REVIEW OF THE PERFORMANCE OF SHARE RECOMMENDATIONS FOR 2022
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21st December 2022
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It was something of a mixed bag for the performance of 'Sexton Reads The Charts.com' in 2022. It was a year that possibly nobody could have predicted, most of which was determined by one key event - Putin's invasion of Ukraine. I don't think anyone was predicting that at the beginning of the year. Indeed, I must admit that when Russia was reported to be mobilising its army at the Ukrainian border in January 2022, I was on the verge of writing an article saying this was mere posturing by Putin and investors should ignore it! The tanks rolled in across the border before I got around to writing it..
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This major unexpected event had the effect of changing the stock market trend from bullish to bearish, changing the interest rate trend from slightly upward to sharply upward, and sending the environmentally unfriendly 'dirty' commodity stocks in the oil and gas sector (which were being boycotted by the ESG and other 'green' funds) soaring to the heavens! Only a 'deep value' investor, who had tolerated years of prior underperformance on their investment portfolio, would have outperformed the market indices in 2022, in my opinion.
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However, the prediction for the direction of the market in the 'Overall Market Trend' section did very well for us, once again in 2022. The key indicator used is the 150 day simple moving average for the S & P 500 index. It flagged a sell signal on March 7th, when it had turned downwards, with the index at 4,328. The index is currently trading at 3,822, being a fall of almost 12% from that level at which we turned bearish on the outlook for the overall market.
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The all time high in the S & P 500 index was 4,796 which it reached in January 2022. Therefore, the index was down almost 10%, before the 150 day simple moving average flashed a bearish signal. That is acceptable, as technical analysis will not get you out at the very top (or in at the very bottom), but only seeks to get reasonably close to indicating these levels.
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In my opinion, there is no indicator, either technical or fundamental, that reliably indicates the very top or bottom of a market, and it is a waste of time searching for one. The best one can do is to determine that we are in 'danger territory' - but in my experience those 'danger territory' indicators saying that we are close to the top, can be flashing for what seems to be quite a long time before they finally come good. And of course, no indicator is correct 100% of the time.
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As regards the performance of the individual stock recommendations, the performance was mixed. Technical analysis is a trend following technique, therefore, in a year when the trend changes - it will usually underperform. However, in most years, the trend on stock markets remains unchanged, so technical analysis will usually outperform.
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Our best performance was the Irish share recommendations. These registered an average gain of 2.3% versus a fall in the ISEQ index of 9.6%.
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The next best performance was for the US share recommendations, that are constituents of the S & P 100 index. These registered an average loss of - 6.1% compared to a fall in the index of - 19%.
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The Euro Stoxx 50 share recommendations showed an average loss of -14% compared to a fall in the index of -7%.
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The NASDAQ share recommendations showed an average decline of - 42% compared to a fall of -31% in the index.
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Our poorest performing sector was the FTSE 100 recommendations, which showed an average fall of - 19.5% versus a rise of 4% in the index.
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On a cumulative basis, the outcome was an average loss of -15.9% for our share recommendations compared to an average decline of - 12.5% in the stock market indices per above. However, that negative outcome is very much offset by the correct negative indicator given for the overall market trend on March 7th.
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On a more positive note, while SRTC subscribers would have an average loss of -15.9% per stock, they would have had a lower amount invested in stocks, if they heeded the bearish signal given on March 7th, when their portfolios are compared to investors who remained bullish for the entire year.
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In other words, the investor with €100,000 invested in stocks which go down by 15.9%, and €100,000 in cash, will still do a whole lot better than the investor with €200,000 invested stocks that go down 12.5%!
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That is a tolerable outcome in a difficult year. The overall market trend changed during the year, and technical analysis will usually underperform for a period of time centred around the top (or conversely, the bottom) of the market.
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A detailed breakdown of the performance of all recommendations for 2022, together with updated recommendations for all of these, can be found on the following page - CLICK HERE.