Saturday, January 30, 2016

Bullish on Financials?....01.30.16

Barron's likes the financials this week and they have been beaten down for a while so maybe there's hope at the end tunnel.  We'll put this into Mosaic context and look at XLF. the SPYDR sector financials ETF and its top 10 holdings, which are not all banks, but they do dominate the % makeup of XLF.  For our first look we'll turn on the 4 day pullback based mean reversion filter so we basically buy the short term lows (hopefully).  And we'll use our default .7% limit stop....which has been the historical median for the past 2 years although since mid December that value is 1.0+ and varies somewhat among the issues.
All things considered M11 did a respectable job over the past 2 years keeping equity linearity high while significantly mitigating drawdowns.  Note that the ALERT is now bullish.
For now the mean reversion strategy is working best but if the XLF components do start to run then switching to the momentum or short term momentum model may offer larger returns.
We'll check in on the model monthly to track how its doing.