ETF

Collaboration

by

This site is designed to allow collaboration among people who are managing or intending to manage their retirement investments themselves.

The important elements of retirement investing are covered including stock/ETF selection, asset allocation, rebalancing, BUY/SELL timing. What is out of scope is retirement budgeting, expense management, and other financial planning topics such as estate planning.

One of the elements of the site is a monthly strategy that is designed to provide low risk return with a predictable income stream. This strategy is grounded in technical investing theory as well as economic theory. It is designed to be reviewed and managed on a monthly basis.

Review the various postings on the site at your leisure. And “follow” topics of interest to get emails as updates are created. read more

OTM Market Update – Inspection

by

The best way to understand the market is to look at it in various timeframes.

Below is a picture of the S&P since 1982.  The shaded areas are official “recessionary” periods.  At a weekly level the technical model is saying Sell in all periods.  So we start with the overarching long term trend as downward.

02282016 GSPC W

 

 

 

 

 

 

A Daily view of the S&P also reveals weakness.  The technical model is Sell in the Intermediate and Long term, consistent with the broader Weekly view.  Note that the S&P is a BUY in the short term view.

02282016 GSPC D

 

 

 

 

 

 

An Hourly view of the S&P reveals short term emerging strength.  The technical model is SELL in the hourly long term and intermediate term, but BUY in the near term hourly period.

02282016 GSPC H

I believe what we are seeing is a short-term upward movement in the market but in the context of a broader, long term downward market.

Turning attention to Bonds, the TLT ETF (Long Term Bonds) have been strong.  On a weekly basis going back to 2010 the technical model is BUY in short and medium terms particularly in the past 18 months.

02282016 TLT W

 

 

 

 

 

 

A Daily view of TLT reveals recent strength.  It is now BUY in all periods.  In some respects this is a confirmation of investor anxiety reflected in the high VIX and continuing concern about the market in general.  It is also a reflection of the belief that the Fed has no room to further raise rates with an economy that is weaker than the Administration is advertising.

02282016 TLT D

 

 

 

 

 

 

An Hourly view of TLT confirms the above.  TLT has been a BUY on the hourly chart since late January.

02282016 TLT H

 

 

 

 

 

 

We are watching DOG, the inverse ETF, for an investing opportunity.  There was an opportunity for investing back in mid-December, but the opportunity expired with a profit at the end of January.  I will continue to keep you posted on the opportunity.
02282016 DOG H

 

 

 

 

 

 

Overall, the recommendation for intermediate term investors (not short term traders) is an 80% fixed income / 20% market equity allocation as we protect principal and wait for a trend in this market.

OTM Market Update – Reiteration

by

The advice from the January 17 post is still in effect.  As the S&P 500 toys with 1880 (it closed at 1853 today) you should prepare for a material drop if that 1880 level does not hold.  By now you should only have a small equity position.

As has been noted by others, there is an ominous piercing of the neckline of a head and shoulders setup in four different S&P 500 time frames, including daily and weekly.  This market may rise again beyond 1880 but as I said last month the risk/reward is simply not worth it.  If you have not yet positioned yourself for a material downside drop you should do so, with the idea that this market may climb again back above 1880 and even as high as 2040 but this chart looks like we are on our way down in the intermediate term.

The model is 6.1% ahead of the S&P500 in the trailing 12 months, 6.4% in the trailing 2 years, and 7.8% in the trailing 3 years.

The DOG S&P inverse ETF has not yet fired to a BUY, but for those interested in being aggressive it is BUY in the short and medium terms.  Note that this market may come back up to “kiss the trend line” before it fades so you may be early but you likely won’t be wrong.

02082016 GSPC

OTM Market Update – Preparing for a Trend to Emerge

by

As noted in prior posts the 1880 mark for the S&P (which is currently at 1940) has proven an important measure.  When 1880 holds there is always the likelihood that we might see another leg up in the market.  If 1880 fails there is almost certainly going to be a material collapse to the downside.

The S&P bounced off of 1880 and is now at 1940.  Intermediate and Long term indicators are still leading downward, and for that reason today I include a look at DOG, which is the S&P Inverse ETF.  While not yet a BUY it represents an opportunity to make money in a bear market for those Intermediate term investors whose assets are already properly allocated.  When DOG fires a BUY I will pass that along in an update.

The S&P was down 5.1% in January.  TLT (long bonds) were UP 5.5% in January not including the associated dividend income.  This again stresses the importance of asset allocation.  We continue to be about 80% Fixed / 20% Market as we wait for this relative volatility to pass and reveal a trend that intermediate term investors can capitalize upon.

01312016 DOG

01312016 GSPC 01312016 TLT 01312016 GSPC hourly

OTM Market Update – Following the Model Part 2

by

The technical model is now 2.3% ahead of the market over the past 12 months, and ahead of the market at the 2 and 3 year periods as well.  Recommended Equity allocation is around 8%.

The inverse S&P 500 ETF (DOG) is approaching a BUY point, as it is BUY in short and intermediate periods but not in the long period, at least yet.  If you care to try to profit on market weakness you can use an inverse ETF.  I will wait until I get a long term signal before buying.

It will be a while before the model is long back into the market.  The action is whether or not to take a material short position.  I will be doing research with the model over the next several days to support that strategy.

Mark

09012015 DOG

09012015 asset 09012015 GSPC

OTM Technical Model – ETF Backtesting Results

by

Attached is the most recent backtest report for the technical model as run against a universe of 640 high volume ETFs.    The first trades start in 1997.

Capture4

 

 

 

 

 

 

 

 

 

 

Capture 4 equity

 

 

Portfolio equity increases at a pace much slower than the NASDAQ composite.  Many of these ETFs are bond funds, and the model is indifferent to asset allocation.  There are losses in 6 years of the 22 year period (2000,2001,2002,2008,2011,2015), although none top 8.8%.  What you can see is that again the model is designed to protect against severe downtrends.  So far in 2015 the model is down 0.6% through yesterday.

Risk adjusted return — that is, the return of monies actually invested — is 8.67%.  The average length of time of a trade is 157 trading days, or a little over 7 months.

Winners are held about 210 days longer than losers, and the win percent is almost 50%.

The attached backtest listing is a summary of the trades, including those that are still “open”.

07062013 final v76 backtest ETF

 

June 6 2014 – Just like last week. Only longer in the tooth.

by

All four ETF technicals (SPY for the S&P500, VEU for International, BSV for short term bonds, and TLT for long term bonds) are in the BUY range for all intervals.  But there are some cracks developing, and deterioration particularly in the short term aspect of the models.  Maybe we’ll sell in June and go away after all…stay tuned.

SPY – US Equities
TLT – Long Term Bonds
VEU — International Equity