Buy Don’t Hold Dashboard V2 Review for 2011

Version 2 of the Dashboard (V2) was introduced in March 2011. It differed from the original Dashboard introduced in Buy Don’t Hold (published in April 2010), in that it uses only four of the eight original indicators. The March 12, 2010 blog provides the V2 backtest results.

The 2011 Dashboard V2 performance was negative 6.16%. This was calculated using the NASDAQ Composite Index for the December 10, 2010 buy signal (closest to January 2011) through December 29, 2011, which was 384 days. During that same period, the benchmark NASDAQ Composite Index produced a negative return of only 0.28%. The V2 negative performance resulted from economic and global financial events that moved the market in a roller coaster pattern, especially from July through December (refer to chart below). In this unstable non-trending market environment, the Dashboard’s trend-following strategy did not perform well. When there are many quick trend changes or a sideways market, the Dashboard will change signals often resulting in overall loses, until the uptrend is finally established.

Please refer to Table 1 on page 3 to view each of the 2011 signals’ gain or loss and the resulting value of $1000 invested at the beginning of the year. Neither dividends, brokeragecommissions or taxes were included in these calculations.

The Dashboard was invested for 188 days during the 384-day period, and was in cash for 196 days. Some investors following the BDH approach may have placed their cash in one or more of the ETF bond funds mentioned in the book to earn interest income while waiting for the next buy signal. Also, some investors may have held a core bond position throughout the year for returns that offset the equity ETF losses. Since the yield obtained in these scenarios was different for each investor, none is included in the performance data.

Dark Liquidity 15 ETF Performance

Dark Liquidity, an independent website not affiliated with BDH in any way, tracked the performance of an aggressive BDH strategy of purchasing the 15 equity and commodity ETFs having the highest six-month relative strengths (from the universe of 74 ETFs recommended in the book) for each buy signal. The ETFs were sold at the next business day’s opening price after a Dashboard sell signal. The 100% equity ETF portfolio had a negative return of 6.46% as measured from March 31, 2011 to year-end 2011. A 7% stop limit order was used to limit losses in determining these figures.

Please refer to the following link and then scroll down to observe the detailed transactions:

2011 Market Action

During 2011, the stock market encountered numerous up and down moves that resulting from negative financial news from the euro zone, and a sluggish U.S. economy. This resulted in a very unstable market with only short bursts of strength followed by market reversals. Since the Dashboard uses atrend-following strategy, it was not surprising that the numerous market fluctuations resulted in a loss for the year. There were 8 buys and 7 sells during the year, much more frequently than those in the BDH backtests. The tests found 14 buy and 14 sell signals for the entire July 1999 through May 2010 period of almost 11 years (see March 12 blog entry or FAQs section for these results).

The worst 2011 Dashboard period was during September 2011, with a 9.20% loss, as the market also took a big hit. Interestingly, seven days after the Dashboard’s October 3 sell signal, the market reversed direction and a new buy signal was issued on October 10. However, the Dashboard missed a huge 10% rally during these seven days prior to the buy signal. Unfortunately, nothing can be done to improve the Dashboard’s performance against this type of rapid market flip-flop.

Table 1. Dashboard V2 2011 Signal Performance
Signal / Signal / NASDAQ / Percent / Value of / Days
Date / Composite / Change / $1,000 / Invested
12/10/2010 / Buy / 2617.3 / $1,000.00
1/20/2011 / Sell / 2716,92 / 3.81% / $1,038.10 / 41
2/15/2011 / Buy / 2815,09
3/1/2011 / Sell / 2735.05 / -2.84% / $1,008.62 / 14
4/27/2011 / Buy / 2862.53
5/9/2011 / Sell / 2851.91 / -0.37% / $1,004.89 / 12
6/24/2011 / Buy / 2653.07
7/29/2011 / Sell / 2791.45 / 5.22% / $1,057.35 / 35
8/29/2011 / Buy / 2547.07
10/3/2011 / Sell / 2312.68 / -9.20% / $960.04 / 34
10/10/2011 / Buy / 2554.7
11/17/2011 / Sell / 2595.02 / 1.58% / $975.21 / 38
12/2/2011 / Buy / 2666.47
12/14/2011 / Sell / 2565.93 / -3.77% / $938.44 / 13
12/29/2011 / Buy / 2610.23 / TBD / 1
188
Dashboard / 2011 / -6.16%
NASDAQ / 2011 / -0.28% / Buy and Hold
Performance measured from 12/10/2010 through 12/29/2011.
NASDAQ Composite price is opening price on next business day after signal.
No stop limit orders were used in presenting this data. If it was used the 9.23% loss experienced
on 10/03 would have been capped at 7%.