Organ Practice
As pointed out in the Bullish Percent Indicator blog post earlier this morning, five of the eleven sectors are over-sold. I’ve selected the Gauss to show how I plan to implement this information after the market opens Monday morning. Next week I plan to check up on the other three Sector BPI portfolios as they also need attention as a result of the latest BPI data.
Gauss Sector Recommendations
Below is the current holdings in the Gauss portfolio. As Bob W. mentioned in a Comment, we should have waited a bit longer before moving into sectors that had yet to penetrate the 30% bullish line.
As of Friday, March 10th, the three sectors are down this much.
- Energy (VDE) down 2.1%
- Health (VHT) down 2.9%
- Utilities (VPU) down 2.9%
Utilities was over-sold for a number of weeks. A loss of 2.9% is less than the 5.3% loss experienced by ESGV.
It is important to explain the third column from the left. The Strategic or Max AA percentages are calculated by multiplying 0.70 x three-year volatility average. I adjust the coefficient (0.70) so the maximum percentage in a given sector is no higher than 25%. Should there come a time when nearly all the sectors are flagging a Buy signal I will lower the coefficient so the portfolio is split up across more sectors. This will become clearer when the situation arises. We have yet to encounter this situation.
Gauss Percentage Adjustments
One of the reasons for this blog post is to explain how the Gauss Sector BPI portfolio is managed. To have cash available to purchase the required shares of VDE, VFH, VHT, VAW, and VPU I will sell all shares of SCHP.
- Energy “requires” 25% so I’ll pick up another 175 shares.
- Financials needs 255 shares to reach the 17% mark.
- Health needs another 50 shares to reach the 13% level.
- Materials needs 125 shares to reach the 18% level.
- Utilities is currently fully populated.
Gauss Performance Data
Despite the recent losses the Gauss continues to outperform the AOA benchmark as well as the other five potential benchmarks. When last reviewed the Gauss was dead even with AOA so the portfolio picked up a bit of ground over the last week.
Gauss Risk Ratios
Short-term interest rates dropped and that helped the Sortino gain a slight edge over the February reading. Improvement also showed up in the Jensen Alpha and Information Ratio. This is the good news.
The slope of the Jensen is still quite negative (-1.3) and it will likely take several months before we see this trend turn positive.
If readers have questions, post them in the Comment section provided below.
ITA Wealth Management is now free to all readers who register as a Guest.
Discover more from ITA Wealth Management
Subscribe to get the latest posts sent to your email.
Orders for VDE, VFH, VHT, VAW, and VPU (if necessary) were either filled or are close to filling. This was accomplished for both the Gauss and Carson. Now we wait for these sector ETFs to move up to the over-bought zone. It may be months before this occurs.
Later this week I’ll update the Franklin and Millikan, the other two Sector BPI portfolios.
Lowell