Sector Selection changes 6/29/2011

[Timothy Clontz]

The action over the last few days has changed the sector configurations.

The long sector is now XLK (technology), and no longer XLU (utilities)
The short sector is now XLE (energy)

I know I had stated that I would test my model against the Robot without changing sectors during a call, but on further examination I think it is warranted to make the change. In my model the first position is the best performer, but the second is the worst (think of the first position as the edge of the cup and the second position as the handle on a CANSLIM configuration).

Since this is the very first trade with the Robot I plan to make the change of sectors unless there is a serious gap between them in the morning. I'll continue with the same method for the rest of the test.

[Timothy Clontz]

Obviously the two sectors gapped away from each other yesterday after I had received the 1% dividend payout from XLU from the day before.

Typical dividend behavior.

Still, XLU continues to drag IWM even with the payout.

But I'll need to count the dividends from ETFs in order to track true returns.

The gap reminded me why I had opted to test sector selection changes only at the time the Robot changes direction. There's no way to properly account for this kind of behavior without more time in testing, and I do not plan to start over.

So... still in XLU.

As Pascal and I discussed a couple of weeks ago, my sector selections should drag in one direction and outperform in the other (in theory), with the only proper test being whether the total performance in both directions outperforms or underperforms IWM.

So far, IWM is trouncing XLU. Bravo to both Billy and Pascal for brilliant work.

If my model is to give any positive synergy, it has a good bit of catching up to do first!