Fund Flows

July 24, 2014

Mutual fund flow estimates are derived from data collected by The Investment Company Institute covering more than 95 percent of industry assets and are adjusted to represent industry totals.

ici 07.24.14 Fund Flows

This data is presented for illustrative purposes only and does not represent a past recommendation.

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High RS Diffusion Index

July 23, 2014

The chart below measures the percentage of high relative strength stocks that are trading above their 50-day moving average (universe of mid and large cap stocks.)  As of 7/22/14.

diffusion 07.23.14 High RS Diffusion Index

The 10-day moving average of this indicator is 80% and the one-day reading is 82%.

This example is presented for illustrative purposes only and does not represent a past recommendation.  The performance above is based on pure price returns, not inclusive of dividends or all transaction costs.   Investors cannot invest directly in an index. Indexes have no fees. Past performance is not indicative of future results. Potential for profits is accompanied by possibility of loss. 

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Systematic RS International

July 22, 2014

There may be some truth to the idea that there are greater opportunities for outperformance in less efficient markets.  That has certainly been the case in our line-up of separately managed accounts.  The strategy where we have been able to generate the largest margin of outperformance over time has been our Systematic RS International portfolio.

As shown below, this portfolio has outperformed its benchmark by 5.23 percent annually (net) since its inception of 3/31/2006.

1 Systematic RS International

As of 6/30/14

Characteristics of our Systematic RS International portfolio:

  • Invests in 30-40 international stocks out of an investment universe of several hundred American Depository Receipts (ADR’s).
  • Invests in Small, Mid, and Large-Cap stocks
  • Relative Strength determines which securities are bought and when they are sold
  • Minimum investment is $100,000
  • Available as a separately managed account on many different platforms.

Top holdings as of 6/30/14 are shown below:

2 Systematic RS International

To learn more about this portfolio, please call 626-535-0630 or e-mail andyh@dorseywright.com.

Historical Performance of the Dorsey, Wright Systematic Relative Strength International Strategy

The performance represented in this brochure is based on monthly performance of the Systematic Relative Strength International Model.  Net performance shown is total return net of management fees for all Dorsey, Wright & Associates managed accounts, managed for each complete quarter for each objective, regardless of levels of fixed income and cash in each account.  The advisory fees are described in Part II of the adviser’s Form ADV.  The starting values on 3/31/2006 are assigned an arbitrary value of 100 and statement portfolios are revalued on a trade date basis on the last day of each quarter.  All returns since inception of actual Accounts are compared against the MSCI EAFE Total Return Index.  The MSCI EAFE Total Return Index is a stock market index that is designed to measure the equity market performance of developed markets outside of the United States and Canada and is maintained by MSCI Barra.  A list of all holdings over the past 12 months is available upon request.  The performance information is based on data supplied by the Manager or from statistical services, reports, or other sources which the Manager believes are reliable.

There are risks inherent in international investments, which may make such investments unsuitable for certain clients. These include, for example, economic, political, currency exchange, rate fluctuations, and limited availability of information on international securities.

Past performance does not guarantee future results. In all securities trading, there is a potential for loss as well as profit. It should not be assumed that recommendations made in the future will be profitable or will equal the performance as shown. Investors should have long-term financial objectives when working with Dorsey, Wright & Associates.

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Relative Strength Spread

July 22, 2014

The chart below is the spread between the relative strength leaders and relative strength laggards (universe of mid and large cap stocks).  When the chart is rising, relative strength leaders are performing better than relative strength laggards.    As of 7/21/14:

spread 07.22.14 Relative Strength Spread

After a rough March and April, the RS Spread has stabilized and is showing signs of getting ready for a move higher.

This example is presented for illustrative purposes only and does not represent a past recommendation.  The performance above is based on pure price returns, not inclusive of dividends or all transaction costs.   Investors cannot invest directly in an index. Indexes have no fees. Past performance is not indicative of future results. Potential for profits is accompanied by possibility of loss. 

