Daily DWA Indexes Wrap

April 30, 2015

As of the close, 4/30/15:

perf

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.

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Finding Emerging Market Winners

April 30, 2015

With four months of 2015 now in the books, a quick glance at YTD performance of a broad range of asset classes reveals some important changes taking place.  Clearly, Emerging Markets have come alive after having produced negative returns in both 2013 and 2014.  So far in 2015, Emerging Markets are top of the heap.

YTD

Source: Yahoo! Finance.  The performance above is based on total returns, inclusive of dividends but does not include all transaction costs.  Period 1/1/15 – 4/29/15.

Obviously, one way to get exposure to Emerging Markets is through a cap-weighted ETF like EEM or VWO.  However, over the last 6 years, momentum-weighted exposure has been more profitable.

Emerging Markets

Source: Yahoo! Finance.  The performance above is based on total returns, inclusive of dividends but does not include all transaction costs.  Period 1/1/15 – 4/29/15.

Even though all three of these ETFs are investing in Emerging Markets stocks, the differences in investment universe and weighting scheme can make a big difference in performance.  While VWO and EEM are weighted by capitalization, PIE is investing in the top 100 Momentum stocks from a universe of approximately 1,000 Emerging Markets stocks.  Each quarter, PIE is reconstituted with the 100 stocks that meet our PnF relative strength criteria, reflecting both their near-term and longer-term favorable relative strength characteristics.  It’s also important to note that once we identify those 100 Momentum stocks, the index is weighted by Momentum so the strongest names get the most weight.

Top holdings and weights of the PowerShares DWA Emerging Markets Momentum ETF (PIE) are shown below:

weights

 Source: PowerShares.  As of 4/30/15.

As with any relative strength strategy, one of the keys to good performance over time is having sufficient dispersion in the investment universe and as shown below, there has been plenty of dispersion in Emerging Markets!  The chart below shows the trailing 12 month performance for the 1,000 Emerging Market stocks from which we select our stocks for PIE.  The best stock was up 389% over this period of time and the worst stock was down a mere 82%.

em dispersion

Source: Dorsey Wright, FactSet.  Period 4/28/14 – 4/28/15.

I would argue that an ETF like PIE deserves a strategic position in an asset allocation, but for those advisors allocating tactically, I think there are plenty of reasons to give some consideration to taking a new position in PIE right now.

Nothing contained herein should be construed as an offer to sell or the solicitation of an offer to buy any security.  The 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 readers of this blog (www.systematicrelativestrength.com)  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. The 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 PIE.

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RS Chart of The Day

April 30, 2015

 photo SPYVSEEM_zpsiytgj5ko.gif

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.

 

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High RS Diffusion Index

April 30, 2015

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 4/29/15.

diffusion

The 10-day moving average of this indicator is 59% and the one-day reading has fallen to 44%.  Dips in this indicator have often provided good opportunities to add money to relative strength strategies.

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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RS Chart of The Day

April 29, 2015

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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.

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RS Chart of The Day

April 28, 2015

 photo spyvsiyr_zpshrmidhac.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.

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RS Chart of The Day

April 27, 2015

 photo SPYVSAGG_zpsys4hr1r1.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.

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Daily DWA Indexes Wrap

April 24, 2015

As of the close, 4/24/15:

perf

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.

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RS Chart of The Day

April 24, 2015

 photo SPYVSEFA_zpsiljjarcr.jpg

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.

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Waiting for the Dust to Settle

April 24, 2015

The Irrelevant Investor kills it with this post:

The Worst Investment Strategy Ever

Sarcasm

Do you make bad decisions when your portfolio goes down? What if there was a way to automate the decision so that your emotions wouldn’t get in the way. Good news, I found a way!

Here is the strategy, every time stocks drop five percent, you sell and wait for “clarity.” Why would you voluntarily ride out volatility, right? And here is the best part, you don’t get back in until things have stabilized. Repurchase stocks when they are one percent higher than when you sold, just to make sure that the dust has settled. Better be safe then sorry right? Here is what that strategy has looked like since the inception of the S&P 500.

a

Alright so you didn’t beat the buy and hold investors but you did compound your money at 2.8% with less than a ten percent annualized standard deviation. This is just slightly worse than what the average investor has historically earned, but after adjusting for risk this looks like a great alternative.

End sarcasm

If you want to suppress volatility it’s likely you’ll suppress your returns as well, it’s just that simple. Here is an idea- if you are uncomfortable with equities, pick a different asset class. Notably, five year treasury notes have compounded at 6.6% a year since 1957 with an annualized standard deviation of just five percent. Unless your looking for an equity strategy with bond-like returns, you might want to rethink jumping in and out every time the market takes a dip.

