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A Timing System Based On Liquidity

Dec. 31, 2013 12:50 PM ETXLF42 Comments
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I want to maintain a public record of timing calls for the market. I will provide sell and buy signals ahead of time. I will keep track of the system's performance using 3.59 p.m. closing prices, except for buying TWM, which I will quote as the close at the minute that the Russell 2000 hits a level where TWM should be bought or sold.

The aggressive system (system 1) will buy IWM, TWM, TLT or be in the money market (when it starts to pay a lot more interest, which may not be in my remaining lifetime).

System 2 will not buy TWM, and will on occasion buy PTY as well as IWM. When not in those, it buys TLT or goes into the money market.

Buy and sell signals are infrequent except for TWM, after an intial buy TWM signal occurs.

System 1 has been 75% in IWM and 25% in PTY since 12/7/2012. System 2 has been 100% in IWM since 12/7/12 also. Hindsight is great, isn't it? So that's why I will only track the system from the next sell signal, which could be some time away.

Today is 12/30/13. XLF is priced at 21.76. If XLF drops (at any time during the day) below 20.09 on 12/31, below 20.15 on 1/2/13, 20.22 on 1/3, or below 20.38 thereafter, IWM and PTY will be sold near the end of the day. I will go for 3.55 p.m.; so there is time to buy other stuff. These securities are also sold if the Russell 2000 drops (at any time during the day) below1065.81 on 12/31, below 1076.49 on 1/2/13, below 1077.69 on 1/3, or below 1079.08 thereafter.

If the sells are hit (which is unlikely for a while), system 2 will buy TLT just before the close (100% of the portfolio). System 1 will put 75% of the portfolio into TLT, and put 25% into TWM if the Russell 2000 is below 1099.67. It is possible to get a sell signal from XLF, without the Russell 2000 being below 1099.67. In that case keep 25% of the portfolio in cash, until the Russell 2000 signals a buy on TWM. We will use the 3.59 pm closing price to track the initial purchase of TWM.

Disclosure: I am long IWM, PTY, REM, NLY, AMJ.

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