Tango5 Contributing Strategy by Wear Wilson May 10, 2007 PowerPoint accessible at donsfunds - PowerPoint PPT Presentation

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Tango5 Contributing Strategy by Wear Wilson May 10, 2007 PowerPoint accessible at donsfunds

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  1. Tango5 Investing MethodbyDon WilsonMay 10, 2007 PowerPoint available at www.donsfunds.com

  2. “Tonight I Will Show You” • What the level of risk is in the market today – any day. Should I be “In or Out” • Top 1% of 3000 + No Load Mutual Funds - any day • Make “good money” year in and year out. • Only if you follow the rules.

  3. My Background • Let’s take a journey. • Mechanical Engineer – technical guy • Small business owner last 30yrs • Cashed Out in 1987 • Started investing with Fundamental Analysis • Now mechanical trader using Technical Analysis • Since 1997 been investing the Tango5 way

  4. Origin of Tango5 • To teach my adult children how to invest • Expanded to family & some close friends • Expanded to Web Site & several 100 users • All the users I know of are profitable • Tango5 has been running “real time” for four years • Uses FastTrack and Amibroker Softwareand “freeware” Trade and Tradefr

  5. The Market Timing Question

  6. My Concern – Risk of Deep Bear Markets Market Timing is really “Risk Management”

  7. Tango5: What is it?

  8. Tango5at www.donsfunds.com • A fully developed and documented trading system • When to buy • What to buy • How to manage your holdings • When to sell • How to manage your money • How to track your trading history • The software “pre-packaged” to run the system

  9. Tango5 Is Also • “Semi Automated” to save time • Almost “Turnkey” investment process • Almost “Autopilot” in use • A heavy “dose” of my investment philosophy • Novice Investor - Like driving your car ----Start the motorPut it in gearSteer and Brake • Expert Investor – Just use it.

  10. Tango5 Is Also • A Teaching Tool • Graphs and Indicators Displayed • Fund Ranking and Selection Displayed • Money Management Reports Displayed

  11. “And It Is Free” • Caveats: • Must have high level of computer skills or know someone that can help you. • Considerable set up detail. • It takes your time and effort.

  12. Market Timing • My experience with “Market Timing Models” since 1994 • Why? Keeps you out of “Deep” Trouble • Timing is “Risk Control” not for Performance • Tango5 is not a “Black Box”, totally open • Tango5 MRI (market timing) is all you need • MRI “Managed Risk Investing”

  13. How Does it Perform Tango5 Back Test Example • Backtest Results from the Amibroker Custom Backtester. • All FT data, 15 years of history. • High Risk Portfolio22.72 ann, 13.56 mdd, win rate 73%, holding 4 positions, 8% trailing stop • Mid Risk Portfolio 19.77 ann, 10.87 mdd, win rate 68%, holding 4 positions, 6% trailing stop • Low Risk Portfolio 16.49 ann, 7.43 mdd, win rate 64%, holding 4 positions, 3% trailing stop *Note Back testing is a simulation of the past. It is imperfect“Back testing is an approximation of what might happen in the future”

  14. Statistics | Charts | Trades | Formula | Settings | Symbols Backtest Example Tango5Bear Market Years • Backtest Results from the Amibroker Custom Backtester • Getting “in & out of the market” at exactly the wrong time • FT data starting 03/21/2000 – 10/07/2002, 2 1/2 years bear market • High Risk 9.76 ann, 8.30 mdd, win rate 80%, holding 4 positions • Mid Risk 11.29 ann, 6.77 mdd, win rate 75%, holding 4 positions • Low Risk 10.53 ann, 3.21 mdd, win rate 70%, holding 4 positions

  15. Who Is Tango5 For ? Investment Level Beginners ? Investment Level Average ? Investment Level Advanced ? It can be for all levels

  16. What Do You Need to be Successful • Control of Market Risk • What to Buy, Fund Selection • How to Manage Your Portfolio

  17. Market Cycles --- “Are they Real”“Yes”SecularCyclical& Intermediate

  18. Secular Bull & Bear Marketssince 1802 ---------- Range 8 to 20 years There is a definite pattern here! What causes these cycles? FEAR and GREED, yes but that is to simple. Michael Alexander, Andy Kessler, and Ed Esterling’s research shows that “Innovation Waves” especially since the “Industrial Revolution” have the effect of of creating long cycles in financial markets.

  19. Another Illustration of the Cycling of Valuation Corresponding to Secular Bull and Bear Markets for the last 100 years

  20. Copyright 2006, Crestmont Research (www.CrestmontResearch.com) 1.00 10.00 100.00 1,000.00 10,000.00 100,000.00 1910901091109210931094109510961097109810991190119111921193119411951196119711981199129012911292129312941295129612971298129913901911392139313941395139613971398139914901491149214931494149514961497149814991590159115921593159415951596159715981599169016911692193169416951696169716981699179017911792179317941795179617971798179918901891189218931894189518961897189818991990199119921993199419519961997199829092000200120022003200405 0 15 30 1900 1910 1920 1930 1940 1950 1960 1970 1980 1990 2000 SECULAR STOCK MARKETS EXPLAINED Dow Jones Industrial Average: 1900-2005 P/E Ratio (trailing) Secular stock market cycles are driven by trends in the price/earnings ratio (P/E) Secular bull markets start after the trough of below-average P/Es Secular bears start after the peak of above-average P/Es +2% +317% -80% 200% -38% +774% -10% +1214% ???% Despite market declines in the 2000s, P/Es remain above average and trending lower − the potential sign of a current secular bear market 1,000 100 10,000 Copyright 2006, Crestmont Research (www.CrestmontResearch.com) 1.00 10.00 100.00 1,000.00 10,000.00 100,000.00 1910901091109210931094109510961097109810991190119111921193119411951196119711981199129012911292129312941295129612971298129913901911392139313941395139613971398139914901491149214931494149514961497149814991590159115921593159415951596159715981599169016911692193169416951696169716981699179017911792179317941795179617971798179918901891189218931894189518961897189818991990199119921993199419519961997199829092000200120022003200405 0 15 30 1900 1910 1920 1930 1940 1950 1960 1970 1980 1990 2000 SECULAR STOCK MARKETS EXPLAINED Dow Jones Industrial Average: 1900-2005 P/E Ratio (trailing) Secular stock market cycles are driven by trends in the price/earnings ratio (P/E) Secular bull markets start after the trough of below-average P/Es Secular bears start after the peak of above-average P/Es +2% +317% -80% 200% -38% +774% -10% +1214% ???% Despite market declines in the 2000s, P/Es remain above average and trending lower − the potential sign of a current secular bear market 1,000 100 10,000

