Over the past several weeks we have seen some positive developments come out of the quant department. Our proprietary quant model, which officially went live in the spring of this year (but was extensively back-tested through the rocky 2007-2011 period), gave its first bullish signal on 6/8/2012. Since then, the model has stationed in a tight range in the upper half of the mildly bullish bracket, briefly touching the bullish bracket in a few occasions. In the meantime, one after the other, the quant models of our independent research providers joined the chorus. As a result, our quant model scorecard (see below) is currently showing a whole lot of green (bullish) and no red (bearish).
Historically, mildly bullish readings of the Pinnacle Quant Model were followed by average S&P 500 six-month returns of 6.64%, with roughly 68% of observations falling between 14.61% and -0.93%. If we combine the mildly bullish reading with the model being in a positive trend, as it is at present, the figures are even higher: a 7.60% average return with roughly 68% of observations falling between 17.7% and -0.80%.
Since the model turned mildly bullish on June 8th, the S&P 500 has returned 8.75% inclusive of dividends in roughly three months. However, since the trend of the model turned positive on July 13th, the S&P 500 has returned “only” 6.05% inclusive of dividends in roughly two months. The fact that the S&P 500 has already more or less delivered in three months what was promised by the model in six months should not be a concern; at any point in time, the model gives us its best estimate of what is coming next. While our Pinnacle Quant Model is just one of the indicators we look at when making investment decisions, this is nevertheless a positive sign.
|Research Provider||Model||Message||Signal Date|
|Pinnacle Advisory Group||Pinnacle Quant Model||Bullish||June 8, 2012|
|Leuthold Weeden||Major Trend Index||Bullish||July 2012|
|Ned Davis||Big Mo Composite||Bullish||June 8, 2012|
|Ned Davis||Fab Five Composite||Bullish||August 3, 2012|
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