One of the first tactical and strategic maneuvers Yale Hirsch made upon completion of the first Stock Trader’s Almanac in the summer of 1967 was to hire a salesman to go door-to-door on Wall Street to all the brokerage firms and wire houses to introduce them to this tour de force. So while Jimi Hendrix shrouded the airwaves and the Monterey Pop Festival with Purple Haze and the Beatles rocked the music landscape with groundbreaking concept albums and took the world on a Magical Mystery Tour of love, peace and controversy, Yale’s Almanac salesman pounded the pavement of lower Manhattan during the Summer of Love, turning the investment world on to the efficacy and validity of market patterns, seasonality and cycles and Yale’s brilliant creation, The Stock Trader’s Almanac. The rest, especially in our case, is history.
Decades later in 1999 Joe Childrey, at the time a branch manager for A.G. Edwards in La Jolla, California was heading out on a long-planned African safari vacation. Departing from his office and having left his reading material at home, he grabbed the Stock Trader’s Almanac that had been sitting on his desk and conference table annually for years – a gift from his boss, the late Ben Edwards, a wise man Joe respected very much. While Joe had perused it and shared it with clients, he had never really delved deep into the Almanac.
Gains in 2008
Traveling for two weeks with nothing to read but the Almanac, Joe came back a changed man and a converted market pattern devotee. Upon his return he began to trade his own account using the Best Six Months/Worst Six Months Switching Strategy with a solid degree of success. In 2007 Joe went out on his own and founded Probabilities Fund, LP. This private investment partnership went live on January 1, 2008 and outperformed the S&P in 2008. While the S&P 500 lost 37.0%, including dividends, during the worst bear market in a generation in 2008, the partnership gained 5.3% net of management fees and other expenses, including the effect of the hedge fund performance fee.
After five more years of continued success Joe was compelled to make the strategy available to more people, especially registered investment advisors and their clients and individual investors. In 2013 the strategy became available to retail investors in a public format under the Investment Company Act of 1940, following the same strategy used to manage the hedge fund. Probabilities Fund Management LLC also began to run the strategy on a variety of variable insurance trusts and other programs as well as for individual clients.
Rules-Based, Data-Driven
Probabilities Fund Management LLC utilizes a rules based, systematic approach to attempt to capitalize on repeating cyclical, seasonal, political and other long-term historical patterns in the S&P 500 Index. They seek to identify periods when the S&P 500 is estimated to have the highest and lowest probabilities of capital appreciation to identify market entry and exit points. This dynamic methodology utilizes strategic rules and tactical signals.
Strategic rules create a calendar blueprint from historical trends and patterns that define the daily biases, either, bullish, bearish or neutral. Daily biases are updated annually as each new year incorporates the previous years’ trends and patterns. These strategic rules include:
• Presidential election cycles
• Historical “Best Six Months”
• Historical “Worst Six Months”
• Monthly market patterns
• Quarterly market patterns
• Institutional fund flow patterns
Tactical signals are generated from technical or political event driven decisions used to dial up or down the exposure and predetermined entries and exits. Tactical signals include:
• Technical Momentum Indicators
• Pre-Fed Announcement Drift
• Congress in or out of session
• International markets relative to domestic markets
• Special Congressional Sessions
In 2015, I joined the Probabilities Fund Management LLC team as a consultant to the firm and an Investment Committee Member. I will be working them to refine, hone and improve upon the rules and signals where possible and assist in developing a new Tactical Sector Rotation Strategy for mutual funds, ETFs and separately managed accounts based on much of the seasonal sector work we do.
Probabilities Fund Management LLC’s strategy is geared to compliment any well-thought-out diversified portfolio. It may serve as a diversifier for traditional and alternative portfolios. With a low correlation to the S&P 500 Index it can act as a separate asset class, providing non-correlated alpha.