GGT / TSP Not-so-Notables, as of Monday, December 21st

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AGG/F-Fund and EFA/I-Fund continue to show a CASH status -- if you didn't move to cash with these when indicated it's highly probable that you've lost some change, but probably not much since everything has been so range-bound.  AGG/F-Fund signaled a move to cash on 12/11 with a closing price of $104.62, and last evening's close was $104.31.  EFA/I-Fund signaled a move to cash on 11/20 at a price of $55.34, and last evening's close as $55 even. 

The SPY/C-Fund continues to plod along, with a closing strength of +3 and with an average 5D strength of +1.8.  The VXF/S-Fund continues to show strength, with another Affirmed Long on Monday (strength = +5), and an average 5D strength of +2.6.

I'm staying the course until the trends change.

Regards,

pgd

Nothing new here as of Wednesday, December 16th ....

...
but I wanted to give you a head's up on this strategy.

As an equally-weighted strategy, this one is decreasing in acceleration.  It's still making money in this market, but it is doing so at a slower and slower pace each day.  I base these statements on the slope of the 65 DEMA, smoothed over 1 week (5 DEMA - short term), 1 month (21 days -- intermediate term), and 7 weeks (34 days -- longer term).

Correspondingly, my observations are as follows:

Long-Term Trend:  slightly (+) at 0.0594/day

Intermediate-Term Trend (-) at 0.0542/day

Short-Term Trend:  (+) at 0.0536/day

Ideally, we want all of these pointing upward, but that middle trend line is pointing downward (although it is still positive), giving us a bit of a warning shot.

AGG / F-Fund has moved to cash

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With the close on Friday, December 11th, AGG / F-Fund has moved to cash.  I missed this transition, so will have to do it on the open tomorrow (Tuesday). The open price on Monday was $104.82, and today's close was $104.68, so not too much damage relative to missing the signal.

For the record, AGG has been looking bad on many different views:

• It has fallen enough that it has found support (at least for today) at the 65 DEMA.  This is bullish if it holds, bearish if temporary.
• The slope of the 5d of the (slope of the 65 DEMA) started to fall on 12/1.  On 12/13 the slope of the 13d of the ( ) started to fall.  These two together is a warning shot across the bow.  Finally, on 12/9, the 21d of the ( ) started to fall.  All three have been falling since, which is bearish.
  
• Both Elder (2) and (13) went red on 12/1, signaling trouble.
• Final values for the 5/13/21d EMA of the (slope of the 65 DEMA) are respectively 0.0078 / 0.0172 / 0.0256, which are all positive, but falling towards 0, which is bearish.

The only thing that gives me pause about this cash signal of AGG is that the price has held at the 65 DEMA; we'll see if it holds going forward.

==========

For the 3-ETF / Fund portfolio, which invests only in the EFA / I-Fund, SPY / C-Fund, and VXF / S-Fund, we are up a total of 23.48% since 9/08 through 12/14/09.  The Mathematical Expectation (ME) on this portfolio is 1.274, which is very good, and the Compounded Rate of Return (CRR) is 17.74%. The Maximum Drawdown (MDD) for this portfolio is -9.05%, yielding a Calmar Ratio (CR) of 17.74 / 9.05 = 1.96, which is good but shy of our target of > 2.0.

For the 4-ETF / Fund portfolio, which invests only in the AGG / F-Fund, EFA / I-Fund, SPY / C-Fund, and VXF / S-Fund, we are up a total of 20.03% since 9/08 through 12/14/09.  The ME on this portfolio is 1.142, which is very good, but slightly less than the 3-ETF/fund portfolio.  The CRR is 15.15%.  The MDD for this portfolio is -7.1%, yielding a Calmar Ratio (CR) of 15.15 / 7.1 = 2.13, which is better than the 3-stock portfolio, as expected (more equities, less variance).

The allocations in the funds should be as follows, with the 3-Fund allocations in the first column, are:

F-Fund/AGG:  0% / 0%
C-Fund/SPY:  46% / 42%
S-Fund/VXF:  30% / 27%
I-Fund/EFA:   0%  /  0%

G-Fund/Cash:  24% / 31%

Remember, you are responsible for your own investment decisions, not me.  Follow at your own risk!

Regards,

pgd

December 4th Weekend Update

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There are no changes to the GGT TSP portfolio in terms of holdings, but if you've been on the sidelines, here is a recommended allocation that I will use going forward IF I move to cash THEN have to move long again:

AGG / F-Fund:  0% / 9%
SPY / C-Fund:  46% / 42%
VXF / S-Fund:  30% / 27%
EFA / I-Fund:  24% / 22%

The values in the first column are appropriate for the 3-ETF/fund allocation, the numbers in the last column are appropriate for the 4-ETF/fund allocation.  These will be the allocations for this month (December).


