Mutual Fund/ ETF Actual Cash Account at Record High
The Mutual Fund/ETF Actual Cash Account was started on August 29, 1988 (almost 26 years ago) with an initial $100,000 deposit. As of today, the real money account is worth a record high $1,386,957. Our first buy signal occurred after the close on September 14, 1988. We advised over our hotline to buy four funds: Gintel Capital Appreciation (GINCX), Selected American (SLASX), Mutual Shares (MUTHX) and Guardian Mutual (GUARX) and we were off and running.
Keep buying stocks, top-ranked advisers say. -Mark Hulbert CBS MarketWatch
From the start, and this hold true for our senior publication The Chartist as well, the cornerstone of our investment strategy is built around managing risk. We believe that one of the keys to success in the stock market is to limit losses during major declines. We use our proprietary market indicators to measure risk. When our models warn of a potential long-term decline, we exit the market and move to money market funds. Understand that a sell signal does not mean that a major decline will transpire, only that the risks in the market have increased substantially. The benefit of our strategy was evident during the last bear market. On January 15, 2008 we advised log-term investors acting in sync with our Actual Cash Account to sell a majority of the ETFs and move into an approximately 80% cash position. On August 4, 2008 we advised investors to sell the remaining ETFs and move 100% to cash. The result was a decline of only 5.4% for our Actual Cash Account in 2008. In comparison, the S&P 500 lost 38.5%
When we started, the vehicle for our strategy was mutual funds. In 2006 we bought exchange-traded funds for the Actual Cash Account and have continued to buy them ever since. While ETFs have been around since 1993 with the introduction of the standard & Poor’s Depository Receipt more commonly known as SPDRs, the Nascent industry had yet to experience the explosive growth that it has had in recent years. By the end of 2005, there were approximately 340 U.S. listed ETFs with total assets of about $400 billion. Today, there are in the neighborhood of 1,500 with total assets of $1.7 trillion.
TECHNICALS
The benchmark S&P 500 closed today in record high territory comfortably above its up-trending 50 day moving average (DMA) and miles above its 200 DMA. The Dow is also in record high territory. A Dow theory buy signal was flashed as recently as June 2nd when both the Dow and Dow transports simultaneously recorded bull market highs. The all-important advanced decline line, also at new highs, has been in a pronounced uptrend throughout this bull market. Since moving above its 200 DMA in April of 2009, it has remained comfortably above it except for some very narrow penetrations during the latter half of 2011. In addition to this, the advance decline line for both the Dow and S&P 500 have recorded a series of new highs along with the equal weighted S&P 500. It’s very hard to argue against the bullish case with breadth readings this strong.
The performance of the S&P 500 midcap index has also been impressive, having rallied 6.3% off of its April lows; and, in the process, moved back above its 50 DMA with authority as well as pushing its way through overhead resistance, which was in evidence at its March and April bull market highs.
The Nasdaq has also given a good account of itself, having rallied strongly off its April lows to move within 1.4% of its bull market highs. However, it still has considerable resistance to overcome. The Russell 2000, which has been under performing since the beginning of March, continues to lag; although it has managed to move back above its 50 day line. However, in the scheme of things, it only represents a small percentage of the market’s capitalization. And again, as we previously pointed out, it might have gotten ahead of itself since from August of 2012 through its recent peak on March 4th the Russell 2000 surged 54%. This was double the appreciation of the Dow and close to 50% ahead of the S&P 500. It should also be noted that the Dow Jones world index is also at its highest level of the bull market. On top of this, only three out of the 25 international ETFs that we track are currently below their 50 day line; and only one, Russia, is below its 200 day line. As you know, bull markets are global in nature and this one is no exception.