Condition Bear Market
S&P Target 800

Position Date Return Days Call
BKI 5/31/2011 3.89% 74 Hold
CFI 6/22/2011 2.60% 52 Hold
SE 6/27/2011 -7.26% 47 Hold
AWR 7/5/2011 -3.10% 39 Hold
CLH 7/6/2011 -4.15% 38 Hold
GCI 7/14/2011 -25.05% 30 Hold
AGO 8/5/2011 -7.27% 8 Buy
DISH 8/10/2011 4.41% 3 Hold
NA NA NA NA NA
NA NA NA NA NA
Mousetrap Return -4.49%
S&P Return -7.88%

Mousetrap Annualized -45.10%
S&P Annualized -79.08%

Annualized Advantage 33.98%

The good news is that the Mousetrap model is back to its target performance: beating the S&P500 by an annual rate of 30%.

The bad news is that the S&P500 remains on track to do worse than -30%. My yield ratio model is showing -37% returns with current long term momentum. The 800 target above is the HIGHEST projection in my two models. The yield ratio model’s projection is actually 700.

My timed model is still in cash, still waiting to short XLE when the current mini-rally exhausts itself.

And the Mousetrap model will keep building up until it is fully loaded and rotating around sectors and stocks. It’s rather annoying doing a proof of concept on a long-only untimed model at the beginning of what may be a vicious bear market.

But I will continue to do so. This is not all of my portfolio. I run three strategies and I’m down about 2% since the market top overall.

Navigating a bear market is extremely difficult. For most folks, cash is the best place to be. The moves are so violent and convincing that people will sell their long positions and go short just before a rally, and do the reverse just before the rally exhausts itself.

I still expect this rally to take us toward 1250 before it gives up the ghost. Once it does, the short XLE position will serve as a hedge. The net effect should be better than cash – but probably not by a great margin.

Tim