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Dorsey Wright Managed Accounts

July 22, 2014

Picture1 Dorsey Wright Managed Accounts

Our Systematic Relative Strength portfolios are available as managed accounts at a large and growing number of firms.

  • Wells Fargo Advisors (Global Macro available on the Masters/DMA Platforms)
  • Morgan Stanley (IMS Platform)
  • TD Ameritrade Institutional
  • UBS Financial Services (Aggressive and Core are available on the MAC Platform)
  • RBC Wealth Management (MAP Platform)
  • Raymond James (Outside Manager Platform)
  • Stifel Nicolaus
  • Kovack Securities
  • Deutsche Bank
  • Charles Schwab Institutional (Marketplace Platform)
  • Sterne Agee
  • Scott & Stringfellow
  • Envestnet UMA
  • Placemark
  • Scottrade Institutional
  • Janney Montgomery Scott
  • Robert W. Baird
  • Prospera
  • Oppenheimer (Star Platform)
  • SunTrust
  • Lockwood

Different Portfolios for Different Objectives: Descriptions of our seven managed accounts strategies are shown below.  All managed accounts use relative strength as the primary investment selection factor.

Aggressive:  This Mid and Large Cap U.S. equity strategy seeks to achieve long-term capital appreciation.  It invests in securities that demonstrate powerful relative strength characteristics and requires that the securities maintain strong relative strength in order to remain in the portfolio.

Core:  This Mid and Large Cap U.S. equity strategy seeks to achieve long-term capital appreciation.  This portfolio invests in securities that demonstrate powerful relative strength characteristics and requires that the securities maintain strong relative strength in order to remain in the portfolio.  This strategy tends to have lower turnover and higher tax efficiency than our Aggressive strategy.

Growth:  This Mid and Large Cap U.S. equity strategy seeks to achieve long-term capital appreciation with some degree of risk mitigation.  This portfolio invests in securities that demonstrate powerful relative strength characteristics and requires that the securities maintain strong relative strength in order to remain in the portfolio.  This portfolio also has an equity exposure overlay that, when activated, allows the account to hold up to 50% cash if necessary.

International: This All-Cap International equity strategy seeks to achieve long-term capital appreciation through a portfolio of international companies in both developed and emerging markets.  This portfolio invests in those securities with powerful relative strength characteristics and requires that the securities maintain strong relative strength in order to remain in the portfolio.  Exposure to international markets is achieved through American Depository Receipts (ADRs).

Global Macro: This global tactical asset allocation strategy seeks to achieve meaningful risk diversification and investment returns.  The strategy invests across multiple asset classes: Domestic Equities (long & inverse), International Equities (long & inverse), Fixed Income, Real Estate, Currencies, and Commodities.  Exposure to each of these areas is achieved through exchange-traded funds (ETFs).

Balanced: This strategy includes equities from our Core strategy (see above) and high-quality U.S. fixed income in approximately a 60% equity / 40% fixed income mix.  This strategy seeks to provide long-term capital appreciation and income with moderate volatility.

Tactical Fixed Income: This strategy seeks to provide current income and strong risk-adjusted fixed income returns.   The strategy invests across multiple sectors of the fixed income market:  U.S. government bonds, investment grade corporate bonds, high yield bonds, Treasury inflation protected securities (TIPS), convertible bonds, and international bonds.  Exposure to each of these areas is achieved through exchange-traded funds (ETFs).

Picture2 Dorsey Wright Managed Accounts

To receive fact sheets for any of the strategies above, please e-mail Andy Hyer at andy@dorseywright.com or call 626-535-0630.  Past performance is no guarantee of future returns.  An investor should carefully review our brochure and consult with their financial advisor before making any investments.

