Wednesday, July 25, 2012

A 100% SPY Mosaic - Not Recommended

This is a little study to see how much risk management the Mosaic RM filter produces.  Note that in this case the entire Mosaic portfolio is just 1 ETF ...SPY... 100%, so Mosaic=SPY.  The Max Drawdown #s are the focus of my attention and it reveals that the RM filter cuts drawdown essentially in half throughout the 4 year exam period.  Also note the downtrend of the SpreadX and TrendX signal for the SPY and the NAV chart.  Alert readers will notice that if we had sold SPY when the SpreadX & TrendX crossed down through the zero line around 4/9 and stayed in cash until 6/15 when the zero line was crossed to the upside we could have avoided a $4.90/share drawdown in the SPY.  Although not designed to forecast SPY or other market indices, this little XX signal may have some unintended usefulness and we'll publish a snapshot of this signal along with the weekend update.