking to take on less risk, and often happens near the end of a rally. Also, as Tom mentioned the other day, commercial futures traders (i.e., the "big boy" institutional type traders) are becoming more bearish. They have to report their positions weekly to the CFTC:

http://www.cftc.gov/dea/futures/deacmesf.htm

We saw a very similar scenario last year around the same time. In addition, the S&P 500 chart is beginning tolookbearish. Notice how the Relative Stength Index (RSI), a measure of momentum, is now decreasing, while prices have inched higher recently without much conviction. This is known by chartists as "divergence." It doesn't always indicate a trend reversal, but it can, especially when other factors are also indicating bearish signs.

I'll have to end with ausual disclaimer: no charting tool or trading system is 100% accurate.I--and the system, if it gives a sell signal--could be wrong. But I have to put myself on the side of what's probable, and I think it could be an end (or at least breather) in the current rally.

http://ichart.finance.yahoo.com/z?s=%5EGSPC&t=3m&q=c&l=on&z=m&p=&a=r14

[SystemTrader]

New allocation: 100%G Fund


Per my comments earlier, I ran the numbers tonight and got a signal to move out of stocks.

[SystemTrader]

New allocation: 50% I Fund and 50% S Fund

IFT date: 23 Jan 06

[SystemTrader]

New allocation: 100% G Fund

IFT date: 30 Jan 06

[saturneptune]

That is my allocation. I do not trust the rally Friday. The S and I fund are at record highs. The C fund almost is and the F fund is doing lousy (as usual). Any thoughts on when to jump back in, what level of drop?

[SystemTrader]

New allocation: 50% I Fund and 50% S Fund

IFT date: 22 Feb 06

[SystemTrader]

New allocation: 100% G Fund

IFT date: 2 Mar 06

[FundSurfer]

Just feeling overbought?

[SystemTrader]

No, just following the system.

There are quite a few factors involved (seasonal, interaction between different stock indices, crude oil prices, etc.) and they're keeping my system right on the threshold of a buy vs. sell signal. It just tipped back over to the sell side again.

ST


Just feeling overbought?

[SystemTrader]

New allocation: 50% S Fund and 50% I Fund

IFT date: 27 Mar 06

[SystemTrader]

New allocation: 100% G Fund
IFT date: 4 Apr 06

[SystemTrader]

New allocation: 50% S Fund and 50% I Fund
IFT date: 12 Apr 06

[SystemTrader]

New allocation: 100% G Fund
IFT date: 19 Apr 06

[SystemTrader]

New allocation: 50% S Fund and 50% I Fund
IFT date: 24 Apr 06

[Master]

The Nikkei seems to be falling hard. If european markets follow, I will emulate you and also jump from 100% G, but probably to 100% I.
Good luck!

[Birchtree]

I think I'd be inclined to wait on the next 1000 points before jumping - but if you are so inclined - jump and I'll hold the net for ya'll. Shake out time.

[SystemTrader]

Thanks for the input, Master. It's not always easy following my system, but I've definitely had better success with it than my "gut feel." I don't expect this to be a long-term move. I may be back in the G fund pretty soon.

So far, I'm surprised by the muted reaction of the EFA today re: the Nikkei's huge drop last night. The weakness of the U.S. Dollar may be propping it up. Of course, we know the I Fund doesn't always correlate with the EFA on a daily basis. But I won't be in the I fund until after COB today, anyway.

Take care,
ST

The Nikkei seems to be falling hard. If european markets follow, I will emulate you and also jump from 100% G, but probably to 100% I.
Good luck!

[SystemTrader]

Here's an example of a seasonal trading strategy courtesy of a trading friend of mine.

April End-of-Month

If you buy the S&P 500 during the last two days in April and sell it at the close of the 3rd trading day of May, this has historically produced:

Winning Trades: 65%
Annualized Return while Invested: 47% (About six times the normal appreciation rate of the S&P 500)

Now, you may think this is just another backtested, "works-great-in-hindsight" strategy. However, some traders have known and recommended this since 1995. If you'd been doing this every year since then, the results would be

Winning Trades: 55%
Annualized Return while Invested: 58% (Even higher than 1942-1995's results for the S&P 500)

Of course, the April End-of-Month strategy doesn't always work, and I don't follow it verbatim. (I use a variation.) However, the idea is to do as many profitable things like this as possible to stack the odds in your favor.

So what happens after this period? The post-Cinco de Mayo effect:

If you owned the the S&P 500 starting on the close of May 5th (or the next trading day if the 5th falls on a weekend) since 1942, you'd have the following results:

Days Later %Winners Compounded annualized return:
1st day later 44% winners -12.9%
2nd day later 50% winners -21.0%
3rd day later 41% winners -22.4%
4rth day later 44% winners -18.8%

So buying the S&P 500 at the close on May 5th and holding four days historically gives you a -18.8% annualized return since 1942.