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Identifying Long-Term Trends

July 21, 2014

Businessweek’s recent article ”America’s Vanishing Bowling Alleys” caught my attention, in part because I had just taken my kids bowling.

bowledover Identifying Long Term Trends

The U.S. had 4,061 bowling centers in 2012, down 25 percent from 1998, the earliest year for which the U.S. Census collected consistent data. But the decline of the bowling alley probably started a lot earlier. The U.S. added 2,000 bowling alleys between the end of World War II and 1958, when the American Society of Planning Officials reported that “the bowling alley is fast becoming one of the most important—if not the most important—local center of participant sport and recreation.” (The growth spurt included a two-lane alley installed in the White House in 1947.)

I imagine that there are many avid bowlers who may have long predicted a resurgence in interest in bowling.  That is kind of the way that it works when you have an emotional link to any activity (or stock for that matter), it becomes difficult to understand and accept the waning demand.

Long-term trends are pervasive, including in the stock market.  I did a simple query on the Dorsey Wright research database for those stocks currently in the S&P 500 that have been on a PnF relative strength sell signal compared to the S&P 500 Equal-Weighted Index for over 10 years.  The query resulted in the following 14 stocks:

RS sell Identifying Long Term Trends

I then made one change to the query to look for those stocks currently in the S&P 500 that have been on a PnF relative strength buy signal against the S&P 500 Equal-Weighted Index for over 10 years.  The following 34 stocks were the result:

RS buy Identifying Long Term Trends

The beauty of Point & Figure relative strength analysis is that it provides an objective way to identify long-term trends—both positive and negative.  When it comes to a recreational activity, like bowling, by all means allow yourself to get emotionally attached.  However, when it comes to the stock market it is best to leave emotions out of it.  Click here to learn more about PnF relative strength signals.

This example is presented for illustrative purposes only and does not represent a past recommendation.  A relative strength strategy is NOT a guarantee.  There may be times where all investments and strategies are unfavorable and depreciate in value.  Past performance is no guarantee of future returns.

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Unrealistic Paradigms

July 21, 2014

The NYT unintentionally gives a great example of how NOT to analyze active equity strategies:

A new study by S.&P. Dow Jones Indices has some fresh and startling answers. The study, “Does Past Performance Matter? The Persistence Scorecard,” provides new arguments for investing in passively managed index funds — those that merely try to match market returns, not beat them.

Yet it won’t end the debate over active versus passive investing, because it also shows that a small number of active investors do manage to turn in remarkably good streaks for fairly long periods.

The study examined mutual fund performance in recent years. It found that very few funds have been consistently outstanding performers, and it corroborated the adage that past performance doesn’t guarantee future returns.

The S.&P. Dow Jones team looked at 2,862 mutual funds that had been operating for at least 12 months as of March 2010. Those funds were all broad, actively managed domestic stock funds. (The study excluded narrowly focused sector funds and leveraged funds that, essentially, used borrowed money to magnify their returns.)

The team selected the 25 percent of funds with the best performance over the 12 months through March 2010. Then the analysts asked how many of those funds — those in the top quarter for the original 12-month period — actually remained in the top quarter for the four succeeding 12-month periods through March 2014.

The answer was a vanishingly small number: Just 0.07 percent of the initial 2,862 funds managed to achieve top-quartile performance for those five successive years. If you do the math, that works out to just two funds. Put another way, 99.93 percent, or 2,860 of the 2,862 funds, failed the test.

Yes, that is right.  Unless a fund was in the top quartile of performance for each of the four years it was considered a failure.  The premise of the article is that investors should employ index funds unless they can find active strategies that outperform every year.  Talk about setting yourself up for failure!  I am aware of a number of investment factors that have generated outperformance over time (momentum, value, low volatility), but I am aware of nothing that outperforms every year.

The returns of those managers who are able to generate outperformance over time is rather lumpy.  Consider the performance profile of the best performing managers of the 1990′s as an example:

Cambridge Associates, a money management consulting firm, did a study of the top-performing managers for the decade of the 1990s. In 2000, they could look back and see which managers had returns in the top quartile for the entire decade. Presumably, these top quartile managers are precisely the ones that clients would like to identify and hire. Cambridge found that 98% of those top managers had periods of underperformance extending three years or more. 98% is not a misprint!  Even more striking, 68% of the top managers ended up in the bottom quartile for some three-year period and a full 40% of them visited the bottom decile during that ten years. Clearly, there are good and bad periods for every strategy.