Comfortable doesn’t work in the financial markets if you want to earn equity-like returns over time.  My simple solution (for typical 55ish-65ish+  year old): Divide your portfolio into three buckets.  Income Bucket, Balanced Bucket, and Growth Bucket.  For your Growth Bucket, don’t try to manage the volatility (that is, in large part, what the other buckets are for).  Don’t do something similar to the strategy described above of selling when you feel uncomfortable and buying when “the dust settles.”  Rather, accept that your Growth Bucket is going to have some volatility to it, some drawdowns, some uncomfortable years.  By all means, spend the necessary time (or seek the appropriate financial advice) to put together a well-thought-out allocation for that Growth Bucket, but once that part is done, don’t look at the Growth Bucket in isolation.  Look at it in the context of your overall asset allocation.  Simple advice, but I believe it would lead to much better outcomes than are typically achieved in the financial markets by investors.

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.  

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Bloomberg on Point & Figure

April 24, 2015

Good profile by Bloomberg yesterday:

The Nasdaq Stock Market has always been associated with cutting edge technology, whether it be for the companies it lists or the systems used to match buyers and sellers on the first all-electronic exchange.

Yet interestingly enough, one of the lines of business that Nasdaq OMX Group chose to highlight in its earnings report today has its roots in a technique for analyzing stock prices that was championed by the likes of Charles Dow more than a century ago. During the first quarter, Nasdaq bought Dorsey Wright & Associates LLC, which boasts it is “known on Wall Street as the experts in the Point & Figure methodology.”

In an era of heat maps, three-dimensional volatility surfaces and countless other highfalutin technical tools, point-and-figure charts appear adorably quaint at first blush. They were originally done with pencil, graph paper and stock prices taken from a newspaper. The charts look like some sort of extreme version of tic-tac-toe, using columns of Xs to represent rising price trends and Os to represent falling prices.

“A rising series of X’s and O’s tells us that demand is getting stronger and supply is getting weaker — that is what we want to see in stocks, ETFs and funds we own,” is how Dorsey Wright explains how to use the charts. While P&F chart readers look for about 11 identifiable patterns in the charts, Dorsey Wright says they are just variations of two basic patterns: the “double top” buy signal when a column of X’s exceeds a previous column of X’s and a “double bottom” sell signal when a column of O’s exceeds a previous column of O’s.

Simple, right? So easy even a 19th century pencil pusher could do it! Well, maybe not quite that simple. Dorsey Wright applies the charts to ratios of various securities to study the relative strength between them and identify those with the best momentum. And it uses computers that calculate point-and-figure trends and automatically rebalance indexes accordingly. As Anthony Effinger and Eric Balchunas wrote in Bloomberg Markets Magazine, if Tom Dorsey and his team got abducted by aliens, the algorithms wouldn’t even notice. “Once a quarter, we press a button,’’ Dorsey told the magazine. “We just need someone to press the button.’’

But here’s the thing: exchange traded funds based on Dorsey Wright indexes are raking in the cash. In just the first two months the index business was owned by Nasdaq, assets tracking Dorsey Wright grew 37 percent, the company said today.

The 13-month-old First Trust Dorsey Wright Focus 5 ETF (ticker: FV) attracted $1.2 billion in inflows last year and has already topped that amount this year with almost $1.5 billion. The ETF, which tracks an index using the point-and-figure relative-strength approach to identify the five top-ranking ETFs from First Trust, is up 11 percent so far in 2015 and about 23 percent since its inception in March 2014. Its holdings include the First Trust NYSE Arca Biotechnology Index Fund, another health-care fund and ETFs holding Internet and consumer stocks.

Another ETF tracking a Dorsey index, the $1.9 billion PowerShares DWA Momentum Portfolio (ticker: PDP), is up 7 percent this year and has attraced $218 million. Its top holdings currently are Jazz Pharmaceuticals PLC followed by Apple Inc. and O’Reilly Automotive Inc. A PowerShares ETF using the Dorsey approach to buy small caps (ticker: DWAS) has risen more than 6 percent and attracted $134 million this year.

Those three ETFs have helped push the assets tracking Dorsey Wright indexes to $7 billion, according to Tammy DeRosier, president of the DWA business at Nasdaq. She credits the growth with the importance of sector rotation as the bull market ages, and the ease with which it can now be down with an ETF.

“Stocks and sectors rotate in and out of season just like produce in the supermarket does,” DeRosier said in a phone interview. “We are like a chef that’s going to the farmer’s market and creating that menu, with the freshest and best in season.”

Of course, the freshest momentum in the stock market has been known to wilt pretty quickly, and not necessarily at a time that corresponds with a quarterly rebalancing. But at least for the moment, there is a lot of interest in what all those Xs and Os are spelling.

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Sector Performance

April 24, 2015

The chart below shows performance of US sectors over the trailing 12, 6, and 1 month(s).  Performance updated through 4/23/15.

sector

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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Daily DWA Indexes Wrap

April 23, 2015

As of the close, 4/23/15:

perf

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.

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Tweet of the Day

April 23, 2015

Via Myles Udland:

myles

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Fund Flows

April 23, 2015

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

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

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Daily DWA Indexes Wrap

April 22, 2015

As of the close, 4/22/15:

perf

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.

