Mousetrap 11/27/2011

Secular Hold IAU & XLF 0.09%
Condition Bear Market Rally
S&P Target 940
Hedge XLU 2.21%

Position Date Return Days Call
SE 6/27/2011 6.69% 153 Hold
CLH 7/6/2011 1.36% 144 Hold
GCI 7/14/2011 -22.85% 136 Hold
GTAT 9/8/2011 -38.08% 80 Hold
CSGS 10/3/2011 10.34% 55 Hold
NLY 10/25/2011 -2.80% 33 Buy
DD 10/27/2011 -9.31% 31 Hold
AMGN 10/27/2011 -5.68% 31 Hold
KBR 10/27/2011 -14.57% 31 Hold
VG 10/27/2011 -35.32% 31 Hold

S&P Annualized -28.14%
Mousetrap Annualized -12.26%
Hedged Annualized -3.36%
Secular Annualized 0.18%



Eventually most bear markets reach a waterfall collapse. The first phase is where the market dives downward and recovers a good portion of the losses.

After that the trend is clearly down, and the waterfall collapse happens when everyone finally discovers they are in a bear market.

And then, once the panic happens, it’s over.

We are getting closer to the panic, but we aren’t there yet. The long only version of the Mousetrap is clearly getting crushed, and the hedged is barely holding its own. As everyone knows, Germany can DELAY the inevitable by agreeing to quantitative easing. But that would only be a delay.

In the meantime, market timers will still get faked out.

Tim

Thanks, Timothy. What causes you to conclude the 940 target - fundamental or technical criteria, or perhaps some of both? As always, appreciate your thoughts.

Best,
Eric

Eric,

The 940 target is based on how many bearish sectors we have rotated through, factored against the distance from the market top to the (October) low.

If you had a 100 point drop and were 2/5ths of the way through the rotation, the target would be 100 * 5/2 from the market top -250.

I've actually smoothed it a bit, but that's the general idea.

Tim

Money flow in the biotech and power industries finally gave up the ghost in favor of diversified and auto.

In the morning I will be closing the following two positions:

GTAT
AMGN

And I will be replacing them with:

TTM
WHR