A Toast!

Sector Model XLU 0.80%

Large Portfolio Date Return Days
ABX 4/11/2013 -20.94% 289
NEM 9/30/2013 -10.34% 117
ISRG 10/21/2013 9.09% 96
EW 10/28/2013 -10.71% 89
JOY 11/18/2013 -6.91% 68
OXY 11/27/2013 -9.24% 59
MUR 12/23/2013 -4.86% 33
SWM 12/31/2013 -10.65% 25
NKE 1/7/2014 -7.46% 18
BTI 1/15/2014 0.39% 10

(Since 5/31/2011)
S&P Annualized 11.36%
Sector Model Annualized 22.57%
Large Portfolio Annualized 27.29%


No rotation again this week. The new rules didn’t allow it – so I checked the old rules and they didn’t allow it either. Time to sit and wait.

Not much rotation going on because a few weeks ago the sectors and industries turned defensive and they are still defensive.

Hussman is to be congratulated:

[url]http://www.hussman.com/wmc/wmc140106.htm[/url]

That “Log-periodic bubble (Sornette) with finite-time singularity” he’s been crowing about for months was only off by ten days. Not too bad, actually.

I can’t time my way out of paper bag, so I don’t even try. But the Sornette singularity was fun to watch. I mentioned it back in November:

[url]http://market-mousetrap.blogspot.com/2013/11/1117-2013-market-is-almost-average.html[/url]

You can see even then that Hussman was targeting January.

As for the broad market… I’ve noted my expectation of a “scare market” but not a “bear market”. I’d be shocked if we had a crash, and if we did, it would quickly recover. The currency troubles in Emerging Markets are something to watch, but I don’t expect any long term downtrend in the next few years. I’m still looking at 2050 on the S&P by the end of the year.

Long term “fair value” is 1896 (calculated by long term linear regression).

Short term “fair value” is 1752 (calculated by short term linear regression).

And short term support is 1643 (calculated by short term trend).

ALL of those numbers are consistent with a target of 2050 by the end of the year – and in fact ALL of those trend lines converge accordingly:

[ATTACH=CONFIG]22036[/ATTACH]

Okay – so now what?

Well, now not much of anything. My model is ALREADY defensive in nature. It outperforms by more than 10% in bull markets and more than 20% in bears, so bearish moves are rather boring in my corner.

XLU was a snooze-fest for most of the day Friday before finally dropping a bit toward the end. Gold stocks have had a good run lately. I’m even long the VIX (in a separate model I don’t track on the blog). Altogether, I’m slightly up for the week.

The key to investing isn’t in controlling your emotions – but by choosing trades that don’t stress those emotions.

That means that momentum investors will leave me in the dust in the rips, but I catch back up in the dips.

Pick solid companies in beaten-down industries and you too can enjoy being bored in weeks like this.

A toast! To boredom!

Tim