Condition Bear Market
S&P Target 970
Hedge XLE 0.40%

Position Date Return Days Call
BKI 5/31/2011 1.90% 102 Hold
CFI 6/22/2011 -3.28% 80 Hold
SE 6/27/2011 -5.97% 75 Hold
AWR 7/5/2011 -3.64% 45 Closed
CLH 7/6/2011 -4.56% 66 Hold
GCI 7/14/2011 -27.70% 58 Hold
AGO 8/5/2011 -8.48% 36 Hold
DISH 8/10/2011 10.37% 31 Hold
GTAT 9/8/2011 -7.29% 2 Buy
NA NA NA NA NA

Mousetrap Return -5.41%
S&P Return -9.37%
Hedged Return -4.82%

Mousetrap Annualized -35.90%
S&P Annualized -62.25%
Hedge Annualized -28.57%

Annualized Advantage 26.35%
Hedged Advantage 33.68%

We have not yet had a full bear market rally, and the current acceleration between the sectors is showing a probable drive over the 4th quarter of 2011 back up to the long term moving averages. Money Flow is also favoring bullish sectors over bearish ones. The S&P500 index is now on short term support and the VIX is on short term resistance, while the dollar seems poised to spike unless the Fed intervenes.

In other words, there is no clear consensus using the most popular “indicators.”

My sector rotation model remains firmly in stage 2 (out of 5) of a bear market. The rotation is almost too perfect…

I am expecting a rally soon – but only a rally.

GTAT (long) / XLE (short) remain the hedged pairs for new entries. None of my models are granular enough to do more than hedge here. I do not recommend micromanaging the market moves without a timer far more robust than my own.

And my friend Len is on vacation… so no help there! :-)

Tim