What Are We Really Trying To Accomplish Here?

March 1st is the seventh anniversary of our Technical Leaders Index launching on the NYSE.  The last seven years have seen some crazy markets!  Through it all we have been really happy at how the index has adapted to the different market environments we have had.

We often get caught up in the day-to-day gyrations of the market and we forget to take a step back and look at what a strategy is designed to accomplish.  The Technical Leaders Index is designed to keep the index invested in high momentum stocks.  It is a process that is supposed to cut the underperforming stocks out and ride the winners as long as they continue to outperform.  That is how most successful momentum and trend-following strategies work.

With that in mind, I thought it would be interesting to show everyone what would be coming out of the index and what would be going in if we rebalanced it today.  Remember, the process is designed to cut out the stocks that aren’t performing well and to buy stocks that are performing better than what we are selling.  Here are the stocks we would be selling (I have taken the names off the charts for compliance reasons, but the actual names of the stocks don’t really matter anyways):

(Click To Enlarge)

And here is what we would be buying:

(Click To Enlarge)

Pretty remarkable difference, right?  The performance over the last few months is quite different for the two groups of stocks.  Over time that is what the Technical Leaders process does.  It constantly replaces weak stocks with stronger ones.

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