As we gaze into the crystal ball in search of the market's next move this seemed like a good time to review how the XLF model is performing...relative to both the XLF and SPY benchmarks..
For now the SPY TrendX is downslope...confirmed by this morning breakdown... and virtually all models, including XLF remain in CASH following the P6 slope...which is also down.
From a portfolio maintenance perspective the commission costs in sustaining this approach are difficult to justify...unless the portfolio size is several hundred thousand $..
The upper matrix is shown with a top 6 sort, the bottom matrix with a top 2 sort. Both apply to the XLF component model so our goal is simply to show the relative performance of using greater than a top 2 sort.
You can obviously play around with other top# sorts...these are just a couple examples. In most cases a top 2 sort generates the optimum return....you just have to pay attention to the consequent drawdown and skew values and act accordingly....as noted below.
In the situation below, with SPY as the benchmark, the argument for adopting a T2 strategy makes a lot more sense...although it must be noted that the volatility (skew) of the model is considerably greater than the blended SPY and to protect against possible drawdowns the money management stops...especially the P6 slope indicator...must be rigorously enforced.