  21. Is the Four Year Cycle Always Four Years?“NO” Lets Take a Closer Look

  22. The Average of the Last 60 Years is 4.02 years.But the Range is from 2.68 yrs to 5.31 yrs

  23. Intermediate Term Cycle --- Weeks to Months Indicated by OTC New High/Low Summation NASDQ(OTC) Composite NASDQ 52 week High/Low Oscillator

  24. Market Timing Components for Tango5 Explained 1. Rutvol uses Price-R2000, Total Volume NASDQ 2, Tango5 Summary: Dominant Market Relative Strength of NASDQ vs NYSE Uses Data from Dominant Market NASDQ or NYSE for: Market Environment 30yr Bond, Price Osc., McClelland Summation Price Risk Factor Two Oscillators Advance / Decline Risk Factor Two Oscillators Hi / Low (52 week) Risk Factor One Oscillator Rutvol PlusTango Summary = Tango5 Intermediate Timing

  25. Rutvol PlusTango Summary = Tango5 Intermediate Timing The RUTVOL test has passed. Further analysis is needed. Data by www.FastTrack.Net The Total for 09/01/06 is 4 or above. We should be invested in the market. Handle investments in accordance with Tango5 Fund Management When Tango5 is indicating BUY.

  26. Ranking Explained RSI/Stochastic = RSI / 2 + Stochastic / 2 NCAlpha = Alpha without the correlation component Ulcer Index = the negative portion of Standard Deviation Ranking = RSI/Stochastic + NCAlpha – Ulcer Index Absolute numbers are then weighted for Rank calculation

  27. Note this table repeated For Mid & Low Risk

  28. Note this table repeated For Mid & Low Risk

  29. Example Sector Ranking

  30. Example 2ndSector Ranking

  31. Amibroker “MRI” Charts“Managed Risk Investing”

  32. Tango5 ruttr Indicators - Russell2000

  33. Tango5 rutvol Buy Indicators – Russell2000

  34. Tango5 Dominant Market Indicators-OTC/NY

  35. Ann 18.96 MDD 8.83 Win % 72.18 PayRatio 3.46 tamrankDW, 6% trailing stop Starting equity 50K, 09/20/89 to 06/16/05

  36. tamrankDW, 6% trailing stop Starting equity 50K, 09/15/02 to 06/16/05

  37. Tango5 Holdings DrawDownFT File

  38. Tango5 Amibroker DD (DrawDown) Chart

  39. Tango5 Sample Portfolio Equity Chart vs. S&P 500 Composite Tango5 Sample Portfolio (black)

  40. That’s the Output File Package • Market timing – MRI (Managed Risk Investing) • Fund Screening & Ranking • Fund Holdings Management • Portfolio Management

  41. Back Testing Tango5 A more extensive look at results

  42. Mid Risk Back Test Results

  43. Investing’s Two Major Forces • 1. Method ---- solution --- Tango5 • 2. Emotion --- solution -- Discipline(Tango5)Refer to “Mean Markets & Lizard Brains” by Terry Burnham and “Predicting the Markets of Tomorrow” by James P O’Shaughnessyand “The (MIS) Behavior of Markets by Benoit Mandelbrot & Richard L Hudson

  44. Wrap up - Risk When Investing • You can’t control the “Market Action” • You can control “RISK” • Tango5 strongly oriented towards controlling “RISK”:from Market Timingfrom Fund Risk Levelsfrom Fund Selectionfrom Buy – Sell Rules • It’s all about controlling “RISK” • Tango5 puts the odds on “YOUR SIDE”------- If you “follow the rules”

  45. TangoETF • New Fee ($299,95) Service • Trades only ETF’s • Proprietary not open system • All automated mechanical trading platform • You get email Daily Update • No data download or programs to run • Backtest approximate 20% annualized return over last 5 years

  46. New ETF Rotational Trading Method vs S&P,R2000,& OTC Indexes

  47. TangoETF Signal Trading IWM/Money Market

  48. TangoETF Signal Trading IWM vs R2000 Short

  49. <tETFportmod.ini> =================== Portfolio ETPortmod =================== Positions on 04/02/07: Fund Shares Value % 1Day ---- ------ ----- ------ FDRXX 60000.00 60000.00 0.04 ----- ----- ------ Total 60000.00 0.00 Positions on 05/04/07: Fund Shares Value % 1Day ---- ------ ----- ------ FDRXX 735.13 735.13 0.01 EWN 700.00 21770.00 0.68 EPP 140.00 20118.00 0.54 EWA 750.00 20895.00 1.02 ----- ----- ------ Total 63518.13 0.74