The “Cat Came Back” Trade on Volatility – The Sequel

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SYNOPSIS

Last Week… While last week’s gains weren’t as substantial as those a week before in the major indexes, they’ve driven the trend values higher. What’s more, the broader measures that we follow are really doing well too! All of the 37 countries and geographies that we follow via regional ETFs now have positive trend values, and 80% of the 10,000+ stocks and ETPs that we follow now have positive trend values. Regardless of what the media are still preaching about global recession and bear markets, we’re planning a shopping expedition this week!

ProfiTrend Portfolio (PTP)… The PTP is 70% in cash, and we’re itching to go shopping! We don’t try to predict how long a rally will last, but when the conditions are this good, we need to expand our portfolio beyond the three positions we’re currently holding.

New name, same math… Our PTP annualized price appreciation (APAR) index has improved to 72% from 57% a week earlier, tied with the Canadian market index. We hope to improve that situation soon with new acquisitions. And, yes, we previously used the label “annualized growth rate (AGR)”. We didn’t realize that there was any possibility of confusion, but it’s been pointed out that AGR is a metric that is normally applied to a company’s earnings growth rate. That is quite different from our use of the term meaning price growth rate. So now we’re making it clear with a new name and acronym… APAR. We actually still prefer to call it the “speedo chart”. It truly is a speedometer indicating how fast we are making money with our investments. It’s unique to our PTA 2.0 service and TrendWatch Weekly newsletter.
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You may recall our four-year track record with the PTP shown in the following chart. As the “4 Year” implies, that’s an average of 4 x 52 weeks of APAR data. wpid-bar_speedo_160311mdn-2016-03-14-22-35.png
PTA Perspective… The “Cat Came Back” Trade on Volatility – The Sequel
In the February 15 edition of TrendWatch Weekly, we discussed an interesting trade that falls outside the realm of trend tracking. It’s a volatility play that we dubbed the “Cat Came Back (CCB) Strategy”. It’s simple… (1) when the volatility index (VIX) rises from the teens to above 20 (no matter how much higher) and starts to turn lower again, buy an inverse VIX ETN appropriately labelled XIV (VIX backwards) at whatever level it is trading at. Then, (2) when VIX returns to its long-term median (about 16), sell XIV. Our research study based on the past five years shows an average return of 12% with an average holding time of 11 trading days. 17 of 19 round-trips over the past five years would have been profitable with our fairly rigid algorithm. This week we are revealing the results of the latest trade, and offer some tips on making this trade even more profitable, based on our personal experience with real dollars involved.

Data & Charts Upgrade… Don’t forget that as of last week we now have a new major workbook to join the others in the Data & Charts Workbooks section of the web site. It’s a database of trend and consistency data on ADRs from around the world. Now you can diversify globally with the comfort of knowing which potential opportunities are rising in price most rapidly. Read more in last week’s edition of TrendWatch Weekly.