Elkhorn Commodity Rotation Strategy ETF (DWAC)

October 17, 2016

While the majority of investors allocate their dollars primarily between equities and fixed income, there are a number of alternative assets that may add value to the portfolio over time.  Furthermore, the advent of ETFs has made it easy for investors to gain exposure to areas of the financial markets that were previously reserved for the savviest of investors.  One such example is the Commodity asset class.  Today, investors can select from upwards of 140 ETFs and ETPs to introduce commodity exposure into the portfolio, instead of trading futures contracts. One of the newer ETF products to hit the market within this space is the Elkhorn Commodity Rotation Strategy ETF DWAC, which uses the Dorsey Wright methodology to target those commodities with the strongest relative strength characteristics.

One of the main factors which helps enable a relative strength based strategy to generate strong returns is ample performance dispersion among the investable universe.  The most popular commodities discussed by mainstream media are precious metals (gold, silver, platinum) and energy (crude oil), but that only scratches the surface of this asset class as a whole. For example, the “softs” complex (which includes Sugar, Cotton, Cocoa, Orange juice, and Coffee) certainly isn’t making CNBC headlines on a daily basis, but Sugar futures are the top performing commodity on the year and have registered an impressive gain of over 50% in 2016.  On the flip side, agricultural Commodities such as Live Cattle (-20.22%), Wheat (-20.79%) and Lean Hogs (-25.27%) continue to lag and remain in very firm downtrends.  At some point these trends will change, but the dispersion which exists within the asset class remains wide year over year.

Generally speaking there are about 5 different commodity sectors: precious metals, industrial metals, livestock, agriculture, and energy.  One of the most commonly used benchmarks for the asset class is the S&P Goldman Sachs Commodities Index (GSCI).  It was launched in May 2007 and holds approximately 24 different commodities. The index allocations are world production weighted based on the average quantity of production of each commodity.  Currently, the index is allocated as follows:  Energy (70.44%), Industrial Metals (8%), Precious Metals (3.68%), Agriculture (12.78%), and finally Livestock (5.11%).   As a result, energy is the tail that wags the dog in this instance, accounting for more than two-thirds of the index’s performance. This is not unusual to see across many broad based commodity ETFs, making the DWAC quite different from the rest of the pack in terms of the exposure it offers.

The underlying index follows a Dorsey Wright relative strength based strategy to make its allocation decisions. The product also implements the dynamic roll methodology in order to avoid cost of carry issues at futures expiration. The universe for the underlying index includes 21 different commodities, and the index will target the top five on a monthly basis with a 20% weighting in each. The ability to tactically rotate through a broad universe of commodities and concentrate within the top performing sectors while eliminating exposure to the weak sectors is what makes this product both dynamic and unique. As of 9/30/2016, the current allocations in DWAC are as follows: Sugar, Silver, Coffee, Zinc, and Cotton. Additional information regarding historical allocations and other product info can be found on the DWAC factsheet.

DWAC vs. GSCI Equity Curves

1995-2015

Below we have as we plotted the equity curves in order to help compare historical performance of DWAC vs. GSCI.

1

DWAC inception date: Sept 21, 2016, GSCI inception date: May 7, 2007 – data prior to inception is based on a back-test of the underlying indexes.  Please see the disclosures for important information regarding back-testing.  DWAC Returns are calculated on a total return basis.  Past performance is not indicative of future results.  Potential for profits is accompanied by possibility of loss. 

DWAC vs. GSCI Performance

1995-2015

The table below gives a detailed perspective on the historical performance for each index.  Notice that DWAC offers a higher annualized return, and does so with lower annualized volatility.  Additionally, losses have been relatively contained when compared to the benchmark, while periods of outperformance have been instrumental in cumulative performance.

  • Cumulative Returns:  DWAC (+576.80%) vs. GSCI (-18.35%)
  • Annualized Returns:  DWAC (+10.02%) vs. GSCI (-1.01%)
  • Volatility (Annualized):  DWAC (22.23%) vs. GSCI (28.19%)
  • Largest Annual Loss:   DWAC (-20.24% – 1998) vs. GSCI (-46.49% – 2008)
  • Largest Annual Gain:  DWAC (+50.91% – 2006) vs. GSCI (+49.74% – 2000)
  • # Years Outperforming:  DWAC  (12 years) vs. GSCI  (8 years)
  • Total Performance in Outperforming Years:  DWAC (+253.90%) vs. GSCI (+73.11%)2

DWAC inception date: Sept 21, 2016, GSCI inception date: May 7, 2007 – data prior to inception is based on a back-test of the underlying indexes.  Please see the disclosures for important information regarding back-testing.  DWAC returns are calculated on a total return basis.  Returns do not include all potential transaction costs.  Past performance is not indicative of future results.  Potential for profits is accompanied by possibility of loss.

