V2 Model April 17, 2021 Update

April 17, 2021

Good morning!

Welcome new Members.

Here is V2 Model performance versus our benchmark of SPY.

This week:

V2 +5.01%

SPY +1.40%

This year:

V2 +30.82%

SPY +11.97%

The major United States markets were higher this week. The S&P 500 Index was this week’s best performing major index while the Nasdaq Composite gained over 1%. All sectors, with the exception of communication services, finished the week higher. The utilities and materials sectors outperformed the broad market S&P 500 this week, with utilities helped by lower interest rates and materials a clear beneficiary of the economic reopening.

V2 made gains this week. Our holding NAIL was up over 7%. You can see below Ratio #1 charts for each holding. On each chart, the faster moving orange and blue exponential moving averages are above the slower green exponential moving average. As such, we remain long.

I was asked twice this week if our holdings are overextended (overbought) and if now is a good time to take profits. I cannot answer that question, the model is not built to buy low and sell high. It is not built to be smart in the short term. It is built to catch higher probability trends over the longer term. If you want to take profits, there is no harm in that, it really depends on your personal situation and tolerance for volatility.

There are a number of indicators that a person can use to see if a market is overextended. The most common one is RSI. A reading over 70 may indicate the market is overbought. Then it needs to be reviewed for many time frames. Monthly, Weekly, Daily, 4-hour, 1-hour, etc... All will have different readings - you would need to decide which is most important to you. An ETF may be overbought on some time frames and not on others.

Another common tool is to use the price percent distance over the 50-day moving average. Then comparing that percentage to previous history and computing probabilities.

These tools help but they are not perfect. Nothing is.

For your perspective, I have enclosed daily charts of our holdings since the first of the year. You can see the current RSI for each and look back at some history. UDOW on this time frame looks the most overextended. Could we pull back from here? YES. Could we move higher from here? YES.

Last I have enclosed a daily chart for the Rydex Bear, Bull Index. You can see how it has moved lower (sloping down favors the Bulls). You can see it looks nothing like the Covid spike in February and March of 2020. This ratio may change, and it may change quickly, but it has not changed yet.

Our plan this week? We will stay flexible and keep an open mind to changes in either direction. We will follow the math.

V2 Allocation:

NAIL (35%)

TQQQ (33%)

UDOW (32%)

We are 100% invested.

The V2 Model has performed exactly as expected.

Distance=Victory

Chris

ps. Please invite others to join The Vig Company. And also, please, do not share the V2 Model allocations with others. We keep the monthly charges low for all as everyone pays their own way. Our information should not be copied or shared in any form.

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