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Marc Cohn
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I am a patent litigator with a background in physics and electronics. I enjoy studying quantitative, rules-based investment methods through rigorous backtesting and numerical analysis. I believe that patterns exist in the market that benefit trading -- the challenge is finding them!
  • Modified GMR Signal For June 2014: ILF (Again) 42 comments
    May 30, 2014 11:52 AM | about stocks: SSO, SPY, EEM, EPP, ILF, FEZ, EDV, TLT, SHY

    Today we will receive the June signal for my modified GMR system. Unless something extraordinary happens in the next 2 hours, the new signal will be ILF. This is a repeat of last month's signal.

    ILF did well in May for a while but it fell in the last week and it looks like we'll close with a tiny loss of around -0.6%. Win some, lose some. The overall performance of the system this year has been terrific at 13.6% as follows, compared to SPY year to date performance:

    MonthPositionTradeTotalvs. SPY
    JanuaryCASH0.00%0.00%-3.52%
    FebruarySSO9.06%9.06%0.86%
    MarchEDV1.93%11.17%1.70%
    AprilEDV2.94%14.44%2.41%
    MayILF-0.58%13.78%4.62%

    As of a few moments ago, the 3-month performances were:

    SSOFEZEEMILFEPPEDV
    7.10%4.59%7.90%11.38%6.69%9.66%

    Thus, today's signal is BUY ILF for June 2014.

    Cheers and good luck.

    Stocks: SSO, SPY, EEM, EPP, ILF, FEZ, EDV, TLT, SHY
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Comments (42)
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  • berry
    , contributor
    Comments (152) | Send Message
     
    As far as ranking order, your top three should match the GMR strategy for June also.
    30 May, 12:11 PM Reply Like
  • olmendreef
    , contributor
    Comments (14) | Send Message
     
    Ok, I'm in, while ILF is falling..., but I will try to keep my eyes shut till end of month :)
    Happy trading.
    PS: SSO/EDV correlation is 0.72 in my calculations
    30 May, 05:47 PM Reply Like
  • rolandus11
    , contributor
    Comments (3) | Send Message
     
    Marc, what I meant is that the MSCI Lat. Am. (or EEML) would be better fit for the MSCI Asia Pac. ex Jap. . And EEML (or Large Cap Em. Asia even a lot more) won in May. Is that not that worth a thought?
    30 May, 05:47 PM Reply Like
  • rolandus11
    , contributor
    Comments (3) | Send Message
     
    And if you take EEML as indicator (you can still invest in ILF) would you avoid the small loss in May, because then EPP a higher ROC value had late May.
    31 May, 11:59 AM Reply Like
  • TrickPony
    , contributor
    Comments (12) | Send Message
     
    Hello Marc,
    Do you have any data that would show how many times the monthly pick turned out to be the worst horse in the race?
    30 May, 06:05 PM Reply Like
  • leon817
    , contributor
    Comments (2) | Send Message
     
    Olmendreef, I have 0.75 for my SSO/EDV correlation.
    31 May, 05:55 AM Reply Like
  • scarecrow93
    , contributor
    Comments (3) | Send Message
     
    Hi Marc-
    Awesome system! Just want to make sure my spreadsheet I was tinkering with last week works. I have -.594 for the latest correlation number. My %'s are a few tenths/hundredths off but can probably chalk that up to the last 2 hours of trading.
    Good job and thanks again!
    31 May, 06:07 AM Reply Like
  • Marc Cohn
    , contributor
    Comments (85) | Send Message
     
    Author’s reply » your correlation number is correct. It's not 0.75 it's -0.59.
    31 May, 06:48 AM Reply Like
  • Aurelia0001
    , contributor
    Comments (7) | Send Message
     
    Hi Marc, are you using historical prices here for calculating the correlation, based on http://yhoo.it/1rtZlXJ and http://yhoo.it/1rtZn1M? With the current prices I get -.423 for the SSO/EDV correlation, based on the 4-month correlation of the (natural log) performance of SSO and EDV....
    Thank you!
    31 May, 11:38 AM Reply Like
  • olmendreef
    , contributor
    Comments (14) | Send Message
     
