Timing model update – key sell signals approaching

I thought it would be a good time to update the timing model I’ve discussed on the blog before. The model is based on 200-day moving averages and is called the Ivy League Portfolio. See Mebane’s website for more details. I also highly recommend his book on the topic. While I mainly advocate a dividend paying individual stock portfolio approach here, I firmly believe that for investors that have neither the time or inclination required for an individual stock approach, the timing model is the best approach to managing retirement assets. I’ve discussed the reasons why in this post. Now, back to the model update. With the recent market drop and unless we get a huge rally in the last week there are some key sell signals that will be triggered come the end of the month. Lets take a look.

The table below, from dshort shows the status of the timing model portfolio as of the end of July. The table shows that as of the end of July the model was still signaling to stay invested in all the asset classes. But a lot has changed in less than a month.

As of today, only bonds, IEF, and commodities, DBC, are trading above their 200-day moving average. And DBC is getting awfully close to its 200-day. At this time it looks that there is a high likelihood that sell signals will be triggered for US stocks, VTI, foreign stocks, VEU, and real estate, VNQ. You can see the charts update daily on Mebane’s site. What will be interesting to see is if these signals are triggered will they turn out to be false signals like in last summer’s correction.