As another predefined date for asset allocation action as defined by the Market Map model is upcoming ( Dec 31 ), we review the 7 non subjective, price based variables * and rule set in order to guide us towards possible allocation change.
As 2012, 2013, and 2014 were consecutive years of “outperformance” greater than the fixed, valuation baseline ( variable #1 ), the model has been in “cash” allocation in 2015, as it was in 2014. With 3 trading days to go, the model rule set is as follows:
1) the current S&P500 YTD performance reflects an “underperformance” year vs. the valuation baseline ( which stands at S&P 2241). If the S&P500 rallies and closes above 2241, then 2015 will be a fourth consecutive year of “overperformance”, and hence a possible “cash” allocation.
2) 2015 was identified as a “high risk” profile year on 1/20/2015 **. On the last trading day of a “high risk” profile year, if the S&P500 < long term moving average of the S&P 500 ( variable #5 ) then stay in cash into the next year, otherwise invest in QQQ/SPY ETFs *** depending on preference, at the open of Jan 3rd.
Conclusion: Odds suggest that the S&P500, at the time of this writing, won’t rally 185+ points by close Dec 31. The S&P500 vs. it’s moving average needs to be monitored.
Past years with similar variable/rule set configuration to 2015 were: 1969, 1981
*** Model would allocate to QQQ/SPY ETF on Dec 31 with later “favorable risk” profile year validation from variable #2 on Jan 30 in order to “stay” invested.
**** moving average currently stands at 2042
>>> Model using Small cap value and “Sell in May” stays invested with next allocation decision date of importance being May 1, 2016