Sector Selections for week starting 6/5/2011

[Timothy Clontz]

As per the Robot, I opened a long position in IWM at 78.39.
As per my Sector Model, I opened a long position in XLU at 33.09 (slight benefit from the gap down this morning).

Currently the XLU trade is positive. I'll measure the totals when both trades are exited, and will keep a running tally of the percentage performance between the two models.

Tim

[Pascal]

As per the Robot, I opened a long position in IWM at 78.39.
As per my Sector Model, I opened a long position in XLU at 33.09 (slight benefit from the gap down this morning).

Currently the XLU trade is positive. I'll measure the totals when both trades are exited, and will keep a running tally of the percentage performance between the two models.

Tim

Without making a long analysis, I'd say that if the long trade fails, XLU will outperform IWM because it is more defensive. If the trade is a success, then IWM will outperform XLU.

Of course, selecting another ETF than XLU would lead to different results. So here, it is the long term comparison that is important.


Pascal

[Timothy Clontz]

The XLU selection is based on the long term bearishness of the sector configurations, in relation to each other. That is, money flow and price performance on bearish sectors are outperforming those of bullish ones.

My expectation is that XLU would underperform a successful IWM rally, while an XLE short would outperform an IWM short simply because of the likelihood that the primary trend is now bearish.

However, if the primary trend actually IS bearish, that increases the odds of successful Robot shorts and decreases the odds of successful Robot longs. While for the Robot that will be a wash, I do not yet know if this would be a wash with my own model.

By "wash" I do not mean that the Robot would be unprofitable, but merely that the decreased success of contra trend trades is compensated by the increased success of trades WITH the prevailing trend, allowing the Robot to remain profitable over all, regardless of that trend.

My real time trades are meant to compare apples to apples in real time to see if the Robot calls and my model have positive synergy.

If they DO, then the next step would be to see if pivot points calculated on my selected sectors would outperform both.

But that's a good bit in the future. This is the first real time trade using Billy's timing with my sector model. I had missed the previous short because I was still backtesting my own model at that time.