mindmoneymarkets

Gold/ Futures Divergence

Interesting divergence between S&P 500 futs and gold today: 

Interesting times. With the Swiss franc and Yen seemingly off limit due to the thread of central bank intervention, it looks like gold could cement its place as the go to safe haven. 

Equity curve surfing & other filters

Following my last post on the struggles the DVB indicator is having, a reader reminded me of this excellent post Jeff Pietsch's market rewind blog. 

Worth a read certainly. The main highlights from this post for me are these three suggestions: 

1. Know what environment you are trading in (reverting/ trending).

2. Trading methods themselves revert (addition by David V.).

3. Track your methodology's equity curve like it was a stock.

In the context of the current market, I thought it would be a good idea to put some flesh on these ideas applied to the DVB Indicator. 

When does oversold become a sell signal?

My favourite short term indicator the DVB is not having a happy time of it, doggedly signalling long, but the market has been stubbornly refusing to listen.

Trading the indicator via the basic method of long below 0.5 and short above 0.5 is still up 6.14% for the last 250 days on the SPY, as the equity curve below shows, it has fallen from grace somewhat.

Is it just the time of year?

As European politicans cut short their grande vancances to attend to the latest crisis, it's worth having another look how the Halloween effect is once again playing out. 

The theory is that markets perform best between November and May and this has certainly been the case going back to 1990 on the S&P 500. 

The chart below shows three investment strategies: 

1. Buy and hold the S&P 500.
2. Buy in the close in November, sell the close in May. Cash inbetweem return of 3% PA average. 
3. Buy the close in June sell in October. Cash inbetween return of 3% PA. 

Nov-May does give you more months in the market, but they do seem to be the right months. Food for thought...

What the crash says about the UK pension apartheid

For me, the recent market shakeup has highlighted the growing pension apartheid in this country. There is a clear division between…

1)      The pension haves (final salary pensions usually public sector) and

2)      The have nots (everyone else on defined benefit/ personal pension).

I won’t go into the politics of it all here, but following the recent turmoil, George Osbourne might find he is in a stronger negotiating position going into the next round of public sector pension negotiations.

As companies and governments close off their final salary schemes, there will be more people shunted onto defined contribution type plans which depend not on the number of years of your service/ final salary, but on the performance of your investments in the long run.

There are many problems with this:

Dow Losing Run - Quick Stats

The Dow is on course of its 7th losing day.

Going back to 1990 there have been just five seven day losing runs and just two eight day losing runs (October 2008 and September 2001). 

Average returns following a 7 day run are skewed by the 11% return on the 13th of October 2008 following the last 8 day run.