Fidelity Sector Rotational System Going to 66% Cash

Because the S&P 500 closed beneath the 50 day moving average, version 1 of the Fidelity Sector Fund Rotational System will be selling all funds that have met the minimum 30 day hold time. This means that FBIOX and FSHOX will be sold at today’s close. No other funds will replace them until the S&P 500 closes back above its 50 day moving average. One fund will continue to be held, FDCPX, because the minimum 30 day hold has not been satisfied.

For version 2, none of the 3 funds held have satisfied the 30 day hold requirement. Thus, none will be sold, even though the moving average filter has kicked in.

Look at the right side bar under Categories for more information on these Fidelity Rotational systems.

That’s the Bluestone River behind me.

Sorry to see that it was a rough day in the markets. I’m downloading my data on a super-duper slow connection via my wife’s cell phone router. Not much else to say until I can get some data and take a good look at things.

At least the fishing was decent!

We are taking the kids over to West Virginia this week to do some fishing and stay in a cabin. If we can get cell service, I’ll be able to do some blogging  and publish some market updates. If not, you’ll hear from me next weekend.

Just in case I am incommunicado, have a great week!

Yesterday SPY closed beneath the 20 day moving average. For most of 2012, SPY has traded above this average. Is there any edge to buying SPY on a close that crosses either below or above the 20 day average?

The Rules:

Buy SPY at the close if

• the close crosses below the 20 day moving average

OR

• the close crosses above the 20 day moving average

Sell at the close X days later. No commissions or slippage included. All SPY history used.

The Results:

Well, the average performance does not go into the red, so that is a good thing. As for any edge, there doesn’t seem to be much benefit to buying a cross (in either direction) of SPY and its 20 day moving average.

The setup doesn’t do much of anything for a couple of months (~40 trading days).

The reverse setup (buying a cross above the 20 day moving average) under-performs buy-n-hold over the same time period.

During a strongly trending market (such as all of 2012) the 20 day average works well, keeping one long to ride the trend. However, as the market consolidates or pulls back, trading around the 20 day average just whipsaws the trading account. If one could accurately determine when a new, strong trend had started, there would likely be an edge to being long when SPY is above the 20 day moving average.

My boy has just finished a baseball tournament (they won the championship) so I have been in the sun all day…Please forgive me if I make this short and to the point.

Version 1: 2.1.12 – 3.30.12

The top three Fidelity sector funds based on Version 1 ranking are FBIOX (Biotech), FSHOX (Construction and Housing), and FDCPX (Computers). Therefore, on Monday’s close, FSHCX will be sold and replaced with FDCPX.

Version 2: 2.1.12 – 3.30.12

The top three Fidelity sector funds based on Version 2 ranking are FSHOX, FDCPX, and FDFAX. Therefore, FDLSX and FDMPX will be sold on Monday’s close and replaced with FDCPX and FDFAX (Consumer Staples).

SPY was up 6.30% over the same time period.

Version 1 has 2 years of real-time, out-of-sample results. I started trading it in my own account on 2.1.12.

More information on version 1.

More information on version 2.

I tried to play the banjo for awhile. I quit before I mastered the Scruggs three-finger roll. Banjo is still my favorite bluegrass instrument, and no one played it better than Scruggs. I bet Bill Monroe is almost smiling up there and I know old Lester is ready to pick a few with his old friend.

Bluegrass Legend Earl Scruggs Has Died

http://www.youtube.com/watch?v=drHCosJWH0Q