Developments This Week And Friday’s Game Plan

As clients know, hard data is used to make both buy and sell decisions. Since many of the model’s inputs come from weekly charts, we check all our positions versus the hard data at the end of each week.

Last week our two weakest positions printed scores of 74 and 79. A score of 74 tells us that 74% of the data was saying “bullish” at the end of last week. It is quite common for a score to drop into the 70s during a bullish “leave it alone” uptrend. Said another way, it is common for scores to drop into the 70s during normal pullbacks (a countertrend move).

Why do we check scores at the end of each week?

1. Our models use numerous weekly inputs. Weekly charts use one data point per week (the closing price Friday at 4 pm). When we backtest weekly charts, the data has no idea what happened between Monday and Thursday. Experience also tells us that a very ugly looking weekly chart between Monday and Thursday can look radically different after Friday’s session.
2. Under our approach, backtesting tells us the best outcomes occur when checking data at the end of the week, versus making adjustments based on intro week moves.

Last week, every position’s hard data said: “hold the position”. This Friday, we will once again check all of our positions versus a full week of data, just as we did last week.

Can the model ever make a move during the week? Yes, under certain circumstances incremental shifts can be made between Monday and Friday. For example, based on the deterioration in the data since last Friday, we made incremental reductions to some positions this week in select accounts (not all accounts).

We have what the market considers to be the most important economic report coming Friday morning, which means the data we have today may look significantly different Friday at 4:00 pm ET. The data may look better or it may look worse.

One of the weaker asset classes in our portfolios scored favorably on 81% of the questions relative to hard data last Friday. Today, the number is lower. If the facts require action at the end of the week, we will take action. No one knows what the weekly charts will look like after the payroll report.