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The 3-ETF/Fund portfolio, which does not invest in the AGG / F-Fund, is up 22.81% since inception (9/08), for an compounded rate of return (CRR) of 17.64%.  The maximum drawdown (MDD) since inception is 9.05%, resulting in a Calmar Ratio (CR) of CR = CRR/MDD = 17.64/9.05 = 1.949.  We like 2 or better but 1.949 is not shabby.

Within the 3-ETF portfolio the SPY (C-Fund) is up only 0.06% and the VXF (S-Fund) is down -0.08%.  The purchase date for both of these was 11/17/09.

Within the 4-ETF/Fund portfolio, which DOES invest in the AGG / F-Fund, we have a gain of 19.35% since inception, for a CRR of 14.98%.  The MDD since inception is 7.10%, resulting in a CR = 14.98/7.10 = 2.110.  Note that although additional equities reduces the overall gain for the same period of time, the MDD is less, resulting in a higher CR.  This means that our reward/risk profile is better with more stocks, although our total gains are lower.  It is an individual decision as to whether you can live with the respective gains.

As a comparison, since 9/08,

• the fully-invested VectorVest Composite has fallen -9.57%.  
• the VVC timed with the VectorVest C/Up & C/Dn system is up 9.44%, and has a CR of  0.54 (MDD = 13.70%).
• the VVC timed with the VectorVest Primary Wave is down -7.03%, has a CR of -0.23, and a MDD of 24.29%
  

Who says you can't time the market?

Remember, you are responsible for your own investment decisions.

Regards,

pgd

November 28th Weekend Update

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The present status of the 4 tracking ETFs is as follows:

AGG / F-Fund: Long on 11/5, up +1.27% since 11/6
EFA / I-Fund: Cash on 11/20
SPY / C-Fund: Long on 11/16, down -1.24%
VXF / S-Fund: Long on 11/25, BUT, we went long on 11/17 due to TSP account trading restrictions, down -3.19%

Click the image below for a larger view.

The 3-ETF account (which does NOT trade the AGG / F-Fund) is presently with a net gain of 21.65% since inception, with a 17.39% annualized compounded rate of return (CRR).  The maximum drawdown (MDD) on this account is 9.05%, yielding a Calmar Ratio  (CR) of 1.92, which is okay but less than our goal of 3 or better.

The 4-ETF account (which trades the AGG / F-Fund), is presently with a net gain of 18.32% since inception, with a 14.68% annualized CRR.  The MDD of this account is 7.10%, yielding a CR of 2.06, which is okay but less than our goal of 3 or better.  Note the introduction of the bond fund DECREASES overall risk (higher CR), but lowers the overall gain compared to the 3-ETF portfolio. 

======  Commentary ======

As an entire group with equal weighting between the 4 ETFs, there is nothing in the long term that indicates we should be moving to cash, this past Friday's significant down day not withstanding.  I say this based upon the 65d EMA of the group's price behavior, which is shown below in the figure.  The 65d EMA line is the lowest line in the middle pane, colored magenta.  Click on the image for a larger view.

Furthermore, as a complete strategy, the strategy is still in an up-trend, although it is weakening.  I say this based upon the top pane shown above, which shows the slope of the 65d EMA, one fitted to 5days (blue), the other fitted to 34d (green).  The scale on the right in this upper pane shows when the slope will cross negative, e.g., 65d EMA prices are in a down-trend.  What they show is that the absolute gains of the strategy are slowing, but are still trending upward (downward sloping lines, but above 0).

Overall, even though we are slowing in gains, we are making money in this portfolio, so stay the course.

As always, please leave a comment below if desired.

Regards,

pgd

SPY / C-Fund has moved long

With the close of the markets on Monday, November 16th, the C-Fund / SPY has signaled a new long. Because of TSP restrictions on trading, this will exhaust our ability to move long for the rest of the month.  Given this, I am recommending that no monies be in cash for the remainder of the month, e.g., we move into VXF / S-Fund also.

Here are the complete allocations, as of the open for Tuesday, November 17th:

3-ETF portfolio:

G-Fund / Cash: 0%
C-Fund / SPY: 48%
S-Fund / VXF: 10%
I-Fund / EFA:  42%

4-ETF portfolio:

G-Fund / Cash: 0%
F-Fund / AGG: 42%
C-Fund / SPY: 28%
S-Fund / VXF: 5%
I-Fund / EFA:  25%

Rebalancing will occur on/after December 2nd.

