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Strategies & Market Trends : AIM Questions and Answers

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To: Philip Ng who wrote (142)	12/20/2000 11:24:53 AM
From: OldAIMGuy	of 221

Hi Philip, As you've probably already figured out, shifting the bias of the SAFE values shifts the position of the Hold Zone. It really doesn't change the size of the zone, however. Having a Sell SAFE number that's larger than the Buy SAFE builds in a bias for accumulation. Reducing the Buy SAFE value below 10% accelerates the buying activity. This occurs because of the incremental increases in Portfolio Control with each successive buy. The way I use the 'vealie' is with the Idiot Wave. That's a moving target. Last March it was requesting us to have cash in reserve for individual stocks of 60% with only 40% invested. Not a bad call. However, the size of the market bubble and the long corrective period that has followed has many AIMers strapped for cash. Bernie Goldberg has pointed out that the problem in this particular cycle hasn't been the lack of accumulated cash reserves as much as too frequent and aggressive buying on the down turn. He used as a simulation UOPIX. He showed that even with a huge cash reserve UOPIX exhausted it all way too early because of buying on a weekly basis. However, it would just recently have run out of cash if only monthly buys were made. So, one has to factor in Frequency as well as SAFE values. I'm not sure there's an optimum setting that's right for every stock and fund for all market conditions. Generally it appears that most AIMers error by too frequent trading and too frequent manipulation of AIM's internals. The frequency issue is really dependent upon the equity involved more than any other single feature. Some equities benefit from more frequent trading in that they have frequent price fluctuations. Changing SAFE too frequently tends to lead many to being arbitrary and emotional at which point AIM starts to lose its consistency of performance. I addressed this topic a bit more over on the other thread this AM. Check my reply over there as well. Your idea of letting a moving average be a guide to making SAFE adjustments has merit. Something else I use the 26 week moving average for is with AIM's buying and selling activity. If like last March we have a massive run-up in the price of a stock, AIM will probably have us starting our buy-backs well above the 26 week moving average. I usually wait until the price/share has dropped below the M.A. and then satisfy AIM's purchasing desires. This also has the effect of slowing the 'burn rate' of the cash. Thanks for bringing your thoughts to the forum. Best regards, Tom

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