Off Topic (was Re: [CANSLIM] The Parlay (long!!))

From: "Tom Worley" <stkguru@netside.net>
Subject: Off Topic (was Re: [CANSLIM] The Parlay (long!!))
Date: Sat, 26 Jan 2002 18:33:58 -0500
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Hi Gail,

A most interesting post for your first one here. I read your study, and have
a few thoughts. After I read it a few more times, I may have others, but
here goes. And I am going to check my own 401K, but don't think I am offered
any funds with heavy Asia or Europe exposure.

One thing that jumps out at me is that you never mention when you would sell
the foreign funds. The implication is that you would never stay in for more
than a day, but I infer that if the trigger remained positive on the second
day then you would remain invested. If my inference is correct, what was the
typical or average duration of investing in the foreign fund.

I assume you must place your order to buy or sell the foreign funds prior to
3:45 PM. The markets have seen considerable volatility in the final 30
minutes, and could possibly change your trigger after your phone call.

I have had a considerable global perspective for some years now, and have
noted that the Asian markets, most notably Japan, tend to react stronger
than does Europe. Likewise, Europe's reaction to how Asia closes tends to be
more subtle and muted.

The Nikkei has been much less reliable and consistent in the past 12 to 18
months than in years before. That is, in part, due to the tech stock
collapse here, and in part due their own local miserable economic, banking,
and financial problems. If the fund(s) you use have heavy Japan weighing, it
could skew your results.

While daily changes in your 401(k) are permitted, constant changing can
bring about restrictions. Your fund administrator is less likely to be
concerned than the individual fund. Their big worry is that if someone
develops a successful system, then others are likely to follow and soon the
manager is faced with a daily cash inflow / outflow which is difficult to
manage, and forces him to maintain a cash balance much higher than normal.
This could affect the fund's performance.

You might want to examine the results historically just using the high of
the day, rather than the close. Since a heavy volume day can often dry up
towards the end, this might give a different picture of what kind of day it
was, rather than how it closed. This might be especially true since you
found that the best triggering index is NASDAQ, even if it is down slightly.

I am not surprised to find that the Naz was the best index to use, since it
is broader than either the DOW or S&P500, more heavily tech weighed, and
Asia is much more tech sensitive.

You mention that you have actually been using this since July. Did the 22%
results measure up to your expectations? My VR Fund was fully invested by
late August, and remained that way thru the 9/11 attacks and since, and
returned 8% after commissions and charges. I am sure I could have done
better had I not been required to remain at least 65% invested. Without any
calculations, I was expecting that you would have had even higher returns,
considering you were more likely to be invested on up days than down days.

Best regards,

Tom Worley
stkguru@netside.net
AIM: TexWorley
- ----- Original Message -----
From: "Gail Koch" <chloe2046@hotmail.com>
To: <canslim@lists.xmission.com>
Sent: Saturday, January 26, 2002 4:22 PM
Subject: [CANSLIM] The Parlay (long!!)


>
> I've been a member of this list for the past 6 or so months and have
enjoyed
> the insightful posts by many of the members.  I haven't posted any
messages
> until now.  Unfortunately this is a little off the CANSLIM topic.  I want
to
> describe an investment strategy I've been using recently with my 401(k)
and
> get any opinions that you may have on my strategy.
>
> Our company has an excellent 401(k) plan.  We have about 10 mutual funds
we
> can choose between including Janus, White Oak, State Street Aurora, Legg
> Mason Value, Putnam International Growth (POVSX), JP Morgan Institutional
> Growth (JNUSX), Fidelity Growth and Income, etc.  Also, we can switch our
> investment mix every trading day before 4pm.  White Oak is largely a large
> cap tech fund.  During 1999 and early 2000 I rode White Oak up and then
> unfortunately I rode it back down during the latter part of 2000 and until
> mid-2001.
>
> Early in 2001 I noticed a trend.  When the American market indices (DOW,
> S&P, NASDAQ) are up it seemed that the international market was often up
the
> next day.  Thus, gains in the American market might possibly be "parlayed"
> into gains in the foreign mutual funds.  In August of last year I spent a
> solid weekend backtesting that theory.  I looked at the NAS, Dow, and S&P
> over a 5-year period (Aug 1996 to Aug 2001) which covered 1298 trading
days
> and then determined the gain or loss of the foreign funds the next day.
The
> results of my study were surprising and are summarized as follows:
>
> 1. When the NAS is up by any amount, the international funds (POVSX,
JNUSX)
> were up the next day 69% of the time.  More specifically, for the 1298
> trading days studied, the NAS was up 701 days.  POVSX was up the next day
> 485 (69%) times, down 198 (28%) times, and unchanged 18 (3%) times.
>
> 2. I looked at various "triggers" to determine when to move into the
foreign
> funds.  I considered various percent changes in the DOW, S&P, and NAS.  I
> found that the best "trigger" was simply the NAS being positive.
>
> 3. The average daily gain for each of the 701 days in POVSX was .379%.  If
> $10,000 would have been invested in the middle of 1996 and this strategy
> used, it would have grown to $158,300 by August 2001.
>
> More details on my study are provided in the attached WORD file.
>
> Sorry this post is so long.  I would appreciate any feedback on this
> strategy.  I have used it exclusively since July of last year and it seems
> to work fine.  In the second half of 2001 I increased the value of my
401(k)
> by 22% not counting the monthly additions from my salary.  That
performance
> far surpasses the performance of any individual mutual fund choice in my
> 401(k) or the performance of the overall market.
>
>
> _________________________________________________________________
> Chat with friends online, try MSN Messenger: http://messenger.msn.com
>



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