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August 02, 2008

August 2008 Model Signals

Once again there were no changes to Northlake's monthly Market Cap and Style models. The Market Cap signal remains mid cap and the Style signal remains growth. As a result, Northlake continues to own the S&P 400 (MDY) and the Russell 1000 Growth (IWF) for assets devoted to this strategy.

The Market Cap model remains a split decision with half the indicators favoring small caps and half favoring large caps. The resulting signal is mid cap. The indicators did move significantly in favor of small caps for August. In fact the unsmoothed signal month reading is just barely in small cap territory. The two month average remains in mid cap but leaning toward small cap. The only indicators to shift this month were the technical trend measures.

The Style model remains firmly in growth territory as it has been for over one year. The growth signal has weakened form earlier this year due to the steepening of the yield curve and the valuation measure which is reflecting the massive underperformance of value during the last twelve months.

Last month the mid cap and growth signals were inaccurate....

....Both large caps, as measured by the S&P 500, and small caps, as measured by the Russell 2000, produced a return great than MDY. Mid cap indices have been big beneficiaries of their relatively greater exposure to the energy and basic materials boom and relatively lesser exposure to financials. In July, those sectors pulled back sharply and financials rallied. Growth lagged last month as well as financial heavy value indices got a boost from the sharp bounce in that sector and technology stocks lagged.

Posted by Steve Birenberg at August 2, 2008 01:20 PM in Models