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 6, 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: Bought CVS Caremark (CVS) 29.79.

Major movements (+ or - one point or more among holdings): None.

Against the background of yesterday’s exceptionally strong session and the October unemployment rate announced today increasing to 10.2%, it was nice to see the market close the decidedly positive week with a relatively tranquil session for this portfolio model, the most popular averages (Dow Industrial +17.46, S&P 500 +2.67, Nasdaq Composite +7.12) and broadly based measures.

Last week was uniformly positive with this portfolio model and the three most popular averages (Dow Industrial, S&P 500, Nasdaq Composite) as well as broadly based measures posting gains a bit over 3%.  It was also uniform when stocks are grouped by quality rankings.

When the market is viewed week by week, sometimes (certainly not always) uniform movements across several different measures tilt probabilities to favor a reversal the early portion of the following week.  No such data this time, in fact probabilities of net directional movement going into next week are almost exactly 50/50.

It is helpful to keep in mind that we are into a massive combined monetary infusion cycle; created/defined by legislated and Federal Reserve economic stimulus actions.

So far, this cycle has conformed to norms; including the explosive up move off the March low and subsequent advance.  At this juncture (since the September 17 inflection point) probabilities favor a temporary period of meandering pricing patterns with an increase in volatility as has occurred.    

This portfolio sold a position yesterday and entered today intent on replacing it with another to expand diversity. As noted above/below, CVS Caremark (CVS) was selected based on possible relative discounting.
It is this portfolio’s first experience with the issue, time will tell the outcome.

Today’s purchase utilized only a portion of established cash reserve.  As such, this portfolio will be entering next week in a flexible mode (cash to facilitate purchase and inventory to sell). However, when trading resumes Monday, this portfolio has no indication to be attuned to changing positions.  It will likely wait for a volatile session and then shift a position later in the week. 

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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 $1,209,040.29, gain 132.45%.

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

$1,149,532.00 (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	+132%
S&P 500	+105%