    Hi Scarecrow,
    Would you mind sending me your excel table. I can't figure out how to replicate these calculations.
    Thanks
    xpottier@yahoo.com
    5 Jun, 02:47 PM Reply Like
  • Marc Cohn
    , contributor
    Comments (85) | Send Message
     
    Author’s reply » yes but make sure it's dividend-adjusted.
    31 May, 06:45 PM Reply Like
  • Aurelia0001
    , contributor
    Comments (7) | Send Message
     
    My apologies, I stand corrected: for the month of February I was using non-adjusted prices!
    1 Jun, 07:08 AM Reply Like
  • wcmaria
    , contributor
    Comments (3) | Send Message
     
    Hi Mark, thanks for the update as I appreciate confirming my ranking every month.

     

    One question I have is regarding how you are calculating them monthly return as quoted for ILF last month.

     

    I am using the adjusted close price for ILF which has a April Closing price of 37.89 and a May closing price of 37.43. Total loss of 0.46 cents. That is a loss of 1.21% from April closing price. This is greater than the 0.6% you calculated and I was wondering if that was because you were using the price about 2 hours before the close or are my calculations incorrect.

     

    Thanks
    2 Jun, 02:27 PM Reply Like
  • Marc Cohn
    , contributor
    Comments (85) | Send Message
     
    Author’s reply » Yes, I used price before close in my post... because it was before the close. ;-)
    2 Jun, 02:42 PM Reply Like
  • Hank Pong
    , contributor
    Comments (7) | Send Message
     
    great work, Marc,thanks for posting
    2 Jun, 10:40 PM Reply Like
  • rmpalpha
    , contributor
    Comments (44) | Send Message
     
    Re: cash filter: If I use (SSO*0.75)/(EDV*0.25) >0.75 goto cash, I get goto cash every month, so I obviously am using the incorrect formula. What is the correct formula for the cash filter?

     

    PBrowse
    3 Jun, 10:16 AM Reply Like
  • Marc Cohn
    , contributor
    Comments (85) | Send Message
     
    Author’s reply » It's a correlation, not a ratio.
    3 Jun, 12:36 PM Reply Like
  • rmpalpha
    , contributor
    Comments (44) | Send Message
     
    Hi, Marc,

     

    << It's a correlation, not a ratio.>>

     

    I'm not sure I understand the difference.

     

    But regardless of the terminology, I am attempting to create a spreadsheet to try to replicate and apply your strategy, and my math apparently is incorrect. What is the formula to determine the correlation, and what is the criteria to judge the result of the formula to determine whether to go to cash?

     

    From reading the above posts, I may not be the only one who does not understand. Olmendreef and leon817 each calculated the correlation to be 0.72 (which appears to be a simple SSO/EDV), but you state above that the correct correlation is 0.59. Please explain again in detail the method to calculate and interpret the correlation.

     

    Thanks.

     

    Pbrowse

     

    Pbrowse
    4 Jun, 09:42 AM Reply Like
  • redrocker7
    , contributor
    Comments (11) | Send Message
     
    I've tried using the free correlation calculators offered online (I do not have excel) by inputting the 8 div-adjusted monthly closings for sso and edv, but have so far not come up with correct correlation figures. ...Are such correlation calculators usable in this application ?
    8 Jun, 09:36 AM Reply Like
  • Marc Cohn
    , contributor
    Comments (85) | Send Message
     
    Author’s reply » It is a Pearson product correlation, which you can look up on Wikipedia and calculate by hand.
    8 Jun, 10:06 AM Reply Like
  • redrocker7
    , contributor
    Comments (11) | Send Message
     
    Thanks very much.
    8 Jun, 10:31 AM Reply Like
  • redrocker7
    , contributor
    Comments (11) | Send Message
     
    Thanks Marc, took a while, but finally nailed the calculation (very math challenged, a minority here on SA :) but I was impressed by your avoidance of most of Jan's downturn and I'm determined to follow. Thanks for the outstanding concepts you've shared with us.
    8 Jun, 01:18 PM Reply Like
  • olmendreef
    , contributor
    Comments (14) | Send Message
     
    Hi Redrocker7,
    would you mind sending me your excel table?
    thanks a lot.
    xpottier@yahoo.com
    8 Jun, 01:28 PM Reply Like
  • rmpalpha
    , contributor
    Comments (44) | Send Message
     
    Hi, Marc,

     

    I checked "Pearson Product-Moment Correlation" on Wikipedia – Wow: 15-printed pages of formulae!

