Stock Market Advantage Buy Signal

By on October 4, 2011

The Tactical Timing System has generated a buy signal. To comply with the system the following positions were purchased and funded with the sale of a portion of the Vanguard Short Term Corporate Bond ETF (VCSH).

Position    (Symbol)     Allocation

Vanguard European ETF (VGK) 6%

Vanguard High Dividend Yield ETF (VYM)  6%

Pepsico (PEP)  3%
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Target Allocation:

60% equities; 40% fixed income
———————————

Below is an image of the trade confirmations (click to enlarge):

Stock Market Advantage Trade Confirmations

 

 

SMA Comment: Fear has gripped the world stock markets due to a confluence of factors.  Recession possibility, European contagion, the U. S. debt downgrade, and exploding deficits have converged to create a perfect storm leading to investor panic.  Coupled with a leveraged hedge fund complex (many who are in forced liquidation mode), the fear creates an opportunity to purchase assets at what appear to be bargain prices.  There will be rebounds and nimble traders can profit in this environment.

The buy signal doesn’t guarantee a bottom is near or imminent. It would be nice if that were the case. The buy signal merely means there is above average fear in the psyche of investors leading to more favorable prices for buyers of equities.

The current U. S. oligarchical political system operating under the guise of a capitalist democracy lends itself to crisis as wealth is transferred to a socialized elite whose gains are protected through bailout and subsidization, while the losses are born by a largely ignorant mass of citizenry distracted with beer, baseball, football, and right-wing political talk radio. This is an ideal mix for wildly fluctuating (and rigged) financial markets. An announcement by government officials could come at any time leading to a massive bounce in prices.

Disclaimer: It is very difficult to outperform a buy and hold strategy. Many investors have found themselves well served over long time horizons by investing regularly in a diversified portfolio of stocks or low cost, broadly diversified indexed stock funds. Information presented is based on analysis of past data and assessments by the Tactical Timing System model. Future performance may not reflect past performance. Profitable trades are not guaranteed. No system or methodology ensures stock market profits. Although accuracy is strived for, no guarantee is made regarding the accuracy of data presented.

4 Comments

  1. Lou Skuntz

    October 12, 2011 at 10:31 am

    What the heck is the Tactical Timing System?

    • Barron Maestro

      October 12, 2011 at 1:06 pm

      I’m glad you asked since it is something I haven’t explained in quite some time.

      The Tactical Timing System (TTS), is a proprietary timing methodology developed through painstaking research. TTS was applied to a real world account, the Stock Market Advantage Aggressive portfolio (aka SMA Aggressive Portfolio) back in the early 1990′s. The SMA Aggressive Portfolio returned 15.6% per year versus the Wilshire 5000 index return of 12.5% per year over the 10 year period ended March 31, 2002.

      At first glance this outperformance may not sound like much, but over an extended timeframe it is an enormous advantage.

      Starting with $20,000 and achieving the same returns over 30 years, the system would provide an ending account balance of over $1.5 million, while the same investment in the broad index would show a respectable ending account balance of $685,000.

      Dalbar, Inc., a Boston research firm, discovered that from 1984 through 1998, the typical stock investor achieved less than 1/2 the return of the market index and in the example above would end up with a mere $134,000.

      Prior to 2008, there were two SMA Portfolios (Aggressive and Conservative). In 2008 the
      Aggressive portfolio was folded in order to simplify matters. The Conservative portfolio is now simply referred to as the SMA Portfolio.

      In the 10 year period ending 12/31/2010, the Stock Market Advantage portfolio, a/k/a SMA Portfolio, whose trades are based on TTS signals, had an average annual return of 6.2% versus annual returns of 1.3% for the S&P 500 index.

      The Tactical Timing System has undergone several revisions over the years. It formerly was primarily based on a fundamental valuation methodology. However, the Tactical Timing System Fear Index was developed to supplement the system. TTS signals are now based on a combination of fundamental valuation measures and sentiment gauges.

      The signals are offered free by sending an e-mail to stockmarketadvantage@gmail.com and typing “subscribe” in the subject block. There is no guarantee the e-mail alerts will be timely because I’m not always sitting at the computer. Also, remember, no stock market methodology or timing system guarantees profitable trades.

  2. Barron Maestro

    October 13, 2011 at 9:17 am

    Some additional info on TTS:

    Prior to 1997, the Tactical Timing System adjusted allocation between cash and equities by 30 percentage point increments. Due to lower volatility encountered in the 90′s, timing signals were very rare. Sometimes it is better to do nothing, but the dearth of signals allowed some poorly performing equities to remain in the “real world” portfolios.

    TTS was adjusted provide more frequent signals shifting the allocation in 15 percentage point increments. The revised system was backtested with the S&P 500 to 1978 and achieved achieved an annual rate of return that was 25% higher than the S&P 500. Commissions were taken into account, but taxes left out of the equation. The revised system generated 42 trading signals, or approximately one every five months.

    Readers should be aware that the SMA Portfolio is an IRA account, therefore several of the holdings (REITS, Bonds) are more suitable in a non-taxable account. Reductions in equity allocation are typically invested in the Vanguard Short-Term Corporate Bond ETF which provides a much more generous yield than either cash or Treasury Bonds of similar maturity.

  3. A. Nellsechs

    February 19, 2013 at 10:31 am

    Do you sell Herbalife?

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