Saturday, May 25, 2013

All That Glitters- Staying With the Accumulation Signal

Before getting into any supposition, I thought I would start with the models this week.

3-month model, -1.3

6-month model, -1.8

1-year model, -2.3

In my opinion, the models remain decidedly positive. The 1-year model remains solidly below the -2 demarcation, indicating a strong buy, at least in the historical context. Additionally, the 6-month model, albeit peeking above the -2 demarcation in the latest week, mainly due to a rise in the price of gold, at a -1.8 points to stronger forward returns of gold stocks. This is especially true in conjunction with the 1-year model. Historically, a 1-year model and 6-month model in a similar setup have been followed by greater-than-average returns of gold and precious metal stocks on a longer-term basis. Although there is no guarantee the same outcome will occur, there is nothing suggesting that it won't either.

Looking at the model components, gold perked up somewhat from the following week, putting in a double-bottom of sorts. We will have to see if this 'bottom' holds. Additionally, money supply came in lower than expected, not only by my estimates but also relative to historical seasonal patterns. Looking ahead as to the trend in money supply, I am assuming the seasonal patterns in money supply hold true, but that the week-on-week degree of change comes in below the long-term averages.

As for the Phily Gold/Silver Miner Index (ticker- XAU), the equities may be showing some initial signs of catching bid, at least in the volume and other signals. I will go into this deeper in another post, but thought it would be worth mentioning. That aside, the XAU was roughly flat in the latest week's trading based on price and provided little to the model results.

Turning to a programing note, I will be adding another model to the list of models going forward. Including the above three timing model calculations, I will be adding a 2-year model calculation. This is a model that I have been watching on and off for a little while. The model results tend to move very slowly relatively to the other calculations. The stickiness tends to make this model miss inflection points and the long-term performance has been inferior to any of the models provided. That said, I think it could also serve as a good check against the other models results, especially in conjunction or averaging with other models. I continue to research this subject matter, but thought it would be worthwhile for others to see the model itself. So with that, the following is the latest 2-year model calculation.

2-year model, -2.7