What the Charts Say
A market pull-back just before a long holiday weekend is not abnormal, particularly following a strong market run-up. Overall, various indicators suggest investors are not running for safety – just doing a little profit-taking. Additionally, some traders worry that if any serious news breaks over the long weekend, it will more likely take the market lower than higher. Thus, it is not uncommon for some traders to take a few chips off the table before the weekend and then buy back on Tuesday if all is well. The strong jobs report last week along with Monday’s strong European markets (up about 2%) bode well for a strong open in U.S. markets on Tuesday.

In the bigger picture, the market has already repaired most of the Covid-19 induced damage. However, a significant divergence has developed between technology companies that have cashed-in on the pandemic economy, while transportation, energy, restaurants, and the travel industry have taken it in the shorts. Expect a strong, but limited, rebound in these pummeled industries when vaccinations become available. Nevertheless, the work-from-home-economy will continue to command premium valuations for its association with personal health and its unstoppable growth even in the face of a pandemic. As we get closer to the election, we should expect uncertainty to weigh on the markets as investors cautiously hedge their bets, especially since so many pollsters lost credibility following their abysmal 2016 election forecasts. In any case, we’ll soon be on the edge of our seats with election adrenalin pumping as we learn which new trends will become our friends.

SwanGuard Vaccination Deployed
As previously reported, SwanGuard Vaccination was deployed across all of our SectorSurfer, AlphaDroid, and Merlyn.AI platforms on July 22^nd.  Its purpose is to detect the onset of a Black Swan event, such as the recent Covid-19 induced market crash, and escape crashing markets to the relative safety of US Treasury funds. Briefly, it works by detecting a strong rise in the VIX volatility index and is confirmed by an upward movement in US Treasuries, a downward movement in equities, and other factors. Please the MAIindexes SwanGuard page for additional information about employing it. 

Merlyn.AI and Wealth Management.com
On August 25^th our COVID Crash Vaccination article and facing full-page ad appeared in the Wealth Management Midyear Outlook special edition (electronic and print). You may note that the ad refers to sister company Merlyn.AI as a finalist in the Wealth Management 2020 Industry Awards. They will host an online awards event on September 10^th. Sue Guzman of Merlyn.AI got us nominated as a Finalist in two categories: Asset Managers–ETFs, and Disruptors–Technology.  Our fingers are crossed!  We'll keep you posted.
 
Introducing Valéry Talma, The New Merlyn.AI Corp. COO
Please welcome Valéry Talma, the new Chief Operating Officer and Director of our sister company, Merlyn.AI Corp. Last week, I had the opportunity to spend a day-and-a-half with him discussing business strategy and introducing him to some of the folks in our ecosystem. He is a very strategic thinker and we are honored to have him on the team. Valéry has been the Deputy General Manager of Gulf Bank in Kuwait, Managing Director - Head of Investment Banking Advisory of HSBC in Saudi Arabia, Managing Director - Middle East & Africa Investment Banking of Credit Agricole CIB, and Vice President of UBS in Paris and London. Mr. Talma holds a BA in Economics and Business (Magna Cum Laude) from UCLA, and an MS in Business Administration from HEC Paris. Recently he has taken Continuing Studies courses in Computer Science - Artificial Intelligence at Stanford University.

Les Mosier, Master of Safe Surfing
Retired LtCol Les Mosier, a former USAF Chaplain, amazingly found SectorSurfer just eight days after it went live in December of 2010. Of course, we love his testimonial found on SectorSurfer's home page that states: "This product stands like an oak tree amid a forest of saplings."  In our 2013 Portfolio Design Contest, Les won the Grand Prize in the "Lowest Drawdown Risk" category with his Mosier's Vanguard Income Portfolio (still posted). Back in the day, he dominated the Strategy Hall of Fame Safety category with various Vanguard mutual fund Strategies. His set of Vanguard Strategies literally taught us all how to design Strategies to achieve remarkably better safety. Les readily admits that he has excess time on his hands and seems to have found a fun new video game for adults. 

Les has now logged-in to SectorSurfer well over 6,000 times and has extended his design skills to other categories within the Strategy Hall of Fame page – what's life without a challenge?  A few months ago I commented to Les in an email that the Safety Strategy category had unfortunately been taken over by Strategies composed of bond/treasury mutual funds with terrible load fees from a mix of different companies, which makes trading such Strategies impractical. I suggested to him that someone with his skills might consider solving that problem by employing ETFs, which now have quite a bit of history under their belts. Les took the bait and his ETF Safety Strategy designs have again literally transformed the category. Variations of his Strategies are now appearing from others, and the problematic mutual fund Strategies are now nearly gone.

The animated chart (right) sequentially displays Les Mosier's seven Strategy Hall of Fame listings. The nature of these Strategies may be surprising. Our definition of Safety = (Sortino Ratio)/(Relative Risk). Under this definition, the return is doubly punished by downside deviation. Still, we aren't in this game to stuff cash under a mattress in a vault – of course, return matters. Safety is really about minimizing downside deviation. We can do better than simply owning bonds through the reliable transfer of leadership from one well-behaved fund to another and by proficiently shifting focus between a set of offensive and defensive funds to address bear markets. Just like in sports, the best team on the field is not composed of people from all walks of life but athletes who can reliably carry the ball and pass it to other teammates. 

May the markets be with us,