02/28/2013 premarket

Sector Model XLU 36.82%

Large Portfolio Date Return Days
BBRY 7/16/2012 82.76% 227
SEAC 9/25/2012 39.29% 156
CAJ 9/25/2012 3.69% 156
CFI 10/31/2012 37.53% 120
RE 11/26/2012 19.46% 94
NSC 1/28/2013 5.06% 31
BOKF 2/4/2013 4.92% 24
SWM 2/12/2013 1.61% 16
GMCR 2/19/2013 5.38% 9
OKE 2/25/2013 -4.79% 3

S&P Annualized 6.91%
Sector Model Annualized 19.63%
Large Portfolio Annualized 30.44%


From: [url]http://market-mousetrap.blogspot.com/2013/02/02282013-also-sprach-bernanke.html[/url]

No rotation. Just a timing note.

A lot of folks got excited when the market took a dive. Timers piled on short.

Then Bernanke spoke.

Timers hate Bernanke.

So where ARE we?

Well, strictly speaking, I don’t time the market. But I do measure the sectors and industries. In my note on Sunday I said that if I were hedging I’d be about 60% long and 40% short.

After the whipsawing this week I got curious and reran the model. This morning it is showing an ideal 70% long and 30% short portfolio. Still not wildly long, but certainly not aggressively short either. Just a trifle more long than it was on Sunday.

That said, the average true range of the VIX is growing (i.e. the volatility of the volatility index is rising).

If I HAD to read the tea leaves, I’d GUESS (and all anyone can do is guess nowadays) that the market will grow more volatile in a struggle to break all-time highs on more indexes. I understand the DOW made it there, but the S&P has a wee bit more to go.

My timing expert friend, Len, is a bit more bearish in the short term.

And we could BOTH be right, since he looks at shorter time frames than I do. I measure the market in months and he measures in weeks. Perhaps more whipsawing. But I wouldn’t get too excited either way. Not yet. If you try to time, you’d better have a darned good model and flexible stops.

For what it’s worth, these are the best long industries on my model:
ELECFGN
ENTTECH
OILGAS
BANKMID
WIRELESS
FURNITUR
GROCERY
AUTO
NWSPAPER
GASDIVRS
REINSUR
GOLDSILV
EDUC
ADVERT


…and these are the best industries to short:


PROPMGT
BIOTECH
ITSERV
DIVERSIF
CABLETV
PIPEMLP


Fasten on to your seat belts. The sequester is nothing compared to the next crisis due to hit at the end of March.

Tim