Please leave a comment below, if desired.

EFA / I-Fund has moved Long

With Friday the 13th's close, GGT has signaled a "New Long" with EFA, which is the trade proxy for the I-Fund.  Allocation for the I-fund, if you are using a 4-ETF portfolio, should be 25%, and if you are using a 3-ETF portfolio, should be 42%.

Here are the complete allocations, as of the open for Monday, November 16th:

3-ETF portfolio:

G-Fund / Cash: 48%
C-Fund / SPY: 0%
S-Fund / VXF: 0%
I-Fund / EFA:  42%

4-ETF portfolio:

G-Fund / Cash: 33%
F-Fund / AGG: 42%
C-Fund / SPY: 0%
S-Fund / VXF: 0%
I-Fund / EFA:  25%

Rebalancing will occur on/after December 2nd if no further signals are issued this month.

Please leave a comment below, if desired.

AGG / F-Fund has moved Long

If you are trading the AGG or F-Fund as part of the TSP strategy, this moved long with GGT as of 11/5/09.

There are two portfolios that are managed with the GGT/TSP methodology:  one uses the AGG, the other one does not.  See the previous blog to get an idea of the overall performance.

If you are trading the 3-ETF portfolio, do nothing.  You should be 100% in cash.

If you are trading the 4-ETF portfolio, you have two choices to allocation: 

a) 25% of your portfolio,with the balance in cash, or
b) based upon a weighted performance of the last month, 42% of your monies would be allocated in the F-Fund, with the balance in cash.

Happy trading!

As always, please leave a comment if you need to.

GGT-TSP Performance through October 30, 2009

This wasn't a stellar month for the GGT-TSP plan, but we have protected ourselves overall and I think since we started the plan (August, 2008) we've done quite well, relative to the market.  What follows is a summary overview of performance; read the "Trading Plan for the TSP Funds, ver 1.0" blog for details on the strategy.

This blog entry will be a quick synopsis of the performance from inception.  Click on any image to see a larger view:

3-Fund 15-Performance graph (does not trade the AGG / F-Fund):

Here is the 3-TSP Fund Portfolio Summary, since inception:

Take a close look at the above table.  

• Total gain is 23.17%.
• 50% of the trades are winning trades -- this is normal
• When a trade wins, it wins (on average) $4,032, and when it loses, it loses (on average) $1,135
• The Mathematical Expectation of this strategy (ME) is 1.276, which is very good.
• The Compounded Rate of Return (CRR) is 19.52%.  As a reference, the 3-ETF buy-and-hold portofolio over the same period has a CRR of -15.28%
  

Given the above information, we can calculate the Pessimistic Return Ratio (PRR) of the strategy:

The PRR is (((W - (W^(1/2))) / T) * AW) / (((L + (L^(1/2))) / T) * AL)

Where:
W = Number of winning trades (in this case 8)
L = Number of losing trades (in this case 7)
T = Total number of all trades (winning and losing, in this case 15)
AW = Average winning trade amount (in this case $4,032)
AL = Average losing trade amount (in this case $1,135)


PRR = 1.905, which is very good.

This last graphic shows that we have a maximum drawdown (MDD) of 7.91% over the entire period.  The Calmar Ratio (CR) is a measure of reward to risk, and is given by:

CR = CRR / MDD

In this case, we have CR = 19.52 / 7.91 = 2.46, which again, is very good.

Summary of 3-ETF / Fund TSP Strategy

• Total gain is 23.17%.
• 50% of the trades are winning trades
• When a trade wins, it wins (on average) $4,032, and when it loses, it loses (on average) $1,135
• The Mathematical Expectation of this strategy (ME) is 1.276, which is very good.
• The Compounded Rate of Return (CRR) is 19.52%. 
• The Maximum Drawdown (MDD) of this strategy is 7.91%, as measured from 8/1/08.
• The Calmar Ratio (CR) of this strategy is 2.46
  

The system is a winner, even without the AGG / F-Fund in the strategy.