     

    Not being a math wiz, I instead used two online calculators and the Excel "correl" function. All three gave essentially the same results for the same input data; however, I was not able to duplicate the value of 0.59 for the correlation of SSO/EDV on May 30th. Presumably, my input data sets were different (I downloaded Yahoo Finance Adjusted Daily and Monthly closing prices for various lookback periods). Please describe the data set that was used to obtain the SSO/EDV correlation of 0.59 on May 30th.

     

    Thank you.
    9 Jun, 10:20 AM Reply Like
  • In&Out
    , contributor
    Comments (55) | Send Message
     
    Would the work you do help my decision.. would like your opinion should I sell SSO Puts expiring June 27th..I'm looking for a downturn of this endless up surge of the S&P 500 sooner rather than later...like this week! I would like to see a dip to near 1940? Or should I just suck up a 50% loss and sell this position? Strange market going up with little or no reason..other than Q-e money..and the politics of "good times"....so don't vote the dems out.
    8 Jun, 04:07 PM Reply Like
  • olmendreef
    , contributor
    Comments (14) | Send Message
     
    Hi Marc,
    in the GMR Enhanced strategy from Mr Grossmann he uses a 2 week period for re-evaluation. Even though the assets are more limited than the GMR strategy (and your variant) and the fact that ZIV dictates the need to review every two weeks, I wonder how the GMRE/your version would perform if you would re-evaluate every two weeks. Is one month the tested and proven best investment period?
    Best regards.
    13 Jun, 03:58 PM Reply Like
  • zydecosailuh
    , contributor
    Comments (17) | Send Message
     
    fyi .... Frank's GMRE is GMRS w/ZIV and is monthly It's his Max Yld Rotation Strat that is bimonthly, and uses MDY, EDV, ZIV & SHY.
    Appreciate this site greatly, and everyone's input.
    Larry
    17 Jun, 05:18 PM Reply Like
  • rmpalpha
    , contributor
    Comments (44) | Send Message
     
    redrocker 7:

     

    "Thanks Marc, took a while, but finally nailed the calculation"

     

    I and several others still are unable to do so. Please advise in detail how you did it.
    13 Jun, 04:23 PM Reply Like
  • redrocker7
    , contributor
    Comments (11) | Send Message
     
    Find the 8 end of month div. adjusted historical prices for sso/ edv for the 4 month period desired and calculate each percentage gain/loss. Enter percentages into correlation calculator (I use pearsoncorrelation.com).
    13 Jun, 08:05 PM Reply Like
  • rmpalpha
    , contributor
    Comments (44) | Send Message
     
    Thank you, redrocker 7.

     

    However, when I apply those instructions for 12/31/13 (to derive the cash signal for January 2014), I get the following:

     

    DivAdjPrices %GainLoss/Mo
    SSO EDV SSO EDV
    8/30/2013 79.39 92.62
    9/30/2013 84.54 92.24 6.49% -0.41%
    10/31/2013 99.21 93.98 17.35% 1.89%
    11/29/2013 97.53 89.88 -1.69% -4.36%
    12/31/2013 102.53 88.07 5.13% -2.01%

     

    Correlation per Excel 97%
    Correlation per Pearsoncorrelation.com 97%

     

    Mr. Cohen stated that his correlation for that signal was 59%, not 97%. I still am doing something wrong. If you got 59%, please advise what you did different from the above.
    14 Jun, 12:05 PM Reply Like
  • scarecrow93
    , contributor
    Comments (3) | Send Message
     
    Rmpalpha,

     

    You are using the wrong period to try to match the -.59 for the current signal. You need to end of month for the 4 previous months - Jan, Feb (1st monthly perf), Mar (2nd monthly perf), Apr (3rd monthly perf) and May (4th monthly perf).

