Sunday, November 01, 2009

SigmaStock & SigmaSeek October Performance

SigmaStock ended the month up 1.67% after a wild final week in the equity markets. On Oct 15 I mentioned that risk was high according to the risk assessment models that I've been following. The month started out very strong as equities advanced and SigmaStock reached as high as a 9% return for the month before faltering. The model is showing a chance for a reversal coming up fairly soon across almost all markets if it isn't short already.

SigmaSeek ended the month up 21.5%. Like SigmaStock, the month started strong and faded towards the end. Positions in gold, silver, and currencies drove returns this month. The "risk rally" in anything not bonds has continued with the (Non) Federal Reserve's debt monetization scheme. Although it has indicated that it is done with its Treasury monetization, it still has hundreds of billions of agency (Fannie Mae & Freddie Mac) mortgage backed securities it can still purchase. This monetization along with very lax underwriting on agency mortgages are causing a mini-bubble in housing prices. If you own a house, it might be a good idea to consider selling it into the wave of first time homebuyer hysteria. But I digress. Returns in the future will be driven by fear and greed as they always have rather than what I think. Overall, the underlying trends are a mixed bag. Typically, when trends occur they tend to be correlated unless it is due to a supply or demand shock. I expect to be adding significantly more money to this trading program over the next few months, particularly during drawdowns. Further, I have dialed down the risk since June so going forward, I expect to see a bit less volatility. I have found out what my risk tolerance is through the school of hard knocks.

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