============================

4-Fund 15-Performance graph (DOES trade the AGG / F-Fund):

 

As can be seen above, the stats for the 4-ETF / Fund GGT TSP Strategy are as follows:

• Total gain is 19.43%.
• 55% of the trades are winning trades -- this is normal
• When a trade wins, it wins (on average) $2,270, and when it loses, it loses (on average) $781
• The Mathematical Expectation of this strategy (ME) is 1.131, which is very good.
• The Compounded Rate of Return (CRR) is 16.37%.
• The calculated Pessimistic Return Ratio (PRR) is 1.886 (calculate this for yourself)

 We see from the above graphic that the Maximum Drawdown is 5.77%.  This allows us to calculate the Calmar Ratio (CR):

CR = CRR / MDD = 16.37 / 5.77 = 2.83

Summary of 4-ETF / Fund TSP Strategy

• Total gain is 19.43%.
• 55% of the trades are winning trades -- this is normal
• When a trade wins, it wins (on average) $2,270, and when it loses, it loses (on average) $781
• The Mathematical Expectation of this strategy (ME) is 1.131, which is good.
• The Compounded Rate of Return (CRR) is 16.37%.
• The calculated Pessimistic Return Ratio (PRR) is 1.886 (calculate this for yourself)
• The Maximum Drawdown (MDD) of this trategy is 5.77%, as measured from 8/1/08.
• The Calmar Ratio (CR) of this strategy is 2.83

Commentary

It's important to note that removing the bond fund (AGG / F-Fund) from our investing strategy increases gain, but it also increases risk, as determined by the Calmar Ratio (CR).  For longer-term investing, the higher CR is the better choice if you are looking for better "units" of return/risk ratio.  If you can stomach the slightly higher drawdown potential of the 3-ETF strategy (7.91% vs. 5.77%), and realizing that a strategy will ALWAYS LOSE MORE AT SOME POINT IN THE FUTURE THAN IT HAS LOST IN THE PAST, then you can probably do better with a 3-ETF strategy, compared to the 4-ETF strategy.

As always, comments are appreciated.

Regards,

pgd

Signal update for Thursday, October 29th, 2009

All 4 tracking ETFs for the GGT Thrift Savings Plan have moved to cash.  Although I am on the fence as to selling at this local minimum, the backtesting and rules of this plan mandate that I liquidate all positions to cash related to this portfolio (shoot).

Correspondingly, I will send the order to the TSP to move everything into the G-Fund (cash).  The order will most likely be filled as of the close tomorrow (Friday).

Trading Plan for the TSP Funds, ver 1.0

Background

The Thrift Savings Plan (TSP) is a government-sponsored retirement plan for government employees as well as the military. My wife is a government employee and has been contributing the maximum amount allowed every two weeks for nearly 20 years, and has accrued a sizable nest egg.

I use the Greek-God Trading system signals to trade my wife's TSP account.

The TSP account has 5 basic funds available, as well as numerous "life cycle" funds. I choose to use the 5 basic funds, simply because I can choose the amount of ownership of each, as well as the bi-weekly contribution allocations.

There are four (4) ETF funds that closely track the funds that are available in the TSP. Their mapping is as follows:

F-Fund: AGG, the iShares Lehman Aggregate Bond Fund, which is a fund that seeks to provide investment results generally equivalent to the total United States investment grade bond market as defined by the Lehman Brothers U.S. Aggregate Index.

C-Fund: SPY, the SPDR for the S&P 500, which is a fund that generally corresponds to the price and yield performance of the S&P 500 index.

S-Fund: VXF, the Vanguard Extended Market ETF, which is an exchange-traded share class of the Vanguard Extended market Stock Index Fund, which employs a passive management investment approach designed to track the performance of the Standard & Poor's Completion Index, a broadly diversified index of stocks of small and medium-sided U.S. companies. The S&P Completion Index contains all of the U.S. common stocks regularly traded on the NY and AmEx and the NASDAQ OTC markets, except those stocks included in the S&P 500 index.

[Trading equal amounts in VXF and SPY would be the same as investing in the entire U.S. market of approximately 4500 stocks]

I-Fund: EFA, the iShares MSCI EAFE Index Fund, which seeks to provide investment results generally equivalent to publically traded securities in the European, Australasian, and Far Eastern markets, as measured by the MSCI EAFE index.

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The TSP manager restricts trades within the funds to 2 exchanges per month, so short-term trading is not permitted. Correspondingly, the GGT trading system works well with the TSP fund restrictions.

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Trading Rules

The trading rules for this plan are very easy. Purchase the appropriate fund when the corresponding ETF signals LONG, via GGT, and sell the appropriate fund when the corresponding ETF signals CASH.

Trades
Independent verification of the trades is easy to accomplish. The GGT web site has 99% of the ETF files for the dates listed below. Because GGT signals are not stationary, e.g., a buy or sell date that occurred in the past can move depending upon new optimizations, it is strongly suggested that those of you who are verifying the dates below download the appropriate GGT ETF files within about 10 days after the dates posted below.