     

    Make sure you are using the dividend adjusted numbers.
    14 Jun, 12:53 PM Reply Like
  • redrocker7
    , contributor
    Comments (11) | Send Message
     
    8/30--9/30 79.39 and 84.54
    9/30--10/31 84.54 and 92.21 ----- sso
    10/31--11/29 92.21 and 97.53
    11/29--12/31 97.53 and 102.53

     

    8/30--9/30 92.62 and 92.24
    9/30--10/31 92.24 and 93.98 ----- edv
    10/31--11/29 93.98 and 89.88
    11/29--12/31 89.88 and 88.07

     

    Calculate each percent loss/gain, use correlation calculator....if greater than .75, cash signal.
    14 Jun, 01:06 PM Reply Like
  • rmpalpha
    , contributor
    Comments (44) | Send Message
     
    Thank you, scarecrow93 and redrocker7. Using your above guidance I now am able to essentially duplicate Marc's tabulation at the beginning of this Post.

     

    I have one question, however. Mr. Cohen and Mr. Grossman both use 3-mo. look-back periods when evaluating the equity ROC's; but Mr. Cohen uses a 4-mo. look-back period when evaluating the cash signal correlation. It seems like all the look-back periods should be the same, but -- whatever works best, works best, I guess.
    16 Jun, 04:13 PM Reply Like
  • tmdoherty
    , contributor
    Comments (46) | Send Message
     
    Thanks much for the clarification. I can replicate Cohn's calculations now. Since 1/29/08 (when EDV began), the correlation in 4-month returns using end of month dividend-adjusted prices has been > 0.75 only twice: once at the end of December 2008, and once at the end of December 2013. In each case, the correlations at the end of the 2 prior months were positive, so there was some warning. And BTW, at the end of last month (May), the correlation was +0.538. So this bears watching when the next signal arises at the end of this month.
    17 Jun, 05:43 PM Reply Like
  • tmdoherty
    , contributor
    Comments (46) | Send Message
     
    Hi Marc,

     

    Outstanding work, thanks very much. Two questions:

     

    1) Have you tried to apply this to the Minor Markets listed on Vector Grader as well? (I realize there is some overlap there between the major and minor markets)

     

    2) Have you tested a strategy that selects, say, the top two ETFs (so you are either in two ETFs or cash/SHY)?
    13 Jun, 07:46 PM Reply Like
  • IndyDoc1
    , contributor
    Comments (105) | Send Message
     
    It looks like VWO is going to be the winner for July
    28 Jun, 05:23 PM Reply Like
  • berry
    , contributor
    Comments (152) | Send Message
     
    VWO?

     

    Do you mean SSO?

     

    Or am I talking the wrong strategy?
    28 Jun, 06:16 PM Reply Like
  • IndyDoc1
    , contributor
    Comments (105) | Send Message
     
    My bad. You are correct. The winner is SSO
    29 Jun, 11:52 AM Reply Like
  • berry
    , contributor
    Comments (152) | Send Message
     
    Looks like you're tracking another strategy you haven't told us about?
    ;)
    29 Jun, 01:14 PM Reply Like
  • tmdoherty
    , contributor
    Comments (46) | Send Message
     
    According to my spreadsheet, the rankings at the moment are:

     

    SSO: 10.04%
    EDV: 5.80%
    EEM: 5.71%
    ILF: 5.11%
    EPP: 3.41%
    FEZ: 1.52%

     

    So unless the markets crash on Monday, SSO will be the ETF for July.

     

    Does everybody who is following this strategy have the same or similar numbers?
    29 Jun, 02:24 AM Reply Like
  • tmdoherty
    , contributor
    Comments (46) | Send Message
     
    Also: I calculate the correlation coefficient between the % differences in monthly returns for SSO and EDV over the past 4 months at R = -0.14.

     

    So we are nowhere near a signal to go to cash.
    29 Jun, 03:41 PM Reply Like
  • zydecosailuh
    , contributor
    Comments (17) | Send Message
     
    Thanks Marc,
    any chance you could add the rankings for for all etf's tracked
    each month?
    30 Jun, 12:21 PM Reply Like
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