No. of Recommendations: 3

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Thank you to all those who commented and criticized the new FCFLAN screen. Here are some thoughts on your responses.

1. From Winker:

  "There is an obscene January effect going on. Try some of the other start months."

Absolutely. FCFLAN worked obscenely well only with a January start date. One wouldn't use it for any other month's start date. Isn't that fine so long as its performance in both good and bad years continues? It's strictly a one time per year screen.

On a side note, one of the things I like about the screen is that its best performance seems to take place not in January but during the last months of the calendar year hold.

2. From Mainiac Joe regarding my comment on why I worked only with TimelinessTM 2-2:

"T=2 not only contains stocks recently promoted from T=3, it also contains stocks recently demoted from T=1. You can't rely on it to choose stocks whose best is ahead of them. For many the best is in the rear-view mirror."

Agreed. However, don't stocks that have been demoted also recover? Some technicians use the "cup and handle", others call it retracement followed by consolidation prior to beginning a "new leg up." John Bollinger has written that in his rating system the best moves are often made by those that retrace from a Potential 5 to a Potential 4. Likewise, I seem to recall Jon Markman making similar comments about MSN's Stock Scouter system.
In any event, the purpose of the FCFL sort is to identify from this pool the best values at that point in time. The debt to capital sort screens for financial strength and removes some risk.

But, you are definitely right: Timeliness2, by itself, cannot be relied upon to choose stocks whose best is ahead of them.

3. From Elann:

"This looks like a canary killer. The short backtest makes it easy to find spurious results. The Timeliness 2 preference is suspicious. And the elimination of the top FCFL stock is data mining almost beyond a shadow of a doubt.
The comment from winker clinches it -
There is an obscene January effect going on. Try some of the other start months.
I wouldn't touch it with a ten foot pole."

I cannot disagree with your comment about the short backtest. I wish it was longer, and only presented it because of its performance during both bull and bear markets.

The elimination of the top FCFL stock is not necessary for it to still show good results from 1997-2001. If one alters the screen to Timeliness2; selects the 10 with top FCFL per share divided by price; and then selects the 5 with the lowest debt to capital ratio, it still shows a CAGR of 53, GSD of 42 and a Sharpe Ratio of 1.20.

http://backtest.org/?SB9701011222XOfcflDcsoDpriCT8XOfcflDcsoDpriCB7XdpcB5UUUU

Once again, thank you all for your thoughts, and let me apologize for any typos or other problems. My WebTV Classic has been particularly obstreperous these past few days, and it has been a horror to cut and paste or edit.

I will post the two semi-annual FCFL screens either later today or early tomorrow.

Slievebricken
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