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Momentum in Late-Stage Bull Markets

April 22, 2015

Important insight from Mark Hulbert at MarketWatch:

Don’t give up on momentum stocks just because you worry the bull market may be nearing its end.

That’s because, contrary to popular belief, such stocks do not tend to be among the biggest losers when the market heads south. In fact, during bear markets, high-momentum stocks tend to do markedly better than those at the opposite end of the spectrum.

Momentum is typically measured over the trailing 12 months. So the stocks with the highest momentum are those with the best returns over the previous year, while those with the worst returns have the lowest momentum. A substantial body of academic research has documented that high-momentum stocks, on average, have significantly outperformed the market over the past century, while stocks with the least favorable momentum have markedly lagged.

Despite that strong academic support, however, many erstwhile followers of momentum strategies get particularly nervous when bear-market anxiety heats up. They worry that stocks with the highest momentum when the market is rising will be among the biggest losers when the market falls.

Some resort to a surfing analogy to express their concern: While a surfer rides high so long as his wave continues, he crashes when that wave comes to an end.

Compelling as this surfing analogy may be, however, it is misleading, according to Tobias Moskowitz, a principal at hedge fund firm AQR and a finance professor at the University of Chicago.

He told me that “while high-momentum stocks can be expected to lose during a bear market, historically, at least, they have not suffered significantly more than the overall market, and often fare better. Regardless, such stocks on average have fared better during bear markets than stocks with the worst trailing 12-month returns — those with the lowest momentum.”

“In fact,” he continued, “the times when high-momentum stocks fare worse than low-momentum stocks have come at the beginning of a new bull market — not at a bull market’s end or the beginning of a new bear market. Furthermore, it’s not that high-momentum stocks suffer at such times; their poor relative performance is caused by the sometimes exceptional gains of low-momentum stocks.”

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RS Chart of The Day

April 22, 2015

 photo SPYVSGCC_zps5o5rrdhv.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.

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Daily DWA Indexes Wrap

April 21, 2015

As of the close, 4/21/15:

perf

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.

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Seeking Opportunities Overseas

April 21, 2015

BlackRock takes note of the pick up in investor flows to international markets in recent months:

Our latest analysis leads us to believe that many investors are applying a spring cleaning approach to their portfolios as well, rebalancing as the first quarter ended. The latest exchange traded fund (ETF) flows data show the industry just closed a record opening quarter. More specifically, investors are putting their money to work in markets outside the U.S. Of the $97.2 billion of net new assets raised in the first quarter, over $70 billion went into equity funds with international exposure.

Surely, much of this renewed interest in international equity markets has to do with the fact that both Developed International Markets and Emerging Markets are outperforming the U.S. so for in 2015:

image 1

Source: Dorsey Wright.  Updated through 4/23/15.  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.

One way to consider getting exposure to international equity markets is through our Systematic RS International SMA portfolio.  This portfolio invests in 30-40 ADRs.  We buy stocks out of the top quartile of our relative strength ranks and sell when they fall out of the top half.

1.5

2

As of 3/31/15

Over the last 9 years, this SMA has outperformed its benchmark by 6.57% annually on a net basis.

To receive the fact sheet for this strategy, please e-mail andy@dorseywright.com.

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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Retirement by Choice or by Necessity?

April 21, 2015

Yahoo! Finance raises questions about the theory that you can always get serious about saving for retirement later on:

Americans may be feeling more confident than ever about their chances of securing a comfortable retirement, but there’s one thing we are seriously delusional about: when we will finally call it quits.

There’s a big gap between when workers expect they will retire and when people who’ve actually retired say they left the workforce, according to the latest retirement confidence survey from the Employee Benefit Research Institute. Half of retirees say they retire earlier than they planned.

Fewer than one in 10 workers say they expect to retire before age 60, when in fact 36% of retirees say they stopped working before 60. Comparatively, only 29% of workers retired between the ages of 60 and 64 and only 9% retired at the traditional age of 65. The odds of making it until age 70 and still working — which more than one-quarter of workers say they want to do — are even slimmer. A mere 6% manage to last that long.

“Most retirees retired earlier than they planned predominantly due to health problems,” says Luke Vandermillen, vice president of the Principal Financial Group, a co-sponsor of the study. “All you can do is try to control what you have planned, how you have saved, and whether you’ve taken steps to prepare for retirement as best you can.”

What’s clear is that the vast majority of premature retirees did not leave work because they wanted to. Sixty percent of premature retirees cited health issues or a disability as the reason. Others had little choice in the matter — their company downsized or closed, leaving them out of a job (27%), or they needed to care for a spouse or family member (22%).

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RS Chart of the Day

April 21, 2015

 photo SPYVSIYR2_zpsggbkwgh5.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.

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Relative Strength Spread

April 21, 2015

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 4/20/15:

spread 04.21.15

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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Daily DWA Indexes Wrap

April 20, 2015

As of the close, 4/20/15:

perf

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.

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RS Chart of The Day

April 20, 2015

 photo SPYVSAGG_zpsl2bw8ome.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.

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