Condition Bear Market
S&P Target 940
Hedge XLE 9.96% Closed
Hedge XLF 1.93%

Position Date Return Days Call
BKI 5/31/2011 -4.80% 125 Hold
CFI 6/22/2011 -4.00% 103 Hold
SE 6/27/2011 -8.81% 98 Hold
AWR 7/5/2011 -3.64% 45 Closed
CLH 7/6/2011 -10.26% 89 Hold
GCI 7/14/2011 -32.70% 81 Hold
AGO 8/5/2011 -16.54% 59 Hold
DISH 8/10/2011 6.76% 54 Hold
GTAT 9/8/2011 -43.76% 25 Hold
CSGS 10/3/2011 -1.83% 0 Buy

Mousetrap Return -11.96%
S&P Return -12.21%
Hedged Return -1.26%

Mousetrap Annualized -64.32%
S&P Annualized -65.67%
Hedge Annualized -6.76%

Annualized Advantage 1.34%
Hedged Advantage 58.91%

What amazes me the most is how violently value stocks are getting slammed. IWM (the Russell 2000 Value Index ETF) fell by more than 5% today.

The Hedged position continues to grind its way slowly ahead, but the long-only selections are bottomed out relative to the market.

All I can say at this point is that we are still due a rally, but the model will maintain its hedged position until the bear market is complete. A typical bear market would give us a strong rally in the 4th quarter, and then a full capitulation in the 1st quarter of 2012. In terms of the S&P 500, that would be a push past 1250, followed by a plunge below 950… accompanied by all the screams of terror we would hear on any good roller coaster ride.

The “buy” remains CSGS, with a short XLF hedge.

Tim