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Market Map
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25 years experience in Quant research, portfolio management, and stock market data analytics. 15 years experience in index trading / ETF strategist. Mean revision / time series studies applied towards general market trends with a focus on long term format.
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  • Market Map Model 2 With Sell In May Goes To Cash  0 comments
    Apr 30, 2014 10:09 PM

    As the Market Map model identified 2014 as having a "Neutral" risk profile, using the popular "Sell in May" strategy combined with the Market Map model (as profiled in the previous instapost seekingalpha.com/instablog/1109542-market-map/2322502-market-map-model-1-with-sell-in-may), assets would now be allocated from equities to cash.

    The table below shows returns of the basic "Sell in May" strategy (allocate assets towards equities on November 1 and towards cash on May 1 of an applicable year) combined with the MM model "2" * since 1950. We will see if the algorithm calls for allocation towards long dated bonds in July.

    table

    BOND allocation 75%Dividends reinvest
    entry dateexit date% return$1 becomes
    S&P500cash equiv  
        
       $1
    05/01/5005/01/5361.2%2
    11/01/5305/01/56118.2%4
    11/01/5605/01/570.0%4
    11/01/5705/01/6050.3%5
    Bond 07/05/6010/01/602.00%5
    11/01/6005/01/6121.7%7
    11/01/6205/01/6557.7%10
    11/01/6505/02/661.6%11
    11/01/6605/01/6827.7%13
    11/01/6805/01/691.1%14
    11/01/6905/01/70-9.3%12
    11/01/7005/01/7340.6%17
    11/01/7305/01/74-6.1%16
    11/01/7405/01/7752.3%25
    11/01/7705/01/783.9%26
    11/01/7805/01/8160.4%41
    11/01/8105/04/82-3.2%40
    Bond 9/03/8210/01/824.10%42
    11/01/8205/01/8421.5%51
    11/01/8405/01/8790.2%96
    11/01/8705/01/9049.7%144
    11/01/9005/01/9235.2%194
    Bond 7/10/9210/01/922.40%199
    11/01/9205/01/97101.8%402
    Bond 7/11/9710/01/974.90%422
    11/01/9705/01/9819.2%503
    Bond 7/02/9810/01/987.20%539
    11/01/9805/01/9917.3%632
    Bond 7/02/9910/01/990.80%637
    11/01/9905/01/005.6%673
    Bond 7/6/0010/01/002.60%690
    11/01/0005/01/01-13.2%599
    Bond 7/6/0110/01/015.60%633
    11/01/0105/01/02-1.0%626
    Bond 7/5/0210/01/0211.20%696
    11/01/0205/01/0865.7%1154
    Bond 7/03/0810/01/083.30%1192
    11/01/0805/01/1040.6%1676
    Bond 7/09/1010/01/104.90%1758
    11/01/1005/01/1111.9%1967
    Bond 7/08/1110/01/1116%2282
    11/01/1105/01/1458.4%3615
    Bond 7/11/14 ?   
      CAGR14.13%
        
      Max Draw D-31.4%
      2008 - 09 

    Chart 1 shows the growth trajectory of the S&P500 using the MM model vs. Traditional "Sell in May" with MACD entry and exit filter **

    Chart 1

    (click to enlarge)

    Charts 2 and 3 show all return statistics when Market Map model identified years with: 1) favorable risk - 1st six months of the year, 2) neutral risk, and 3) high risk

    Chart 2 (click to enlarge)

    Chart 3

    (click to enlarge)

    * uses algorithm to identify long bond allocation opportunity in the 3rd quarter of years that the model allocate from equities to cash see seekingalpha.com/article/1779032-market-map-model-2-enhancing-returns-with-bonds

    ** forbestadvice.com/Money/Gurus/SyHarding/index.html

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