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Hi JD, Re: v-Wave ST vs LT Crossovers...............................
Once again the cross over of the shorter term and longer term v-Wave lines has temporarily shown a near term inflection in the Indexes.
I guess this doesn't mean there couldn't be some further downside, but at least the sell-off sems to be slowing.
The SignalPoint MRI has been a bit slower to acknowledge the sell off as being finished. But, it's still descending.
If nothing else, it's nice to have some of the market risk sublimate.
Best wishes,
OAG Tom
Current AIM-CASH weekly values -- Small-cap
With kind regards,
-- MakeItJake
Current AIM-CASH weekly values -- Mid-cap
With kind regards,
-- MakeItJake
Current AIM-CASH weekly values -- Large-cap
With kind regards,
-- MakeItJake
Re: Why the MRI Risk is Falling................................
Looking at the Speculation component of the MRI will give you some insight as to why the MRI risk is declining.
This is the Spec. Index's first journey into Proactive territory since 11/24/2023. It shows just how far speculation risk has dropped since last year's presidential election. Most of the recent drop has happened just in the last few weeks. This is Week 2 of proactive Speculation. Note that this can be breeding grounds for bouncy cats.
Best wishes,
OAG Tom
Re: SignalPoint Market Risk Indicator ...............................................
A similar story is shown in the MRI histogram. It is also showing 31% current cash recommendation, down 2 points from last week.
The "dead cat bounce" in 2022 isn't as well defined here with the MRI, mid year. However, there was a brief "Caution" signal at the end of that year. Should we expect one this time around? Note we're still a bit of distance above the Proactive level with both the MRI and the v-Wave measures. It's as though the Markets are offering us Hors d'oeuvre to get our appetites ready for the Main Course. From what I've been reading, some investors went straight for the dessert table. Mr. Lichello's proportional purchasing aspect of AIM will suit us well, however.
Best wishes,
OAG Tom
Hi Jon, Re: v-Wave histogram...........................
Since we're getting back toward reasonable v-Wave values, I thought looking back at 2022 might be instructive for those who feel the need to hurry their stock/fund purchases. Sometimes the pendulum stalls for a while before successfully reversing its direction.
Best wishes,
OAG Tom
I've completed a few more. I've had computer issues over the last few days, and just got the issue resolved this morning, so I'm behind on testing. I'm rethinking the 10-year testing as it simply takes too long and I'm not sure what additional benefits it provides. Many of the leveraged ETFs had lackluster volatility in the first few years of testing, and there weren't many trades, which hurts overall performance for the period.
The main reason I switched to 10-year periods in the first place was to obtain performance during more downturns in the market, to evaluate maximum drawdown, but I found the website www.portfoliovisualizer.com that determines the historical maximum drawdown for me, and I've already tested various drawdown strategies for several ranges of drawdown, and now can evaluate each fund separately and employ the drawdown strategy more appropriate for that specific ETF.
I've suspected this for a while after testing prices from many years ago, but it seems to me those managing leveraged ETFs have gotten a lot better over the last 5 years at achieving the target daily returns (and resulting volatility), by whatever means they employ, than in the earlier years. In many cases the earlier years ETF prices were in the low single digits, which might also have been a contributor. In any case, going forward I'm generally going to doing 5-year testing only, and may re-report the previously completed results for only the 5-year period.
Here's the updated table with some new additions. I want to have all testing completed by end of March so I can update everything and possibly just update once per quarter afterwards. Some ETFs may drop off in the future, since some are duplicates of the same index, only with different investment firms. My goal is not to randomly test leveraged ETFs, but to test those I am considering for my own use. But, as you can see from the only global ETF on the list, the performance isn't exactly what I'm looking for from a leveraged ETF. Perhaps the more recent 5-year test will yield better volatility and better results than in earlier years.
Also, since I already have the 10-year data on all of these, I think I'm going to approach each new 5-year test by looking at the previous 52-week data to evaluate where the starting share price is in relation to the 52-week range, and use this to adjust the initial 50/50 split a bit to match where the current share price is in that range. For example, if I was about to invest in SOXL, I can see the current price is very low in the 52-week range, so I'm likely not going to start with a 50/50 split, but perhaps 60/40 or 70/30, since less cash would be needed for the drawdown that's already occurred.
Sorry for another long post. I type very fast and words go on the screen about as fast as I'm thinking them. Diarrhea of the keyboard is what one of my friends call it. LOL
Current AIM-CASH weekly values -- Small-cap
With kind regards,
-- MakeItJake
Current AIM-CASH weekly values -- Mid-cap
With kind regards,
-- MakeItJake
Current AIM-CASH weekly values -- Large-cap
With kind regards,
-- MakeItJake
Newton had bubbles
Gravity was the Lesson
I thought this was New!