Investing is challenging enough without setting yourself up for failure by placing unrealistic expectations on active managers.  I have nothing against index funds.  We use them in a number of our strategies and I think many investors can benefit from using them as part of their allocation.  However, they are not a panacea.

This example is presented for illustrative purposes only and does not represent a past recommendation.  A relative strength strategy is NOT a guarantee.  There may be times where all investments and strategies are unfavorable and depreciate in value.

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Weekly RS Recap

July 21, 2014

The table below shows the performance of a universe of mid and large cap U.S. equities, broken down by relative strength decile and quartile and then compared to the universe return.  Those at the top of the ranks are those stocks which have the best intermediate-term relative strength.  Relative strength strategies buy securities that have strong intermediate-term relative strength and hold them as long as they remain strong.

Last week’s performance (7/14/14-7/18/14) is as follows:

ranks 07.21.14 Weekly RS Recap

This example is presented for illustrative purposes only and does not represent a past recommendation.  The performance above is based on pure price returns, not inclusive of dividends or all transaction costs.  Past performance is not indicative of future results. Potential for profits is accompanied by possibility of loss. 

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Cullen Roche on Michael Covel’s Podcast

July 18, 2014

Listen to the 12:45 – 15:20 mark in this interview.  Cullen Roche has some key comments on pragmatism (something that we discuss regularly at DWA and a concept that separates winning investors from the rest).

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DWA Q3 2014 Update Webinar

July 18, 2014

Click here for our quarterly DWA webinar with Tom Dorsey, Tammy DeRosier, and John Lewis.

DWA Webinar DWA Q3 2014 Update Webinar

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Why Bother With Active?

July 14, 2014

National Geographic makes a provocative claim about longevity on one of its recent covers:

national geographic may 13 600x375 Why Bother With Active?

Our genes harbor many secrets to a long and healthy life.  And now scientists are beginning to uncover them.

While it might be a stretch that life expectancy in the US will be approaching 120 any time soon, what is not a stretch is that life expectancy continues to increase.  Among many other aspects of increased longevity, the financial implications of being a good investor are becoming more pronounced.

To illustrate, consider a simple example.  Suppose that when the baby on the cover of the magazine graduates from high school at age 18 he decides to take a summer job selling alarm systems door-to-door.  This boy is a very good salesman, and is able to pull in $100,000 before he heads off to college.  He decides to take that sum of money and invest it in the stock market.  Suppose that this boy ends up never needing to use that money and so throughout his very long life that money just stays invested and is able to earn 9 percent a year.  Compare that return to a different person who, over the same time frame, invests $100,000 and earns only 6 percent a year.

Table 1 Why Bother With Active?

With this simple example, it becomes easy to see how greater longevity can have an outsized reward for those investors who are able to generate even a couple percent excess return over time.  After only 10 years of investment results, the investor earning 9 percent a year only has 1.3 times more money than the investor earning 6 percent.  However, after 100 years there is an enormous difference of 16.3 more money.

Something to think about next time you hear someone say that it is not worth it to try to find an active strategy that is able to generate a couple percent in annual excess return over time.

This example is presented for illustrative purposes only and does not represent a past recommendation.  A relative strength strategy is NOT a guarantee.  There may be times where all investments and strategies are unfavorable and depreciate in value.

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Reconciling S&P 500 with US Economy

July 14, 2014

Interesting insights from Cullen Roche in Pragmatic Capitalism for those who have been having great difficulty trying to reconcile the strong performance of the S&P 500 in recent years with the less strong US economy.

The S&P 500 is no longer a US index.  It is becoming a global index, and understanding its constituents requires a global big-picture understanding as never before.  The big picture matters to market participants because US stock markets are becoming increasingly dependent on a stream of foreign revenues as they tap into foreign markets for business expansion.

