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« How to Profit from the Obama Stocks | Main | Summer Quiz »

June 14, 2009

Comments

oldprof

Daniel -- Thanks for your very thoughtful comment. We are also working on these themes, always trying to improve methods.

I have done some analysis about performance by ranking. There is a good correlation, but we need to focus more on the question you raise.

I hope you will keep commenting, and we will share our results.

Jeff

Daniel

Vince, Jeff, love your sector-rotation system. I found this enjoyable ETF blog several months ago. Since then I’ve back-engineered most of the components and I find it entirely commendable.

Reminiscent of a nearly-identical system used in the 90s by Gerald Appel and his son Marvin MD, in their newsletter ‘Systems and Forecasts’, and in several of their open-end Limited Partnerships. (I was a subscriber for a decade; it’s possible they continued to use the methodology after I lost touch, I can't say.)

I hope you’re familiar with his work on the Sharpe-ratio adjusted superior returns from the second performance-decile, as opposed to the first or third--or have independently derived it in your own work. (Assuming that which was manifest in the 70s--90s is still typical this decade, in the short-intermediate timeframes your model is mining.)

What was striking was how often the second-decile stars seemed to dodge the worst of the short-term reversals that sometimes plagued the superstars of the first-decile.

Out of deference to your excellent model I shall refrain from shorting IYT on Monday, which I was planning to do, other omens falling favorably.

In addition to the obvious chart divergences on IYT versus its designated forechecker role on the hockey team (which landed it in my own version of your penalty box, when it egregiously violated Bollinger-Bands in early May), there is a vibe I have not liked about the trucking industry in particular, which I've picked up from a radio talk show called Midnight Truckers Radio, a mix of political talk, economics, and trucker-economics.

I'm a night owl in the Eastern Time Zone, so the first couple hours of this intelligent, targeted-audience show is something I’ll occasionally listen to while having a late snack or break. Good interviews, and truckers may or may not be above average in IQ, but they are certainly above average in terms of the time they can devote to developing Long-Chain-Thoughts, especially about the industry which provides their livelihood. As a result the caller-questions to the interview guests are also really intelligent.

Seems like much of the transport prosperity of the past few years was from lugging housing related materials. New types of nanopackaging are reducing the amount of packing-stuff around cargo-stuff. so gross tonnage is being techno squeezed. Other such interesting anecdotal straws in the wind... from a kind of ‘insider’ population. Seem to confirm the picture painted by the oscillator pointers...

..But I've noticed, in the months of studying your system, that ETFs are RARELY good shorts when they fresh-pop up into your sweet zones, regardless of their ultimate fate, another timeframe or two later down the road.

So I’ll refrain, and whatever the outcome, I thank you for the insight, which has helped to steady and guide my hand.

Like Mr. Appel, you guys seek to educate, as well as manage money.

Daniel

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