😎
OAG Tom
Current AIM-CASH weekly values -- Small-cap
With kind regards,
-- MakeItJake
Current AIM-CASH weekly values -- Mid-cap
With kind regards,
-- MakeItJake
Current AIM-CASH weekly values -- Large-cap
With kind regards,
-- MakeItJake
Update on my leveraged ETF testing using the preemptive AIM model. I'm about halfway with testing the funds I want to test. Amazing results. Lichello was a genius.
One thing I noticed today in completing the Technology ETFs is how rapidly the share price turned. Within a few weeks there were multiple alternating buys and sells captured by the preemptive model that would likely have been missed with manually updating AIM. It's not often I've seen this behavior but it was present in these ETFs.
These results are current as of end of February 2025. I expect to have all testing completed by end of this month and updated for end of March share prices. I am now testing everything for 10 years if the fund has been around that long. I watched a YouTube video on leveraged ETFs that directed me to a site called Portfolio Visualizer that provides excellent analysis of volatility and maximum drawdown on each of these ETFs, and I'm using this to classify the drawdown strategy needed for each fund to prevent running out of cash too early in major declines. Working well so far. This is quite a lot of work, but I'm enjoying it and learning a lot about how I want to use preemptive AIM with a number of these ETFs.
This chart is easier to view if you click on the chart to open the full size image.
For many investors that were 100% or more invested (with Margin) the last couple of weeks may have been somewhat painful. AIM has once again proved to be better using its 20/20 Hindsight rather than a 50/50 Guess about the future. The v-Wave did I nice job of suggesting caution as well. It's nice to see some of the market risk evaporate as the markets consolidate.
SignalPoint's MRI also shows a turning tide of market risk. Even if these two indicators aren't used directly, they certainly do a nice job of confirming what AIM does automatically.
v-Wave down one to 31% suggested cash; MRI down one to 34% suggested cash.......
Best wishes,
OAG Tom
Two months into 2025 and the markets seem a bit confused so far. Here's the various portfolios I maintain:
U.S. Sector ETF Composite Portfolio of 10 business sectors
(18% current cash reserve)
10 Company Stock Composite Portfolio
(22% current cash reserve)
Tom's Simple IRA, Now managed with AIM
(23% current cash in reserve)
9 International "Style" type ETFs covering Growth and Value in Small, Mid and Large Caps
(27% current cash reserve)
These portfolios were basically flat for February. The first two days of March haven't been very friendly with the exception of the components of the International Style ETFs. They've been holding up better. There's not much action as of yet, but there's cash available should we see a healthy decline. In the meantime, I'm keeping some powder dry.
Best wishes,
OAG Tom
Here are full backtest results for NAIL (Direxion Daily Homebuilders & Supplies Bull 3x Shares) ETF.
Test period: 9.5 years
$50,000 invested on inception date of 8/19/15
Ending date: 2/28/25
AIM total return was 1,165% and Buy/Hold total return was 282%
AIM APR was 30.5% annually over the period
Ending Portfolio Value: $632,477
Ending Cash Value: $348,588
At highest value on 10/1/24 the portfolio value was $893,202 and cash value was $469,278 with overall return of 1,686%. Share price at this point was $170. At the end of the test period reported above share price had dropped to $70 and is on a downtrend with AIM buying shares.
These results obtained using standard 10% SAFE and 10% Minimum Transaction Size. Since this is a Deep Diver ETF, I increased Buy SAFE in 10% increments following each purchase, and reset it to 10% on the first sell. However, when Portfolio Cash exceeded 60%, the standard 10% Buy SAFE was used until it dropped below 50%, then I started to use the 10% incremental increases. The model ran out of cash only once during the test period, and Black Swan trading generated nice profits as the last purchase that wiped out cash was a rather large one.
Hi Jon,
Here they are in Living Color!
....and SignalPoint's MRI....
Both fell in risk profile this week with the 3-5 year v-Wave now at 32% and the MRI showing 34% (down 2 points).
It could get a lot better for future returns, but I don't mind seeing risk decline a bit.
Best wishes,
OAG Tom
Current AIM-CASH weekly values -- Small-cap
With kind regards,
-- MakeItJake
Current AIM-CASH weekly values -- Mid-cap
With kind regards,
-- MakeItJake
Current AIM-CASH weekly values -- Large-cap
With kind regards,
-- MakeItJake
I believe this ETF is one of the very best candidates for the AIM algorithm. It is both cyclical and demonstrates high volatility, which makes AIM really shine. My earlier post comparing multiple leveraged ETFs indicated it was one of the best performers over the 5-year period. This 10-year chart shows the ETF prices over the entire life of the fund. I will be updating my performance listing to show the full 10-year performance.
