Wednesday, February 3, 2016

Back to Basics with M3...02.03.16.

Continuing with our current theme of how to navigate this frothy market using the Mosaic tools here's one way to get a market edge.  We use the default M3 input settings SPY, SH and XLU in the momentum mode and then run the model in the top 1, 2 and 3 rankings to generate a comparative view of the current risk environment.
Clearly we have a lot of variation in the risk/reward outcomes but strictly from a linearity of both short and long term equity as well as drawdown perspectives the last strategy ...the all in all the time delta neutral model is worth serious consideration .  We do have to pay attention to the limit stops and, as always, using M1 to analyze each of the the 3 inputs will produce the best stop modeling.
Click once on each panel below to enlarge.