Since 1990 S&P 500 companies have grown from generating 22 percent of their revenue from abroad to 30 percent.

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Weekly RS Recap

July 14, 2014

The table below shows the performance of a universe of mid and large cap U.S. equities, broken down by relative strength decile and quartile and then compared to the universe return.  Those at the top of the ranks are those stocks which have the best intermediate-term relative strength.  Relative strength strategies buy securities that have strong intermediate-term relative strength and hold them as long as they remain strong.

Last week’s performance (7/7/14 – 7/11/14) is as follows:

ranks 07.14.14 Weekly RS Recap

This example is presented for illustrative purposes only and does not represent a past recommendation.  The performance above is based on pure price returns, not inclusive of dividends or all transaction costs.  Past performance is not indicative of future results. Potential for profits is accompanied by possibility of loss. 

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Sector Performance

July 11, 2014

The chart below shows performance of US sectors over the trailing 12, 6, and 1 month(s).  Performance updated through 7/10/14.

s c 07.11.14 Sector Performance

The performance above is based on pure price returns, not inclusive of dividends or all transaction costs.  Past performance is not indicative of future results.  Potential for profits is accompanied by possibility of loss.    Source: iShares

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The Virtues of Pragmatism

July 10, 2014

Aren’t you glad you are a trend follower?  Leaving aside the potential performance advantages of trend following  for a moment, it is just less drama.  Case in point, as a trend follower you can avoid getting caught up in the endless debate about whether or not the market is overvalued.  Consider the following analysis from Barry Ritholtz:

It has become commonly accepted that stocks are very expensive, overbought and perhaps even in a bubble.

JPMorgan Chase & Co.’s latest quarterly chart book (you can download it here) takes issue with those conventions.

ii19S2zDTQng The Virtues of Pragmatism

As you can see from the chart above, U.S. equity prices closely match their long-term average price-to-earnings ratio of 15.5. That’s precisely at fair value if you are comparing it to the Standard & Poor’s 500 Index earnings-per-share average of analyst estimates for the next 12 months.

That is one of the most common ways to value companies, but there are plenty of other approaches that show stocks either over or undervalued.

It is commonly stated by those immersed is the valuation debate that valuations may not matter in the short-run, but they absolutely matter in the long-run.  That may be true, but when it comes to your experience as an advisor with your clients, what are the practical implications of getting out the of the market 3 years (as an example) before the bull market ends?  That’s right, you get fired.

The principle of keeping it simple, has served Dorsey Wright very well for almost three decades now.  What is a trend follower’s interpretation of the following chart of the S&P 500?  A positive trend with no signs of deterioration at this point.

SP 500 The Virtues of Pragmatism

Source: Dorsey Wright, as of 7/10/14

This is no way negates the need for prudent financial planning and asset allocation.  Nor does this make us perma-bulls.  It does, however, make us pragmatic.  As to whether or not trend following “works” I would recommend reading the following white papers by John Lewis:

This example is presented for illustrative purposes only and does not represent a past recommendation.  A relative strength strategy is NOT a guarantee.  There may be times where all investments and strategies are unfavorable and depreciate in value.

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Everyday Football Fouls

July 10, 2014

So good.

Source: Fourgrounds Media

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Fund Flows

July 10, 2014

Mutual fund flow estimates are derived from data collected by The Investment Company Institute covering more than 95 percent of industry assets and are adjusted to represent industry totals.

ici 07.10.14 Fund Flows

This data is presented for illustrative purposes only and does not represent a past recommendation.

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June Arrow DWA Funds Review

July 9, 2014

6/30/2014

The Arrow DWA Balanced Fund (DWAFX)

At the end of June, the fund had approximately 40% in U.S. equities, 25% in Fixed Income, 23% in International equities, and 11% in Alternatives.

