Condition Bear Market
S&P Target 970
Hedge XLE -5.18%

Position Date Return Days Call
BKI 5/31/2011 4.44% 93 Hold
CFI 6/22/2011 2.60% 71 Hold
SE 6/27/2011 -2.04% 66 Hold
AWR 7/5/2011 -3.64% 45 Closed
CLH 7/6/2011 -0.64% 57 Hold
GCI 7/14/2011 -17.85% 49 Buy
AGO 8/5/2011 6.68% 27 Hold
DISH 8/10/2011 12.99% 22 Hold
NA NA NA NA NA
NA NA NA NA NA
Mousetrap Return 0.32%
S&P Return -6.63%
Hedged Return -4.22%

Mousetrap Annualized 2.16%
S&P Annualized -45.04%
Hedge Annualized -28.64%

Annualized Advantage 47.20%
Hedged Advantage 16.40%

I’ve had some questions about the model, so I’ll recap:

The Mousetrap model is an experimental fusion of technical industry selection and fundamental stock selection within those industries. The industries are chosen by positive breadth and volume action, and the stocks are chosen by a simple GARP (growth at reasonable price) sorting of 12 month earnings yield and 12 month return on total capital.

The technicals have been backtested with a 20-25% return rate, and the fundamentals have been tested with a 10-15% return rate.

A successful test would add the minimum technical rate to the minimum fundamental rate for a 20 + 10 = 30% performance advantage on the long-only model.

Each position is listed with the date it was purchased and the return from that date, followed by the number of calendar days it has been held, and followed by the action required by the model.

GCI is currently listed in the buy position, and if I did not already hold it I would be adding 10% of my portfolio to that stock at today’s closing price.

AWR was closed.

In addition I am listing a short XLE position as an optional hedge for those (like me) who don’t like volatility.

The total returns are listed after the stocks.

The annualized rate is the total returns * (365.25 / average number of days held).

The S&P returns are calculated from the price at the date of each position in the model – so while the S&P is actually down more than 6.63% from its top, the prices from each date of the stocks I hold averages to a 6.63% loss for the S&P.

The annualized advantage is the difference between the annualized long-only return and the annualized S&P return. The hedged advantage is the difference between the annualized hedged return and the annualized S&P return.

The market call (at the top) is the condition reflected in the current volume, breadth, and price strength ratios between the nine sectors that I track. Currently bearish defensive sectors like utilities and healthcare are outperforming bullish sectors like technology and cyclical.

The model is being tested in real time with real money. I will list each change of position and limit order before the market opens.

Currently there is no change, since I already hold the buy recommendation and there are no listed sells.

Tim