
Sunset in the Mountains, Drakensberg, South Africa
The markets took a breather this week. Although US equities remain well within their upward channel there was a pullback from near the top of the channel to the center:
If prices continue the pullback we are likely to see support at ~417 that has been an area of strong support/resistance in the past.
This week’s drop in US equities was ~1.5% but, since no major asset classes generated a positive return, this was not too bad on a relative basis.
Current holdings in the Rutherford Portfolio look like this:
and performance like this:
We are still managing to stay slightly ahead of the benchmark – but last week’s acquisition of a small position in PCY didn’t exactly turn out all that well 🙂 – but we’ll wait and see.
Lets check rankings and recommendations from the BHS model:
Still nothing … and a bit of red creeping into the short-term signals. So, let’s take a look at the rotation graphs:
where we only see VTI really shooting into that top right quadrant – although VNQ is also making an attempt. Is this being reflected in the new algorithm that I’ve been looking at? – let’s check:
Yes, they’re both there, together with PCY and the benchmark AOR. So, I’ll continue to follow these recommendations as shown in the following screenshot:
i.e. I’ll sell my holdings in TLT in Tranche 5 (the focus of this week’s review) and, together with the existing Cash, I’ll use the proceeds to buy shares in AOR, VTI, VNQ and (more) PCY – glutton for punishment.
I have been running manual backtests on the new model for the past 3-4 weeks (very laborious job) and I hope to finish them in the next few days at least to the point that I can post some results. However, don’t get too excited – as with other rotation models that I’ve looked at, performance doesn’t look all that great over the longer term – although there are market conditions where it works better than the other models. I think I may have to add another filter and consider how many assets to select per review (without (over)fitting the data) – but that sets me back another month or two to backtest – and I have other things that I would rather be doing 🙂 . But look out for some preliminary results in the next week.
David
David Depending on your personality type, backtesting could be VERY BORING! I’m glad you are doing the chore and not me. Very much looking forward and the fruits of your labor.
Thanks many times over. John