We had one change in June—sold a currency position and replaced it with real estate.   Our Alternatives sleeve now has exposure to MLPs and real estate, both areas with strong relative strength and attractive yields.  Our U.S. equity exposure performed well in June (this continues to be our biggest overweight), but our exposure to European equities did not fare as well for the month.  After struggling for a couple months, U.S. small caps also had a strong June and outperformed mid and large caps.  Although we have seen some shifts in leadership this year the major trends remain intact. We saw some underperformance in our strategies at the beginning of the second quarter, but after we made shifts in allocations, the portfolios recovered nicely.  While there are always unforeseen events that can derail the market, we are quite optimistic for the second half of the year.

DWAFX gained 1.21% in June, and is up 2.81% YTD through 6/30/14.

We believe that a real strength of this strategy is its balance between remaining diversified, while also adapting to market leadership.  When an asset class is weak its exposure will tend to be towards the lower end of the exposure constraints, and when an asset class is strong its exposure in the fund will trend toward the upper end of its exposure constraints.  Relative strength provides an effective means of determining the appropriate weights of the strategy.

dwafx June Arrow DWA Funds Review

The Arrow DWA Tactical Fund (DWTFX)

At the end of June, the fund had approximately 70% in U.S. equities, 19% in International equities, and 10% in Commodities.

We made one change to the fund in June—replaced a small cap value position with large cap value.  U.S. equity markets continued to climb in June.  Equities had some volatility early on in the second quarter (especially in the high relative strength areas we own), but volatility tapered off toward the end of the quarter.  Although we have seen some shifts in leadership this year the major trends remain intact.  This year has been remarkable in the sense that nearly all asset classes have posted strong returns.  Generally, there tends to be greater dispersion in asset class returns and it is quite possible that we will see that in the remainder of the year.  Bond prices have risen in the first half of the year, but rates are showing some signs of moving higher so this is one area where there may be some weakness ahead.

DWTFX gained 1.44% in June, and is up 2.52% YTD through 6/30/14.

This strategy is a go-anywhere strategy with very few constraints in terms of exposure to different asset classes.  The strategy can invest in domestic equities, international equities, inverse equities, currencies, commodities, real estate, and fixed income.  Market history clearly shows that asset classes go through secular bull and bear markets and we believe this strategy is ideally designed to capitalize on those trends.  Additionally, we believe that this strategy can provide important risk diversification for a client’s overall portfolio.

dwtfx June Arrow DWA Funds Review

A list of all holdings for the trailing 12 months is available upon request.  Past performance is no guarantee of future returns.  These relative strength strategies are NOT a guarantee.  There may be times where all investments and strategies are unfavorable and depreciate in value.  See www.arrowfunds.com for a prospectus.

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High RS Diffusion Index

July 9, 2014

The chart below measures the percentage of high relative strength stocks that are trading above their 50-day moving average (universe of mid and large cap stocks.)  As of 7/8/2014.

diffusion 07.09.14 High RS Diffusion Index

The 10-day moving average of this indicator is 88% and the one-day reading is 85%.

This example is presented for illustrative purposes only and does not represent a past recommendation.  The performance above is based on pure price returns, not inclusive of dividends or all transaction costs.   Investors cannot invest directly in an index. Indexes have no fees. Past performance is not indicative of future results. Potential for profits is accompanied by possibility of loss. 

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Momentum-Weighted Sector Indexing

July 8, 2014

While most sector ETFs are capitalization-weighted, the PowerShares DWA Momentum Sectors are, as the name suggests, weighted by momentum.  The nine momentum sectors are shown below:

sector1 Momentum Weighted Sector Indexing

To highlight the attributes of one of these momentum sector ETFs, The PowerShares DWA Consumer Cyclicals Momentum ETF (PEZ), consider the following:

  1. PEZ has 40 holdings while many cap-weighted Consumer Cyclical sector ETFs have 2-4 times that many holdings.  The number of holdings in each of our momentum sector ETFs can range from approximately 30-75.
  2. The average technical attributes of the stocks currently in PEZ is 4.70.  (Dorsey Wright’s research database assigns all stocks a technical attribute rating of 0-5, 5 being the strongest and 0 being the weakest)
  3. PEZ has exposure to large, mid, and small cap Consumer Cyclical stocks, while, by definition, capitalization-weighted sector ETFs focus on large caps.  PEZ’s capitalization exposure is shown below: pez cap1 Momentum Weighted Sector Indexing
  4. Those investors interested in a sector rotation model using these momentum sector ETFs can click here.

