Navigate the Stock Market: Performance of the Navigate the Stock Market System

THE NTSM SYSTEM IS UP 135% OVER THE LAST 9-YEARS; THE S&P 500 IS UP 51% OVER THE SAME PERIOD.
I developed the system over several years starting in 2008. I’ve revised it many times to optimize its performance. I started using the system in the summer of 2010.

It is a computerized analysis of the S&P 500. Since the system uses closing data, (Sentiment, Price, Volume, and VIX) it is possible to load relevant information from prior years and develop pro-forma results, results that would have occurred if we had followed the computer output to the letter.

Back testing of the system prior to 2010 and actual results since then show the following results versus the S&P 500 index.

YEAR	S&P 500	Navigate the Stock Market System	Versus the S&P 500 Indx
2006	13.1%	12.3%	-0.8%
2007	3.1%	-0.8%	-3.9%
2008	-37.6%	-7.0%	30.6%
2009	23.5%	13.2%	-10.3%
2010	14.2%	35.9%	21.7%
2011	0%	11.7%	11.7%
2012	13.4%	13.4%	0%
2013	29.6%	16.6%	-13.0%

36%

Arithmetically, the system outperformed the S&P 500 by 36% over 8-years by simply buying low and selling high and with no shorting, options or any complicated strategies.

On a compound basis: $100,000 invested in the S&P 500 in 2006 would have resulted in a value of $151,000 at the end of 2013. The Navigate the Stock Market System would have resulted in a gain of $235,000 (excluding taxes and trading fees). You also would have slept better in 2008 and 2009 if you had been out of the market for critical parts of the year.

NO SHORT POSITIONS WERE TAKEN for these results. If the system gives a sell signal, I move to 100% cash. Cash positions were assumed to have no yield (i.e. zero interest is earned.). Since a BUY or SELL signal is given after the close (and all analysis is based on closing data), positions were assumed to be established at the close of the next trade day.

BEST YEAR: The best year was the “crash year” when the market was down 38% and my system was down 7%. This is what I hoped for when I created the system. Its principle purpose is to avoid disastrous losses in Bear markets. Since we are in a Bear market now that may go on for years {the last bear market lasted 16-yrs (1966-1982)} it is critically important to your financial health to avoid losses.

But the 66-82 bear market had an important characteristic that is typical of all secular (long-term) bear markets: it cycled between the bottom and top numerous times (see the page “Compare the 1966 Bear Market to the Current Bear Market”). So the lesson is to make money during the Bear buy investing in the stock market in favorable times and moving to cash (or shorting the market) when times are not favorable for stocks.

LIMITATIONS: The system is least effective in a straight up year or when corrections are over very quickly, for example in 2009. The system didn’t get a chance to react and the buy signal was often late. 2013 was a particularly bad year because it was straight up with no volatility. High sentiment readings prevented Buy signals and this was a major weakness.

Due to weakness in the system in 2013, I added another Buy-signal consisting of the 5-10-20 Timer combined with my review of Market Internals. These provide a BUY signal for the NTSM system if NTSM doesn’t provide a BUY first. (Simple – I should have thought of it a long time ago.) The results shown above include the added 5-10-20 Timer and Market Internal Rules for year 2013. Without the revision results would have been about 5% less for 2013.

Personally, I only earned about 11% in 2013, because I chose not to buy when I got a buy signal from NTSM. I also underperformed by about 2% in 2012 for the same reason. (Only an idiot wouldn’t follow his own system – are you sure you want to keep reading?) That’s just another reason I made the changes to the NTSM system noted above. The revisions should provide an increased level of confidence (and a kick in the pants) to buy in the face of worrisome news when classical market analysis isn’t working.