Condition Bear Market
S&P Target 970
Hedge XLE 3.46%

Position Date Return Days Call
BKI 5/31/2011 2.02% 113 Hold
CFI 6/22/2011 -4.85% 91 Hold
SE 6/27/2011 -5.10% 86 Hold
AWR 7/5/2011 -3.64% 45 Closed
CLH 7/6/2011 0.17% 77 Hold
GCI 7/14/2011 -34.24% 69 Hold
AGO 8/5/2011 -18.07% 47 Hold
DISH 8/10/2011 18.73% 42 Hold
GTAT 9/8/2011 -31.63% 13 Buy
NA NA NA NA NA

Mousetrap Return -8.51%
S&P Return -8.49%
Hedged Return -5.44%

Mousetrap Annualized -48.00%
S&P Annualized -47.88%
Hedge Annualized -30.65%

Annualized Advantage -0.12%
Hedged Advantage 17.22%

Today was a classic example of why I don’t do discretionary trading, and also why I don’t time the small moves. My gut is always wrong. I was pretty sure we’d get an immediate jump up after Jackson Hole, when instead we got a 3% drop.

The good news is that the hedged position pulled ahead, and the portfolio made a few dollars today. As far as the portfolio was concerned, it was a boring day.

Before I get too excited I need to note that on my sector rotation model the rotation is starting to break down – as it does in bear rallies or bull corrections. It hasn’t broken yet, but we are 2/5s of the way through a bear market rotation, and the 3rd position is no longer aligned with the 2nd. According to the model, then, we are still due that rally before the bear plummets. And while the market is never perfectly average, the average behavior of bear markets indicates that a rally is far more likely after today’s action than it was before.

Since I don’t know when and I have horrid instincts, I’m staying hedged. It’s boring – but these days boring is good.

Tim