ST

[SystemTrader]

New allocation: 100% G Fund
IFT date: 28 Apr 06

[SystemTrader]

Here's how the two April/May seasonal strategies I mentioned on 27 April performed this year:

#1: Buy the S&P 500 during the last two days in April and sell it at the close of the 3rd trading day of May: a gain of 0.19% or 10.23% compounded annually.

#2: "The Cinco de Mayo exit" (sell on the 5th day of May and wait 4 days): avoided a loss of -1.5% or -60.04% compounded annually.

Overall, the bullish seasonal strategy #1 performed about the same as historical buy-and-hold performance for the S&P 500. The bearish strategy #2, however, did a very good job of avoiding a large loss that mostly occured today.

Here's an example of a seasonal trading strategy courtesy of a trading friend of mine.

April End-of-Month

If you buy the S&P 500 during the last two days in April and sell it at the close of the 3rd trading day of May, this has historically produced:

Winning Trades: 65%
Annualized Return while Invested: 47% (About six times the normal appreciation rate of the S&P 500)

Now, you may think this is just another backtested, "works-great-in-hindsight" strategy. However, some traders have known and recommended this since 1995. If you'd been doing this every year since then, the results would be

Winning Trades: 55%
Annualized Return while Invested: 58% (Even higher than 1942-1995's results for the S&P 500)

Of course, the April End-of-Month strategy doesn't always work, and I don't follow it verbatim. (I use a variation.) However, the idea is to do as many profitable things like this as possible to stack the odds in your favor.

So what happens after this period? The post-Cinco de Mayo effect:

If you owned the the S&P 500 starting on the close of May 5th (or the next trading day if the 5th falls on a weekend) since 1942, you'd have the following results:

Days Later %Winners Compounded annualized return:
1st day later 44% winners -12.9%
2nd day later 50% winners -21.0%
3rd day later 41% winners -22.4%
4rth day later 44% winners -18.8%

So buying the S&P 500 at the close on May 5th and holding four days historically gives you a -18.8% annualized return since 1942.

ST

[SystemTrader]

New allocation: 50% C Fund and 50% S Fund
IFT date: 25 May 06

[Wheels]

The Tally leader has made a move. I, for one, am taking note.

Dave
<><

[SystemTrader]

New allocation: 100% G Fund
IFT date: 26 May 06

[SystemTrader]

Unfortunately, I was a day behind my system on this one. The system's buy signal was at the close on 5/24, so I should've pocketed 1%+ already. Oh wellThe good news is that I now have provisions in place to ensure this won't happen again.

Speaking of which, I just posted a new allocation (back to 100% G) and this will be my last one here. My site is now up and running. I'll be sending FundSurfer my allocations so he can continue to include me in the monthly/yearly tallies.

I'll still be writing the TSP Tip articles and will visit the other folders here from time to time. Hope everyone has a nice 3-day weekend!

The Tally leader has made a move. I, for one, am taking note.

Dave
<><

[Wheels]

Unfortunately, I was a day behind my system on this one. The system's buy signal was at the close on 5/24, so I should've pocketed 1%+ already. Oh wellThe good news is that I now have provisions in place to ensure this won't happen again.

Speaking of which, I just posted a new allocation (back to 100% G) and this will be my last one here. My site is now up and running. I'll be sending FundSurfer my allocations so he can continue to include me in the monthly/yearly tallies.

I'll still be writing the TSP Tip articles and will visit the other folders here from time to time. Hope everyone has a nice 3-day weekend!

You played this pretty well I'd say, especially if we end up today and then the lows are retest sometime next week. You should maintain the tally lead for a while which should be a nice ad for your site. Are you sharing the link here or no. My fear (since I didn't yet get back in) is that those lows will not be retested and the market will not give me another opportunity to get back in.

Dave
<><

[SystemTrader]

Hi Dave,

I'm not putting the link on here, since this site hosts Rev. Shark's service. I don't want there to be any conflict of interest.

As for the markets, this should be an interesting week--and an interesting summer. I thought we'd see a bounce when the S&P 500 hit the 1250 area last week. If that area is re-tested and decisively broken to the downside, it won't bode well for stocks.

Another scenario is that the S&P will stay in a tight channel this summer between 1250-1300. And I guess we could have a strong breakout to new highs like last summer. But that doesn't look likely right now, and historically it doesn't usually happen until the fall.

Take care,
John

You played this pretty well I'd say, especially if we end up today and then the lows are retest sometime next week. You should maintain the tally lead for a while which should be a nice ad for your site. Are you sharing the link here or no. My fear (since I didn't yet get back in) is that those lows will not be retested and the market will not give me another opportunity to get back in.

Dave
<><

[SystemTrader]

Moderators,
I request we close this thread since I'm no longer posting allocations. I can post in other threads if I want to make comments on the general market, etc.

Regards,
ST

[Spaf]

ST,
Sure, we can put a lock on it.
If you want it re-opened, just let us know....OK!.....:) ........Spaf