Monday, July 01, 2013

Better Bots, Busted Bonds, Gold Gashed

My market bots have been staying in stocks since their creation nearly one month ago, and as the S&P 500 index has risen back above 1600, it's looking more likely by the day that they correctly called this most recent dip as being just a correction in a continuing rally.

I will always be making adjustments to the bots to improve their returns, and as of today the latest versions are bot13_15.A1 and -.A2.  Of particular note is that -.A2 is getting close to a back-tested return of 13% per year (now 12.92%) compared to 7.42% per year for the buy-and-hold method.

If I had to guess why the stock market is still rising at this point, I'd say it's because investors are cashing out of almost every other kind of investment and need a place to put the money.  Long-term treasury bonds, as measured by the iShares 20 year treasury bond ETF [TLT], have fallen more than 18% in the past year.  More spectacularly, the price of gold has fallen 37% in less than 2 years, with most of those losses coming in just the past 3 months.  If my theory is correct, then when this non-stock sell-off eventually comes to an end it will reduce the buying pressure in the stock market.  Will my market bots see this coming?