Robert Drach's "Basic Timing" Model Portfolio
Bob Drach publishes his daily commentary and display portfolio to illustrate the "market timing" method of investing. (To learn more about Bob Drach, read this short biography.)Drach's Daily Commentary
November 12, 2009
Basic Timing
Daily commentary, current portfolio structure and history follow.
Please direct questions and comments to:
Drach Market Research
2910 Kerry Forest Parkway D4-210
Tallahassee FL 32309
Tel.: (850) 576-2680
E-Mail: DrachMkt@aol.com
Model Portfolio Position Changes: None.
Major movements (+ or - one point or more among holdings): None.
With the Dow Industrial having advanced seven of the previous eight sessions (net gain 578 points), some pullback was due.
Today’s decline among popular averages (Dow Industrial -93.97, S&P 500 -11.27, Nasdaq Composite -17.88) and this portfolio model was well within technical norms. Broadly based measures were proportionally weak with the number of declining issues abut 3:1 vs. advancing.
When broadly based measures are proportionately weak, there is often an associated probability of directional follow through the next day. Not so this time. Probabilities associated with tomorrow’s directional move are almost exactly 50/50.
This cycle continues to follow norms. The Dow is now 3,650 points (56%) above the cyclical low set March 9. The magnitude of this gain over such a brief time period would be abnormal for a standard cycle, but this is a combined monetary infusion cycle; created/defined by massive Federal Reserve + legislated economic stimulus actions.
The enactment of the American Recovery and Reinvestment Act on February 17 made it statistically clear we are into the largest combined infusion cycle in history by both amounts and variety of stimulus actions.
Via precedent, these cycles have exhibited an initial stage involving an explosive advance off the cyclical low. Then, a relatively brief stage characterized by a continuation of advance at a more moderate pace. Both of these stages have occurred as anticipated by precedent.
The current stage initiated September 17 and involves stabilization of internal pricing relationships which are a mess from the recession turmoil. As such, should precedent continue to prevail, this stage will be lengthy, lasting well into next year. Gyrations (both directions) are to be anticipated with a positive resolve when the stage concludes.
This portfolio had been waiting for weakness late this week before being attuned to doing anything. Today’s decline perked attention and it is likely a portion (or all) of established cash reserve will be applied to buying tomorrow (Friday).-----
Portfolio model initiated 5/5/95, archived and marked to market daily.
Initial S&P 500 level 520.12, initial portfolio value $520,120.00
Current portfolio value $1,216,96, gain 133.98%.
These results are reflective as to capital capture and market price of current holdings, itemized below. They do not include cash dividends, interest earned on cash balances, transaction costs, or anything else.
Current Stock vs. Cash Allocation
$1,157,455.13 (95%) stock. $59,508.29 (5%) cash equivalents.
Summary of Closed Positions
| Total Positions | 401 | Average Position | |
| Profit | 360 (89.78%) | Percentage | + 7.26% |
| Loss | 41 (10.22%) | Days Held | 205 |
| Even | 0 ( 0.00%) | Annualized | + 12.93% |
Relative performance vs. S&P 500 since initiation (5/5/95)
| This Portfolio Model | +133% |
| S&P 500 | +109% |
