Market and Sector Outlook: An Update on the TCA System

At "A Dash" we believe in the importance of developing strong methods and sticking with them.  Since any method will seem "streaky" to those using it, knowing what to expect is important.

To foster this understanding we have been making public our vote in the Ticker Sense Blogger Sentiment Poll, which moved back to neutral this week.  The actual model signal is currently long on the NASDAQ and short the S&P 500.  We use this information in different ways according to the time frame of our investors, often reducing the long exposure from other positions.  The model signal reduced our volatility during August.  Unless one has actually traded through markets like this, it may be difficult to appreciate the calming effect of hedges.  It makes it so much easier to stick with one’s favored positions.

We explained the TCA model in this earlier illustration.

A New Position

The TCA model first identifies whether a sector is exhibiting trending or cyclical behavior.  Adding a bit of anticipation to both entries and exits, the model seeks to benefit from varying market conditions.

Here is an illustrative example, one of several recent signals, recommending the purchase of IBB, the IShares NASDAQ Biotechnology Index.

Amgen, Inc.,  the largest single holding, is a position we have in individual and institutional accounts from our fundamental analysis.  It is always nice when the technically-based model provides additional support.

Once again, we note that this trade is not for everyone.  It is a look at something we like, but investors must check suitability for themselves.  Find a tested method and stick with it.