Market Map update 12/30/2013

As we approach the end of 2013, we look to the components that make up the Market map model to give us a systematic indication of tactical asset allocation changes, if any.

Component #1 and #2 calculate:

1) the annual performance(s) of the SP 500 index versus calculation of an average of the 40 year CAGR ( compound annual growth rate ) of the SP 500 index ( total return basis ).

2) Rule set applied to mean variance / regression calculations performed on “consecutive” years of annual “overperformance” or “underperformance” that occur as calculated in # 1. See objective # 5.

The average of the 40 year CAGR calculation of the S&P500 up to 12/2013 is 10.3%

The return for the S&P500 for 2012 was 15.9%

The return for the S&P500 for 2013 has been 31.7%

2012 and 2013 have produced consecutive returns > the calculation of component #1.

Component #3  derives data from a time series analysis applied to strategic data points occurring over the months of November, December, and January segregated into performance scores. These scores have had high correlation coefficients relative to the following year’s market performance and are integrated with component #2.

Objective #5 does not apply for this year .

Since the requirement for 2 consecutive years for components #1 and #2 has been fulfilled, this indicates that the market has “overperformed” it’s mean as calculated by the algorithm. We now have an alert towards asset allocation action. We need to wait for the calculation of component #3, which occurs in the middle part of January. If component #3 calculation produces a “Favorable Risk Year 6 month” profile, then we will remain allocated in the equity ETF’s QQQ ( or the SPY ) until July 2014. If it produces a “Neutral” or “High Risk” reading, then we will allocate assets towards cash equivalents. The most recent asset allocation action was taken 12/30/2011; SPY @ 125.5 and QQQ @ 55.8.
If “brand new” capital is to be put to work, then allocation towards the QQQ or SPY ETF would be performed, near the end of the last trading day of the year.

Table 1,2  show previous instances of the current scenario:

Table 1
Deploying brand new cash last trading day of year. Component #3 indicates “Favorable 6 month”:

favorable-6-mo

Table 2
Deploying brand new cash, last trading day of year. Component # 3 indicated “Neutral” or ” High risk”:

Whipsaws Map

 

Market Map component described here:  https://stockmarketmap.wordpress.com/2013/08/

http://seekingalpha.com/article/1725902-market-map-model-1-tactical-asset-allocation-using-low-expense-index-etfs
Market Map risk profiles: https://stockmarketmap.wordpress.com/2013/10/10/market-map-model-1-risk-profiles/ http://seekingalpha.com/article/1738582-market-map-model-1-risk-profiles

We are long QQQ

Market Map  ….. Think different(ly)

 

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