95% of my portfolio is run by my Medium-long term model. This model was developed back in my hedge fund days.
- Medium-long term model. This predicts bull markets, bear markets, “significant corrections” within bull markets, and “big rallies” within bull markets. Click here for the model’s historical BUY and SELL signals.
The other 5% of my portfolio is run by my Day Trading Model. I built and trade this Day Trading Model purely for fun. They say that a “good” day trader averages 15% per year. Can I beat that? Let’s find out.
The medium-long term model
This model predicts:
- Rallies in bull markets. We call these “big rallies”.
- Significant corrections in bull markets. We call these “significant corrections”.
- Bear markets and bull markets.
Following the model to the letter will maximize long term investment performance.
Go 100% long UPRO (3x ETF for the S&P 500) when the model states that the S&P is in a rally in a bull market right now. Shift to 100% cash when the model predicts a significant correction or bear market. Go back to 100% long when the model says that the significant correction or bear market has bottomed.
The model has a 100% accuracy rate for predicting bull and bear markets. It has only failed to predict 3 significant corrections in the past 67 years. The market made a significant correction every time our model predicted one. Sometimes the significant correction began several months after our model predicted one, but the market always fell below our SELL price.
Our medium-long term model has yielded an average annual return of 45% since 1950. Keep in mind that our model does not “fit” the data. Instead, we implement a wide margin of error and utilize back up indicators in case our model is wrong.
Why does the medium-long term model not predict “small corrections” and “small rallies”? Because historically speaking, “small corrections” (6%+ corrections) are impossible to consistently and accurately predict. Many “small corrections” are random and happen for no fundamental/technical reason at all.
Since the model does not predict small corrections, my portfolio will sit through large drawdowns from time to time (i.e. a 7% decline in the S&P is approximately a 20% decline in UPRO). This is inevitable. It is not possible to average 45% per annum without occasional large drawdowns. I am investing to make money, not to minimize my portfolio’s volatility.
The medium-long term model today
Our medium-long term model states that the S&P 500 is in a “big rally” within a bull market right now.
Our model produces a value between 0 and 100.
- When the model hits 100, the model predicts a significant correction or a bear market.
- Anywhere else between 0 and 100 means that the S&P 500 is in a “big rally” within a bull market right now.
- The closer the value gets to 100, the closer the model gets to predicting a significant correction or bear market.
Our model’s value is 53 as of January 12, 2018. This is down from 54 last Friday. The model is updated daily. We post the model’s value here once every week.
Click here for the model’s historical BUY and SELL signals.
My short term discretionary outlook
I share my predictions on the short term direction of the market. This discretionary outlook has no direct impact on my investing/trading. Every once in a while, my discretionary outlook will help me improve the Medium-Long Term Model. Analyzing the market each day from a discretionary perspective is an interesting and fun excercise.
Go to the homepage for my latest market outlook.