Here are the trades since August 1, 2008:

Date	Situation	ETF
8/1/2008	Dn	VXF
8/1/2008	Dn	AGG
8/11/2008	Dn	SPY
8/11/2008	Dn	EFA
8/29/2008	Up	AGG
9/16/2008	Dn	AGG
9/19/2008	Up	AGG
9/22/2008	Dn	AGG
10/31/2008	Up	AGG
12/3/2008	Up	SPY
12/8/2008	Up	EFA
12/9/2008	Up	VXF
12/23/2008	Dn	SPY
1/12/2009	Dn	VXF
1/12/2009	Dn	EFA
1/21/2009	Dn	AGG
2/5/2009	Up	VXF
2/17/2009	Dn	VXF
3/16/2009	Up	VXF
3/17/2009	Up	EFA
3/18/2009	Up	SPY
3/19/2009	Up	AGG
5/22/2009	Dn	VXF
5/27/2009	Dn	AGG
5/29/2009	Up	AGG
6/4/2009	Up	VXF
6/16/2009	Dn	EFA
6/16/2009	Dn	AGG
6/22/2009	Dn	VXF
6/22/2009	Dn	SPY
7/15/2009	Up	SPY
7/15/2009	Up	EFA
7/20/2009	Up	VXF
7/30/2009	Up	AGG
8/5/2009	Dn	AGG
8/17/2009	Up	AGG

8/17/2009   Dn     VXF
8/21/2009   Up     VXF
10/1/2009   Dn     EFA
10/1/2009   Dn     SPY
10/1/2009   Dn     VXF
10/13/2009  Up    SPY
10/13/2009  Up    VXF
10/14/2009  Up    EFA
10/23/2009  Dn    AGG
10/27/2009  Dn     EFA
10/27/2009  Dn     VXF
10/28/2009  Dn     SPY  (all in cash now)
11/5/2009    Up     AGG


4-ETF Performance Graph

This performance graph assumes that the four ETFs: AGG, EFA, SPY, and VXF are being used for the particular portfolio. Equal balancing occurs at the start (25% in each fund), but as funds become available for the next "buy", all available cash is used if 3 of the 4 funds are already invested, 1/2 of the available cash is used if 2 of the 4 funds are already invested, and 1/4 of the available cash is used if 1 or no funds are presently invested.




The figure below shows the individual gains since the latest purchase date. Click on the image to view it full-screen.



The figure below shows the portfolio summary for the 4-ETF TSP portfolio. The mathematical expectation of this approach is 1.389 (we desire values above 1.0 but Dr. D consistently makes money with ME's ~ 0.6), and the compounded rate of return (CRR) is 23.84%.



The figure below is a situational summary for the 4-ETF TSP portfolio. I use this summary because it keeps track of maximum drawdown (MDD), which for this portfolio, is 5.35% over the last year.

Based on this and the previous statement of CRR, we can calculate Calmar Ratio (CR). The CR of a portfolio is the CRR/MDD, which for this portfolio, on this date, is 23.84/5.35 = 4.45. This is a very good CR; values above 2.5 are considered exceptional.




3-ETF Performance Graph

The AGG / F-Fund are bond funds, and aggregating 25% of our assets to this group is not necessarily prudent. If we remove investment into AGG / F-Funds, performance in terms of gain improves, but obviously, the portfolio is more volatile. Here is the performance graph if we restrict investment to only the EFA, SPY, and VXF funds:



The figure below shows the portfolio summary for the 3-ETF TSP portfolio. The mathematical expectation of this approach is 1.545 (we desire values above 1.0), and the compounded rate of return (CRR) is 29.66%.



The figure below is a situational summary for the 3-ETF TSP portfolio. The maximum drawdown (MDD) for this portfolio, is 7.57% over the last year, due to the removal of the AGG fund.

The CR of this portfolio is 29.66/7.57 = 3.91. This is a very good CR; values above 2.5 are considered exceptional. Note that this is lower than the 4-ETF portfolio, and indicates that we are taking more risk for a given gain, which is NOT desirable. The 4-ETF portfolio is less risky when evaluated with this metric.





Receiving Signal Updates

Simply put, you are in control of your own destiny. For the better part of the last year Geoff Cox and I have endeavored to provide you timely information on a daily basis concerning GGT ETFs. Recently, we have implemented a DASHBOARD view which contains various groupings of ETFs. As you scroll down this dashboard, you will see the following area:



The actions you should take with respect to the TSP funds will be evident.

================

Remember, you are responsible for all of your trading decisions.