VXF / S-Fund Signals Long, I-Fund/EFA and C-Fund/SPY still in CASH

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This will be rather brief, as we are in cash.

C-Fund / SPY

Overall, the C-Fund / SPY has individually been signalling cash since 11/12 and at the present moment, is maintaining that stance on the daily charts.  The present level of the C-Fund is $14.3578 / share, and with the SPY at $118.84 / share, the ratio between the two is about 8.2770.  GGT is indicating that we possibly could move back long again if the SPY moves above $120.96, so this would be a C-Fund price of about $14.62.  Hence, watch for closings above that level, but note too that this is a projection into the future, which needs to be re-done on the date of the crossing to determine validity.

S-Fund / VXF

The S-Fund /VXF signal has moved back long, as of 11/18, but I missed it.  The signal was tested again on 11/23, and presently remains long although I'm still sitting in cash.  I'm not convinced that this isn't a sucker rally for the VXF but I have to trust the signals, hence I'll throw my hat into the ring and move long as far as the VXF is concerned.  Had we moved on the signal date, the effective date would have been the close of 11/19, and the VXF price then was $51.08 as of that close, or down 1.7% from where we are today.  As you will see below, we would have allocated around 61% of our monies, so actual loss as of the close this past Friday is about 0.65%.

The S-Fund is trading at $19.9449 and the VXF is at $51.63.  This implies that the ratio between the two is 2.5886.  VXF is telling me that we're in trouble below $50.37, which is $19.46 for the S-Fund, so we've a bit of room above the "trouble zone".  We'll see if this trade works.

I-Fund / EFA

The I-Fund/EAF signal has officially been signalling cash since 11/12 and with the action this past week, has confirmed the move to cash on the weekly chart.  This is incredibly bearish and we'll need some time to get over this hurdle.

This being said, the I-Fund is valued at $18.9231 and EFA at $55.47, suggesting a multiple of 2.9313.    For the present moment EFA would need to clear $58.82, or an I-Fund value of $20.07.  This is quite a bit above where it is right now, and while possible, I don't see it in the near future.

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Performance and Allocation

To date, over the last 30 days, we have the following performance:

• SPY:  +0.34%
• VXF:  +4.46%
• EFA:  - 2.91%

Correspondingly, allocations for funding are as follows:

• SPY -- in cash and will stay in cash, but allocation is 31%
• VXF:  61%
• EFA:  -- in cash and will stay in cash, but allocation is 8%

I am not sure that the VXF entry won't be a sucker's rally but I learned to trust the signals long ago.

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Trading Plan for Monday, November 29th.

Because I have placed 2 intra-fund transfers this month, I cannot transfer this money until after 12:00 on Tuesday, November 30th.  I have placed an order at www.tsp.gov for a contribution allocation to reflect new additions at 61% of the S-Fund / VXF, and leave the remaining 39% in the G-Fund (think money market). Follow me at your own peril.

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Remember, you are responsible for your own trading decisions, and I am not.  Please take ownership for your actions and do your diligence before you blindly follow anybody.

Regards,

pgd

November 7th Weekend Update

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This week saw a transition from cash back to a 50% invested position.  I moved into cash on the October 19th signal (actual transfer date was the 20th), and if we equally-weight between the three funds that I hold, we missed out on 4.1% gain in 11 days.  This is a big loss of potential gain so it's illustrative to understand the cause/effect that got me to that decision the evening of the 19th.

Here's a chart of the 3-Fund TSP, as represented by the following ETFs:

• EFA / I-Fund
• SPY / C-Fund
• VXF / S-Fund

As with all my charts, right-click on any figure to open in a new window:

Signals telling me we were in trouble on October 19th:

1. The first ribbon bar on the top is the 13d Elder Force Index [   FI(13)  ], calculated with an exponential moving average (EMA).  It turned pink, indicating that the FI(13) had moved negative.  This is generally an immediate sell signal.
2. The MACD window shows signal lines as well the histogram.  Here, we had the MACD historgram moving negative on October 19th, which generally is another immediate sell signal.
3. The 13d/34d EMA Slope window shows the slopes of the 13d EMA of the price of this group of ETFs, as well as of the 34d EMA.  We see that the faster one (13d, red) crossed the slower one (34d, yellow) from above, and if not a sell signal, certainly indicates that we have problems.
4. The price window contains an additional EMA in green, which is an 8-day signal.  General thought and good practice is that if a price closes below the 8d EMA of it's price series, then it should be unloaded.  The composite index of all three ETFs closed below the 8d on October 19th, as did all of the underlying ETFs. 

Hence I threw the towel in and moved to cash on October 20th.

In hindsight, I should not have relied on the index chart to make a broad decision about all the constituent holdings.  Specifically, although the 3-ETF composite chart above is poor, here is the Vanguard Extended Market Index ETF's chart, which is my proxy for the S-Fund:

Of particular note here is that the Elder Signals [ Bull Power, FI(13) ] have never transitioned below 0 during this last effort.  Although the MACD histogram, 13/34d EMA slopes, and price series took significant hits on Octobe 19th, these were mitigated by the positive (and strong) nature of Bull Power and the FI(13). 

VXF experienced a 4.7% gain while I was in cash.  Had I held onto VXF, which we had a 36% allocation, we would have maintained a 4.7% x 36% = 1.69% gain over the last 11 days, reducing our apparent loss from +4.1% gain - 1.69% = 2.41%. 

Putting this in perspective, a 4.1% gain in 11 days is equivalent to an annualized gain of 279%.  Being able to gain +1.69% in VXF is the equivalent of an annualized gain of 74%, so every little bit helps.

With respect to the SPY/C-Fund and the EFA/I-Fund, their charts look the same as the 3-ETF index, so I would have sold them despite the VXF signal.

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So a question was emailed to me about why I'm only 50% invested, now that we've apparently entered a new bull leg.  The simple answer is that we are incredibly overbought on the short-term indicators, and I'd like to see a pullback to put the other 50% on the table.  Stay tuned, I'll let you know when (and if) I move the rest of the funds into play.  I note though:

1. We are at extremely high levels in terms of many of the indicators.  Of specific importance is that the MACD is already in the upper half of the chart; the run can last but it's not the same type of run as from below.
2. All the individual ETFs are well above their 8-day value.  This is incredibly overbought, and I fully expect a pullback.
3. If we pullback and hold the 8-day I'll move the rest in, provided that the rest of the market isn't collapsing around me.  I'll determine the latter using the slopes of the 13d, 34d price signals as well as the GGT LCR movement and slopes.

Make sure you pay attention to my other blog:  http://greekgodtrading.blogspot.com/, as well as my trading partner Hsin's:  http://athenastrategytrading.blogspot.com/, as these will give better indicators as to what we are thinking about the markets and a potential entry.

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Disclaimer:  As of this writing I am presently long in the I-Fund, S-Fund, and C-Fund, as well as am holding positions in EFA and VXF.

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Remember, you are responsible for your own trading decisions, not me.  Please take ownership for your actions.

Regards,

pgd

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