If you're willing to explore leveraged ETFs with part of your investment portfolio, I would suggest this one as a candidate. Look at the numerous buying and selling opportunities where AIM would generate profits.
Will, after putting together 10-year historical data on BTC price, it seems pointless to run a comparison to buy-and-hold for this. There's no way AIM will even be remotely close given the price trajectory from $275 on Day 1 of the 10-year period to approximately $80,500 at the current level.
Where would one even begin with the AIM settings? 100% Equity / 0% Cash at the start? How would one set Sell SAFE or Minimum Transaction Size to prevent reducing the bitcoin count or share amount to near zero, given the orders of magnitude of scale reached in pricing? I realize AIM never reduces share count to zero, but walking halfway to a wall with each step eventually leaves a distance that would have to be measured with a micrometer (essentially zero).
The 10-year chart shows a buy-and-hold return of 29,175%, which is an annual return of 174.9% over the period.
I started testing this period under a couple of different settings, but quickly realized there are no AIM settings that can adequately capture such a massive price swing of several orders of magnitude. To prevent the model from running out of cash on price corrections, one would need to implement a lot of huge adjustments to SAFE settings. Or to prevent a extremely large cash position on major price upswings, one would have to take so many Vealies the model quickly mirrors a buy-and-hold strategy.
It is far easier for AIM to manage a Bitcoin ETF, which consist of two types:
1. Spot Bitcoin ETFs that invest directly in Bitcoin, available since early 2024
2. Bitcoin ETFs that invest in Bitcoin futures derivatives but not in actual Bitcoin, available since 2021
I initially starting tracking performance of Fidelity's FBTC Spot Bitcoin fund, but was looking for more volatility so I switched to 2x-leveraged BITX ETF.
Here's the Bitcoin chart for the most recent 10-year period, which clearly explains the difficulties of backtesting using AIM for this period.
By the way, I'm not Jake. 😎
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Here's a handy "Quick AIM Calculator" for finding the next AIM directed Buy and Sell prices for your portfolio holdings:
A.I.M. Users Bulletin Board (AIMUSERS): Thanks LC, Now they can use the "calculator" again! (advfn.com)
While the AIM book is no longer being reprinted, it is available from Amazon for their Kindle for $5.99.
http://www.amazon.com/How-Make-Stock-Market-Automatically-ebook/dp/B002VKJ1EI/ref=sr_1_1?s=books&ie=UTF8&qid=1395757939&sr=1-1&keywords=lichello
Mr. Lichello wrote the book on AIM in 1977. In the mid-'80s he put an infomercial on AIM on late night TV and attempted to sell his workbook and audio tapes.
(1) How To Make $1Million In The Stockmarket Infomercial - 1985 - YouTube
It's a reasonable review of the AIM method for those who are unfamiliar.
Run A Successful Equity Warehouse
Welcome to the AIM Users Bulletin Board. This is the thread to post your thoughts, questions and comments on the use of Robert Lichello's Automatic Investment Management for handling the risk of being involved in the Equities markets.
The AIM strategy gives the user LIFO gains of 20% minimum if the method is followed "by the book." It is ideally suited to those seeking long term investment growth while managing the risk of being invested.
Thoughts on being a successful Individual Investor
I wrote this book review a long time ago. It's a trader's interpretation of
Sun Tzu's "Art Of War." I related it to AIM as best I could.
------------------------------------------------------------------------
Mr. Lundell says, "Today's financial markets are the last bastion of unabashed conflict.....
To participate, you must be your own general, devising a strategy, gathering information, executing your plan, and adapting to the situation."
How can we use AIM and the v-Wave for strategic and tactical planning to carry out Mr. Lundell’s requirements to participate in the Equity Markets?
"Be your own general"
You are in charge. You are responsible. When you win, you benefit. When you lose, only you are to blame.
a) Broad trends persist. Discover them. They will survive boom and bust.
b) Don't contemplate engaging in war while beholden to another. They could become your ruler!
To me this means "Stay away from Margin Buying unless you are certain of victory."
c) Establish and maintain a "Baseline of Survival" for your command.
This is the "income" side of my overall portfolio.
d) Know that reality is governed by Darwinism; Long Term Survival belongs to the fittest.
"Devise a Strategy"
Our strategy is to sell inventory into market strength and to buy into market weakness. Robert Lichello's AIM algorithm provides us with a systematic approach to follow that employs this strategy.
a) Sell quality merchandise to all those willing to pay.
b) Buy quality merchandise when the price offers reasonable hope to resell at a profit.
c) Let the allocation of resources and inventory be governed by the course of the market and AIM's guidance.
