The market hath unbridled fury when efficient market performance is undermined with Machiavellian precision.

Recapping from the Part I installment (Ovobody – Portfolio Rebalancing – Part I; 2/6/2014) we are rebalancing Motif Investing’s “Chinese Solar” motif.  We selected this motif because of its highest year-to-date return at 98%, no sorry, that is in error.

In the past two days, since we began our analysis, Chinese Solar has increased to a dazzling 110.1% in yearly returns, simply based on the market’s pullback on Friday – averaging +1.2% in index gains.

Our benchmark, the S&P 500, bounced back on Friday: +1.2%. But to dramatize the plot by publishing “…made its biggest gains of the year” portrays more hype towards bullish optimism. It seems Motif Investing follows suit making its expected returns destination nearly 12% higher then two days before.

We recall when raising a champagne glass in Times Square at the stroke of midnight 2013, heralding in the new year, the S&P 500 at a historic level; 1850. That quickly faded into memory, piling on the down ticks, by dropping to 1737 within an astounding sell off during 2014’s first five weeks – tapping October 2013 highs, roughly -6.1%.  It would seem then that, the S&P 500 hasn’t actually made “gains” but has recovered +1.2% of -6.1% of losses so far this year.  That puts us at a -4.9% drawdown.

Portfolio Management – Chinese Solar

On February 6th, we back tested Chinese Solar to December 6, 2013. The outcome: -7.35% loss.  What gains we would have made between then and now are gone.  When Wall Street’s closing bell chimed on Friday, Chinese Solar showed a +3.17% profit.  Working within our current 30-day time frame we’re still down: -4.18%.

In contrast, Macroaxis  shows us a+4.40% increase (beta portfolio inception date 2/5/2014). Comparatively,  Chinese Solar return in this three day period would be between $10 to $15 in change on a $350 investment by Friday’s closing.

To qualify the year return percentage, we took a look back to June 4, 2013, the last time the S&P 500 plunged, hitting 1277.  It has gained approximately 575 points since, or a 30.9% gain to the end of 2013.   Across the board, 2013 was a bullish market. Chinese Solar actually would have exceeded even 110.1% in returns; Efficient Market Hypothesis (meaning a perfectly performing market) back testing shows a 265.6% gain in 270 days- adding 12 trading days into the new year.

If you invested $350 on or before June 2013, and weighted Chinese Solar equally, your capital gains would be estimated at $929.60 on New Year’s Eve 2013.   Beginning in February 2014 this prospectus’ capital gains benchmarked to the S&P 500 lost $56 (Balance: +$870) then earning $10 (+1.2%) and change by Friday.

Even though our 30-day back testing empirical data shows Chinese Solar moving almost in sync with the S&P 500, and at a -1% more loss prior to Friday’s market bounce, Motif Investing reports the Chinese Solar portfolio was up by +3.17% .

Giving Motif Investing the benefit of the doubt, the portfolio in our past 30-day window would need to make up -2.95%.  So how can Chinese Solar jump up from a yearly 98% return to 110.1% in two days?

That’s being optimistic.  According to our statistical point-blank twerp analysis, Chinese Solar is still down -2.2%, based on the past 30-days.

We’re not in Kansas anymore, Dorothy.

Currently, Chinese Solar’s individual Return on Assets* are:  CSIQ +.53%; TSL -3.17%; JKS +.93%; DQ -4.00%; YGE -3.23%; JASO -2.39%; HSOL -6.42%; CSUN -5.45%; SOL -1.28% and LDK at -4.29%.    

CSIQ and JKS are the only two assets that “could” sustain profitability in the wake of another market downturn.   The rest are “fish-out-of-the-water” laggards depicting an extremely risk averse valuation.

So what is the Net Asset Valuation of Chinese Solar?

The current resistance level for the S&P 500 is 1800.  Using the six month Day chart, the Rate of Change is at -2.2668 showing a slight upward swing.  The MACD Two Line oscillator shows a slight upward swing – presenting a possible Golden Cross in the near future.  However, we take the side of caution, the wide prolonged gap on the MACD is our compass.

All things considered, Chinese Solar is not a free spirited investment when it comes to restricting its intimacy from the S&P 500’s market performance.  If one were in the money on this one, it would be time to cash in and reset.  This is the juncture opportunity one looks for in an uncertain short-term time horizon.

This past week we’ve been on a scavenger hunt to find authentic securities that fit this thematic motif which will be introduced in the next segment:

Part III – Chinese Solar Rebalanced

*Resource:  Macroaxis Portfolio Management

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