“It ain’t over until it’s over.” Yogi Berra

“It ain’t over until it’s over.” Yogi Berra

Posted on November 17, 2011

Believe it or not, markets spend most of the time in rational and stable environments as opposed to the post 8/4/11 irrational period. There are always a few abnormal days, in a normal market environment. The Dow Jones Industrial Average may experience a daily fluctuation, up or down, of maybe 1.5% or 2.0% (150 or 200 points) on a given day.

Our Canterbury Volatility Index (CVI) signaled a relatively safe market period beginning 9/10/10 and lasting until 8/4/11. During that time (226 trading days) there were only four days (less than 2%) when the Dow finished the day up or down 200 points or more. Two days were up +220 and +250 points and two days were down -228 and -242 points (a wash). The calm was followed by a storm.

The market shifted from rational to irrational on 8/4 and has continued to be irrational for the last 71 trading days and counting. During the last 71 days 26 days or 37% were up or down 200 points plus. But wait! There is more. The two largest daily changes were 500 plus points! And 9 days closed up or down between 300 and 500 points. The good news is that our Portfolio Thermostat Matrix correctly marked when the markets shifted from rational to irrational.

We can’t control the market’s volatility but we can manage a portfolio’s volatility. The primary objective, during irrational markets, is to maintain stability in our portfolios. Successful portfolio management requires a dynamic process that can adapt and potentially benefit from volatility and bearish market environments.

We will continue to focus on portfolio stability. We will continue to maintain our current holdings until we return to one of our six Bullish Market States.

11/17/11 - Market State 12 = Bearish

Canterbury Volatility Index (CVI) 149 = Negative

The Canterbury Portfolio Thermostat Matrix helps maintain stability by identifying the current market environment or Market State. The Matrix process identifies 12 different Market States. There are 6 Bullish Market States, 4 States are Bearish, and 2 States tend to precede a transition, meaning caution.

Every effort was used to provide accurate data and mathematical calculations to provide, what we believe to be, accurate results. Canterbury Investment Management, LLC, and its principal owners, make no guarantee of completeness or accuracy of data or calculations as well as conclusions of any statistical data or information contained in the simulation illustrated on this page. Past results or performance is in no way a guarantee of future results.

Canterbury Investment Management: Tom Hardin

More About Tom Hardin

As Chief Investment Officer, Tom Hardin, Chartered Market Technician (CMT), makes all the final decisions on all investment and portfolio management decisions for Canterbury Investment Management. Tom has more than 30 years experience in the investment management industry and has broad breadth of knowledge. He is known as an innovator, educator and been revolutionary in the advancements in portfolio and risk management.