Daily DWA Indexes Wrap

February 27, 2015

As of the close, 2/27/15:

perf 02.27.15

Source: Yahoo! Finance

See www.powershares.com, www.ftportfolios.com, and www.arrowshares.com for more information.

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.  The relative strength strategy is NOT a guarantee.  There may be times where all investments and strategies are unfavorable and depreciate in value.  Nothing contained herein should be construed as an offer to sell or the solicitation of an offer to buy any security.  This post does not attempt to examine all the facts and circumstances which may be relevant to any product or security mentioned herein.  We are not soliciting any action based on this post.  It is for the general information of readers of this blog.  This post does not constitute a personal recommendation or take into account the particular investment objectives, financial situations, or needs of individual clients.  Before acting on any analysis, advice or recommendation in this post, investors should consider whether the security or strategy in question is suitable for their particular circumstances and, if necessary, seek professional advice.  Dorsey Wright & Associates is the index provider for the above ETFs.

Posted by:


RS Chart of The Day

February 27, 2015

 photo SPYVSEEM_zpsltum4lws.jpg

Point and Figure RS Charts are calculated by dividing one security by another and plotting the ratio on a PnF chart.  When the ratio is rising, it is plotted in a column of X’s and reflects the numerator outperforming the denominator.  Likewise, when the relative strength ratio is declining, it is plotted in a column of O’s and reflects the outperformance of the denominator.

Past performance is not indicative of future results.  Potential for profits is accompanied by possibility of loss.  This example is presented for illustrative purposes only and does not represent a past recommendation.  The relative strength strategy is NOT a guarantee.  There may be times where all investments and strategies are unfavorable and depreciate in value.  Nothing contained herein should be construed as an offer to sell or the solicitation of an offer to buy any security.  This post does not attempt to examine all the facts and circumstances which may be relevant to any product or security mentioned herein.  We are not soliciting any action based on this document.  It is for the general information of clients of Dorsey, Wright & Associates, LLC (“Dorsey, Wright & Associates”).  This document does not constitute a personal recommendation or take into account the particular investment objectives, financial situations, or needs of individual clients.  Before acting on any analysis, advice or recommendation in this document, clients should consider whether the security or strategy in question is suitable for their particular circumstances and, if necessary, seek professional advice.

Posted by:


What You Should Focus On

February 27, 2015

One of my favorite sketches from New York Times columnist, Carl Richards, is the following:

focus

There are a lot of things that matter and there are a lot of things that we can control, but there is a much more limited number of things that both matter and are things that we can control—and that is where our focus should be.

This principle certainly applies to the construction of our investment strategies here at Dorsey Wright. I’ll take one index as an example. Every quarter, we select 100 stocks from a universe of approximately 1,000 U.S. mid and large cap stocks to make up the Technical Leaders Index (used for the PowerShares DWA Momentum ETF—PDP).

What We Can Control

  • We can control the quality of the research that we performed to identify the best PnF relative strength characteristics that will be used to select and weight the stocks for the index
  • We can maintain the integrity of the index construction process from one quarter to the next

What We Can’t Control

  • How those stocks in the TL Index perform after they have been selected
  • World events that might affect the financial markets from one quarter to the next

For Q1 2015, we once again followed the same process that has been followed for the last nearly 8 years in constructing the index for PDP and the following chart shows the current holdings of the index. The chart also shows how these stocks have performed so far this quarter.

pdp

(click to enlarge)

Most of the holdings have done quite well this quarter. Some haven’t. The ones that continue to meet our criteria will stay in the index in Q2 and those which have deteriorated will get cycled out and replaced with stronger names. As is our mantra here at Dorsey Wright, we will continue to focus on the right process and the results will take care of themselves over time.

From the perspective of an advisor who is using rules-based strategies, like PDP, I believe there is a great deal of confidence that comes from knowing that the strategy is based upon a methodology that has stood the test of time. Clients recognize and gravitate to advisors with that type of confidence.

Keeping a focus on the right things (i.e. the things we can control and the things that matter) make all the difference in this industry—an industry which is characterized by a flood of distractions at every turn.

Dorsey Wright is the index provider for PDP.  See www.powershares.com for more information.  The relative strength strategy is NOT a guarantee.  There may be times where all investments and strategies are unfavorable and depreciate in value.  The performance above is based on pure price returns, not inclusive of dividends or all transaction costs.

Posted by: