CMI - Next Generation?

I hope I don't get to the point where I release a CMI Vista Edition. We're only up to CMI 3.0 right now, but could CMI 4.0 be right around the corner? The year-to-date performance of CMI 3.0 is represented by the thick black line that weaves above and below the zero line over the course of the last seven and a half months, not unlike some of the fuzzy pictures of Nessie, the creature of Loch Ness.

For comparison purposes, I have added year-to-date results of Apple and the SPY. Nothing about the CMI's performance instills any sort of confidence. Deep drawdowns tend to scare primates away.

Each version of the Cheetum Market Indicator since 2009 has required an almost complete 're-build' although each has been influenced by the successes and failures of the previous version. The good news is that the previous two years have resulted in double-digit gains if every signal was followed (by only the bravest of jungle dwellers). The bad news is that it took a Herculean leap of faith to follow each signal due to extreme draw-downs, especially this year.

CMI 3.0 uses multiple indicators to generate a buy or sell signal. Looking at the daily action generated by these signals clearly shows the lack of responsiveness during a year that has not produced any real long-term trend. CMI 3.0 was geared to follow the long trend based on data from 2008 and 2009. What is lacking is flexibility.

Recent results, and an eight month back test of the CMI using only four of the ten indicators, have yielded excellent results depicted by the gray line that sits atop all the other lines on the chart. These results are tracked in the sidebar under the 'AlphaMonkey'.

I have turned the CMI 3.0 screws as far a they can go so that I can squeeze as much flexibility out of this version by mimicking this newer, streamlined version. If the gray line continues on it's journey to the upper right hand corner of the chart, 4.0 will be born.

The best news from all of this is that only minor changes to the current version may be needed to produce stellar results. The complications and inaction resulting from ten conflicting indicators may have paved the path to a profitable, synergistic, four signal method.

Who's statement will best describe the future of the CMI?

As Hannibal Smith once said, "I love it when a plan comes together."

Or did B.A. Baracus get it right when he said, "I pity the fool!"