Mousetrap 1/5/2011 -- progress to Bear 3 (of 5)

Secular Hold IAU & XLF 0.64%
Condition Bear Market Rally
S&P Target 1020
Hedge XLU -3.00%

Position Date Return Days Call
SE 6/27/2011 16.36% 192 Hold
CLH 7/6/2011 18.70% 183 Hold
GCI 7/14/2011 0.88% 175 Hold
CSGS 10/3/2011 19.49% 94 Hold
NLY 10/25/2011 -2.74% 72 Hold
DD 10/27/2011 -3.43% 70 Hold
KBR 10/27/2011 -4.36% 70 Hold
VG 10/27/2011 -30.03% 70 Buy
TTM 11/30/2011 11.14% 36 Hold
BT 1/4/2012 -2.70% 1 Hold

S&P Annualized -7.95%
Mousetrap Annualized 5.70%
Hedged Annualized -2.35%
Secular Annualized 1.07%

The sector rotation model has finally shifted from Bear stage 2 (of 5) to Bear stage 3 (of 5). Although the sector model is still long XLF with an optional XLU short hedge, the projected bottom has been revised from 940 to 1020.

This is still somewhat tentative, but hopeful.

On the full industry model the best buy is now VG, which a 30% better buy than where I bought it.

There is no telling where this rally will end, but all of my models still show this as a bear rally, and not a resumption of the bull market. I know a lot of technical traders are getting excited about the market’s move up, but such excitement is premature.

Good luck out there.

Tim