Signal Change! Move to Cash!

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Summary:  It is strongly suggested to move all monies to cash.  F-Fund / AGG has been strong, but I am waiting for this to signal "New Long" before allocating any monies into AGG.  The 3-fund portfolio is performing better in gain than the 4-fund (as expected, since it does not allocate to a bond fund), but the drawdown is unproportionally higher, resulting in a greater risk/reward ratio.  If you are of lower risk the 4-fund approach has better metrics, although the gain is lower.  We bank gain, not risk, so you have to align your objectives accordingly

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GGT has signaled an intermediate-term move to cash across the board.  You should have already been in cash in AGG / F-Fund and EFA / I-Fund, and now you should consider a complete move to cash / G-Fund with the balance of your holdings.

F-Fund / AGG is very strong, with a GGT Strength of +3.  The only thing required to move this to a "New Long" signal is more volume, approximately above 475K shares (it varies daily so do not take this as gospel).  The question is whether we should move to the F-Fund /AGG at the same time we liquidate the other funds; if we do not do this we will remove both of our 2x / month trades available to us with the TSP.  Given that we are so late in the month, burning these 2 trades is not a big risk, so I'm inclined to state WAIT for AGG / F-Fund to signal a hard move long.

Both SPY / C-Fund and VXF / S-Fund were purchased as of the signal of 11/17; since that time (through the close of 1/22) SPY / C-Fund has fallen -1.55% and VXF / S-Fund has increased +2.19%.  If you dollar-cost-average your allocations from your pay on a bi-weekly basis you will have done a bit better, as the period up to 12/22 was relatively flat in price performance for both SPY / C-Fund and VXF / S-Fund, with the VXF slightly outperforming the SPY during this time.

IF you enter your trade this weekend at the TSP site, there is a very high probability that your trade will occur on Monday.  Given that the markets are down three days straight, I anticipate a dead-cat bounce on Monday, meaning there is a higher probability than not that you will be selling on higher prices, which is what you want to do.

As I cannot post fully-accurate statistics until I close SPY / C-Fund and VXF / S-Fund, I'll hold off on the complete dashboard of metrics until Monday or Tuesday.  Until then, here are the stats through Friday, January 22nd, 2010:

3-Portfolio ETF / Fund
Strategy:  Invests only in the C-Fund / SPY, I-Fund / EFA, and S-Fund / VXF.  Moves to G-Fund / Cash when necessary.

• Total gain since 8/08:  22.13%
• Mathematical Expectation (ME):  1.274 (very, very good)
• Average Win per Trade:  $1,340 on $122,300 basis.
  
• Compounded Rate of Return (CRR): 15.36% (very good)
• Comparative Board Market Performance during Same Period:  -8.53%
• Maximum Drawdown (MDD):  9.05%
• Calmar Ratio (Reward/Risk Ratio, CR):  15.36 / 9.05 = 1.697 (good, but desire > 2.0)

4-Portfolio ETF / Fund
Strategy:  Invests in the C-Fund / SPY, F-Fund / AGG, I-Fund / EFA, and S-Fund / VXF.  Moves to G-Fund / Cash when necessary.

• Total gain since 8/08:  19.35%
• Mathematical Expectation (ME):  1.009 (very good)
• Average Win per Trade:  $804 on $119,356 basis.
  
• Compounded Rate of Return (CRR): 13.45% (good)
• Comparative Board Market Performance during Same Period:  -9.02%
• Maximum Drawdown (MDD):  7.10%
• Calmar Ratio (Reward/Risk Ratio, CR):  13.45 / 7.1 = 1.894 (good, but desire > 2.0)

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Remember, you are responsible for your own investment decisions, not me.  Check in early next week to see the graphs/charts/etc. of this portfolio after I close the various funds and move to cash on Monday.

Regards,

pgd