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Wednesday, November 16, 2016

System 12 Update. 11-2016

I am surprised to see how little changed Mega Dozen (MD) and Second Dozen (SD) have been over a past year or so.

This is MD:

This is SD:

FinViz link
Currently, only few stocks are Disqualified and really only one from MD ( T for sure and FB by a smidge), while half of MD+SD are Not Available... quite a predicament...

MD Control was recently re-balanced and updated. It remains remarkably correlated to S&P500 index. I continue to maintain it as a Motif for tracking and comparison:

This post will not update with recent activities (like I used to do). Instead, I set up a simulation at MarketWatch.  This whole 'virtual account' project turned out to be a major disappointment - I will write about all this in detail later. Meanwhile, this link will have all recent activities in (close to) market representation, but mostly for illustration purposes, rather than for record and comparison.
System 12 Game link
(MarketWatch virtual game started 11/9/2016 and expected to end on 12/30/2016)

This is System 12 AMD today:
with pending sell orders for GOOGL and PG;
with pending buy orders for GE and XOM;

S12 hasn't been fully loaded for-awhile, and it doesn't look like it will happen tomorrow, but I will leave it up to market to sort out. Large cap 'growth' stocks had been laggards on this Trump Stump rally, while 'value' group leads and making decisive new highs.. The whole market split into stocks that rallied like crazy and stocks that dropped like dead. S12 positions managed to side step most of carnage and keep some top performers, with overall results slightly north of zero since summer top. Simultaneously, portfolio suffered only trivial draw-down of about 2% (about $800) at the depths of Trump Slump, which is nothing to worry about and has already been recovered and exceeded.

System 12 Select - AO

This is one of the ideas I am actively working on right now.
Basic recipe is to take MD and upper portion of SD, rank it according to sales, then use Arnott Overlay (post link) to determine 12 stocks in an order of financial 'importance'.

Naturally, this list serves as a blue-print on 'what to buy in panic', in case a big and sudden collapse happens and one needs a good selection of major stocks in an order of importance, although it is not apparent at present time.
This Select group can be treated as a limited universe of stocks, to serve as basis for further selection based on Relative Strength (RS). The goal is to be invested into stocks exhibiting better price performance relative to S&P500 tracking ETF - SPY, and to stay away from laggards. Concomitantly, RS can be used to pick a minor bottom, but only with general guidelines of cycle analysis (I'm working out some kinks there) and within the framework of System 12 Method.

Because selection process is inherently flawed and prone to misjudgement, inevitably S12S-AO will miss some big winners and catch catastrophic losers, if only by chance.
Equally, the opposite is entirely possible...

Test portfolio in simulated environment at MarketWatch:
(MarketWatch virtual game started 11/9/2016 and expected to end on 12/30/2016)

To understand what this article is about, make sure to READ these:
Part 1: System 12. American MegaDozen. Introduction.
Part 2: System 12. Portfolio Construction and Rules 
Part 3: System 12. Trade Management 
Part 4: System 12. Performance and Risk
Part 5: System 12. Portfolio Initiation
and remember that you are responsible for your own decisions with your own money (tips hat)

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