This example is presented for illustrative purposes only and does not represent a past recommendation.  A relative strength strategy is NOT a guarantee.  There may be times where all investments and strategies are unfavorable and depreciate in value.  Dorsey Wright is the index provider for the suite of PowerShares DWA Momentum ETFs.  See www.powershares.com for more information.

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Relative Strength Spread

July 8, 2014

The chart below is the spread between the relative strength leaders and relative strength laggards (universe of mid and large cap stocks).  When the chart is rising, relative strength leaders are performing better than relative strength laggards.    As of 7/7/2014:

spread 07.08.14 Relative Strength Spread

This example is presented for illustrative purposes only and does not represent a past recommendation.  The performance above is based on pure price returns, not inclusive of dividends or all transaction costs.   Investors cannot invest directly in an index. Indexes have no fees. Past performance is not indicative of future results. Potential for profits is accompanied by possibility of loss. 

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Weekly RS Recap

July 7, 2014

The table below shows the performance of a universe of mid and large cap U.S. equities, broken down by relative strength decile and quartile and then compared to the universe return.  Those at the top of the ranks are those stocks which have the best intermediate-term relative strength.  Relative strength strategies buy securities that have strong intermediate-term relative strength and hold them as long as they remain strong.

Last week’s performance (6/30/14 – 7/3/14) is as follows:

ranks 07.07.14 Weekly RS Recap

This example is presented for illustrative purposes only and does not represent a past recommendation.  The performance above is based on pure price returns, not inclusive of dividends or all transaction costs.  Past performance is not indicative of future results. Potential for profits is accompanied by possibility of loss. 

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High RS Diffusion Index

July 3, 2014

The chart below measures the percentage of high relative strength stocks that are trading above their 50-day moving average (universe of mid and large cap stocks.)  As of 7/2/14.

diffusion 07.03.14 High RS Diffusion Index

The 10-day moving average of this indicator is 89% and the one-day reading is 88%.

This example is presented for illustrative purposes only and does not represent a past recommendation.  The performance above is based on pure price returns, not inclusive of dividends or all transaction costs.   Investors cannot invest directly in an index. Indexes have no fees. Past performance is not indicative of future results. Potential for profits is accompanied by possibility of loss. 

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Q2 Manager Insights

July 2, 2014

Click here.

q2 Q2 Manager Insights

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Trend Toward Professionally Managed 401(k) Portfolios

July 2, 2014

From U.S. News comes some interesting insight for any who might have thought that all a 401(k) participant needs is an roster of index funds with no additional guidance:

Another positive trend noted by Vanguard is the increased use of professionally managed portfolios. At the end of 2013, 40 percent of participants enrolled in Vanguard plans had their entire balance invested in a single target-date fund, balanced fund or managed account advisory service. Vanguard projects that 58 percent of all plan participants and 80 percent of new plan participants will be fully invested in some form of a professionally managed portfolio by 2018.

If one thing is obvious from the sordid history of 401(k) plans, it’s that most participants are incapable of putting together a globally diversified portfolio in a suitable asset allocation on their own, using low management fee index funds. Of course, this assumes that low management fee index funds are even an option. Although they are available in Vanguard plans, these funds are more the exception than the rule in 401(k) plans “advised” by brokers and insurance companies. (my emphasis added)

We are happy to be working with Pat Church of Church Capital on what we believe will be part of the solution to this challenge.  Click here and here to learn more.

Past performance is not indicative of future results. Potential for profits is accompanied by possibility of loss. The relative strength strategy is NOT a guarantee.  There may be times where all investments and strategies are unfavorable and depreciate in value.

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