Monkey Throw Dart: Monkey Makes Plans and Mr. Market Laughs

Wednesday, November 27, 2013

Monkey Makes Plans and Mr. Market Laughs


The wheel is turning and you can't slow down
You can't let go and you can't hold on
You can't go back and you can't stand still
If the thunder don't get you then the lightning will

~Lyrics, The Wheel

By the end of last year, I had the new "add-on" completed for the CMI 4.0.  The Cheetum Market Indicator 4.0 would now become the "MensaMonkey", the version of a market timing method that would outperform the market and put some serious distance between the five-year performance of a monkey created program and the S&P500.

The "add-on' was a longer term signal generator that is used as a hedge.  It was intended to put the "brakes on" under specific market conditions.  This would be coupled with a trend-following system that was capable of out-performing the market over the last few years.  A reduction in risk with a slight reduction in reward is a great trade-off when playing both sides of the market.

As it turned out, the hedge I was looking for worked great, but unfortunately these longer term "risk-on" signals overwhelmed the short-term trend following signals, and as you can see the rest is history.


 Looking back at my research, the limited data available for construction of  the longer term signal, or hedge, seemed to be the culprit.  Haste makes waste, and some of the deadly trading system "sins" listed in the previous post had re-surfaced. It's possible to get away with using limited data for a while but eventually the weakness in the system is exposed by the ebb and flow of the market.  The 2012 market timing method (CMI 4.0), if left alone, would have handled this years up-trend quite easily. This proves that sometimes additions are really subtractions.

It ain't over 'till the fat monkey sings, but with a month to go and eleven months of muted MensaMonkey performance, it is unlikely that the final result will look much different than it does now.