"Gather Information"
Today there is no excuse for not being informed.
a) Differentiate between information VOLUME and QUALITY.
b) Differentiate between FACTS and OPINION.
c) Find good sources of judgement where you cannot act as judge.
d) Information is trusted only when provided by those proved trustworthy.
"Adapt to the Situation at Hand"
The v-Wave measures general U.S. Market Risk (and may be sensitive to world market risk) from low to average to high. This helps you gauge the situation by:
a) Gauging your initial cash reserve requirements on new investments
b) Gauging your on-going cash reserve requirements on established investments
c) Judging whether to establish a bias for accumulation or distribution
d) Possibly starting no new AIM accounts when the v-Wave is showing High Risk
e) Possibly ignoring all AIM Buy Signals during v-Wave High Risk events.
f) Following all AIM buy and sell signals during v-Wave Average Risk events
g) Possibly ignoring all AIM Sell signals during v-Wave Low Risk events
h) Re-assessing your "Baseline For Survival" at times when AIM has your account heavily in Cash
i) Always attempting to beat measured inflation by 5 basis points minimum after all taxes and living expenses are paid. If you do this consistently, in good and bad markets, you will be winning long term
j) Possibly using "vealies" when your positions are cash rich relative to the v-Wave. Limiting supply helps to keep Momentum player’s Demand high.
"Execute your Plan"
Set the plan in motion; know that it takes time for realization. Follow the plan without hesitation allowing the goals to be realized. The strategy is sound so execution is all that is required.
a) Buy when the plan says
b) Sell when the plan says
c) Be very patient when no buy or sell signals are being generated
Reading Mr. Lundell's interpretation of Sun Tzu's work will help you focus on your own plan. It will arm you with knowledge of what others not using AIM are doing in the market. Understanding Short Term Trader's strategy and tactics is like having a spy in the enemy's camp. AIM users can profit by knowing just how these people think and act. AIM acts as almost a mirror image of what goes on in a trader's mind.
-------------------------------------------------------------------------------------------------------------
The v-Wave........
Mr. Lichello used fixed cash starting levels; first it was 50/50 then 67/33 and in the last edition of his book 80/20 for the Equity/Cash ratio. This "one size fits all" approach is like a broken watch that shows the correct time twice a day but is wrong the rest of the time!
Minstrlman, a regular contributor here, helped gather data from Value Line and formed a highly capable risk-cash indicator for our use. Since then, J Derb continued his work each week. As an adjunct to the AIM methodology we now have a Cash Indicator which helps guide our starting and ongoing Cash Reserve level of AIM relative to measured market risk. It can be used as a general market barometer or specifically with the AIM method. The v-Wave (or VW) is derived from the Value Line "Appreciation Potential - Next 3-5 Years" (VLAP) indicator shown weekly in their Summary and Index Section for their 1700 stock edition. Looking back through V/L's history we find the peak Appreciation Potential occurred 12/23/1974 at +234%. Our continuous database starts January of 1982 and we scaled our "zero cash" to the market risk low point of early that year. We take the VLAP and manipulate it to get an indication of how much cash should be reserved for diversified mutual fund AIM accounts. It should be multiplied by your stock or portfolio's BETA to get the cash reserve level of less diversified or more aggressive holdings.
v-Wave Weekly Cash Reserve Indicator For AIM Users
Current years of the v-Wave:
For diversified portfolios the Median value for the v-Wave is 29.5%. High Risk is 34% cash or higher for individual company stocks. Low Risk is 24% cash or lower.
To get a more proper cash level for individual company stocks multiply the current "Diversified" value by 1.5. This gives us 51% as the high risk threshold and 36% for the low risk boundary.
Looking at the cumulative risk of the v-Wave gives another perspective:
Cumulative v-Wave is calculated by taking each week's v-Wave Stock value, subtracting the median value from it and adding it to the previous total.
Significant historical events are shown nicely here and the v-Wave's response at those times.
v-Wave Calculations can be found at #30219. The data are a work-in-progress for now.
TooFuzzy provided us with a handy "Quick AIM Calculator" Here's a link to that page:
A.I.M. Users Bulletin Board (AIMUSERS): Thanks LC, Now they can use the "calculator" again! (advfn.com)
(follow the link on the above page)
AIM has a predictable pattern of "cash burn" in a declining market. Depending upon the SAFE settings AIM will generate new buy orders sequentially as share prices decline. It can be helpful to know in advance about how deeply AIM is going to draw down one's cash reserves. This link is to the "Cash Burn" AIM page. It shows various end points based upon the starting cash reserve level. Here's a link to that page:
"" rel="nofollow noopener noreferrer ugc" target="_blank">http://www.aim-users.com/cashburn.htm"; rel="nofollow noopener noreferrer ugc">A.I.M. Cash Burn Rate (archive.org)
Best wishes,
Old AIM Guy
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