Performance data for the model is the result of hypothetical back-testing.  Performance data for prior to inception date is the result of backtested underlying index data.  Investors cannot invest directly in an index. Indexes have no fees.  Back-tested performance results have certain limitations. Back-testing performance differs from actual performance because it is achieved through retroactive application of an investment methodology designed with the benefit of hindsight. Model performance data as well as back-tested performance do not represent the impact of material economic and market factors might have on an investment advisor’s decision making process if the advisor were actually managing client money. Past performance is not indicative of future results. Potential for profits is accompanied by possibility of loss.

Neither the information nor any opinion expressed shall constitute an offer to sell or a solicitation or an offer to buy any securities, commodities or exchange traded products.  This document does not purport to be complete description of the securities or commodities, markets or developments to which reference is made.  

 

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Momentum & Value vs. Growth & Value

September 20, 2016

At Dorsey Wright, we believe momentum can be used as a stand-alone investment strategy, however, combining it with other smart beta factors to which momentum is negatively correlated has its advantages.  We have referenced this in previous blog posts, noting that it allows for a portfolio to capture alpha at different periods of the market cycle, which in turn can reduce both drawdowns and volatility.   In this post we would like to discuss the potential benefits of combining momentum with value versus combining growth and value.   Furthermore, we will take a look the correlation of excess returns for each portfolio, and wrap things up by comparing the returns of each.

To begin, let’s take a look at the side by side performance (annual figures) for the products we will be using in our study:  PowerShares DWA Momentum Portfolio PDP, Russell 1000 Growth Index RLG, and the Guggenheim S&P 500 Pure Value ETF RPV.  We can reference this table in comparison to the results we get when combining the smart beta factors we mentioned earlier.  In order to get proper historical data, we used the underlying index (total return) for both RLG and RPV.  For PDP, total return figures were used starting on 3/1/2007.  The table below confirms that when using each of these products as a stand-alone investment product.  As we can see, momentum outperforms all other factors but also at a slightly elevated volatility.   Perhaps the most surprising theme is the underperformance of the growth factor throughout this time frame.

all

PDP inception date: March 1, 2007, RLG inception date: May 22, 2000, RPV inception date:   March 1, 2006 – data prior to inception is based on a back-test of the underlying indexes.   Please see the disclosures for important information regarding back-testing.  PDP returns do not include dividends prior to 3/1/2007.  Returns do not include all potential transaction costs.  Past performance is not indicative of future results.  Potential for profits is accompanied by possibility of loss. 

Next, let’s take a look at the correlation coefficients when comparing the returns of each portfolio.  Below we’ve plotted the returns of each portfolio against each other on a year-to-year basis.   The correlation of excess returns between PDP and RPV came out to be -.50 during this time period, just slightly better then RLG vs. RPV (which registered -.40).   Again, both of these are impressive in terms of negative correlation which hopefully will give us the ability to capture alpha at different areas of the market cycle once we construct our portfolios.   Typcially our goal in doing this is lowering portfolio volatility and reducing max drawdowns when compared to using them as stand alone investments.

pdp-vs-rpv

PDP inception date: March 1, 2007, RLG inception date: May 22, 2000, RPV inception date:   March 1, 2006 – data prior to inception is based on a back-test of the underlying indexes.   Please see the disclosures for important information regarding back-testing.  PDP returns do not include dividend prior to 3/1/2007.  Returns do not include all potential transaction costs.  Past performance is not indicative of future results.  Potential for profits is accompanied by possibility of loss. 

rlg-vs-rpv

PDP inception date: March 1, 2007, RLG inception date: May 22, 2000, RPV inception date:   March 1, 2006 – data prior to inception is based on a back-test of the underlying indexes.   Please see the disclosures for important information regarding back-testing.  PDP returns do not include dividend prior to 3/1/2007.  Returns do not include all potential transaction costs.  Past performance is not indicative of future results.  Potential for profits is accompanied by possibility of loss.  

In conclusion, the portfolios we will construct are going to be based on a static allocation of 70%/30%.  To clarify, both the momentum and growth allocations will remain at 70%, while the value portion will be 30%.  The portfolios are re-balanced annually (although as we mentioned the allocation will remain static).    Looking at the table below, we can see that the momentum/value combination portfolio outperformed has over the growth/value combination.   The returns are nearly double, while volatility remains the same at 22%.   Market participants looking to combine a portion of their value portfolio with another allocation would certainly seem to benefit by using a momentum product vs. a growth product.

summary

PDP inception date: March 1, 2007, RLG inception date: May 22, 2000, RPV inception date:   March 1, 2006 – data prior to inception is based on a back-test of the underlying indexes.   Please see the disclosures for important information regarding back-testing.  PDP returns do not include dividend prior to 3/1/2007.  Returns do not include all potential transaction costs.  Past performance is not indicative of future results.  Potential for profits is accompanied by possibility of loss. 

DWA provides the underlying index for PDP (discussed above) and receives licensing fees from Invesco PowerShares based on assets invested in the Fund.

Some information presented is the result of a strategy back-test.  Back-tests are hypothetical (they do not reflect trading in actual accounts) and are provided for informational purposes to illustrate the effects of the strategy during a specific period.  Back-tested results have certain limitations.  Such results do not represent the impact of material economic and market factors might have on an investment advisor’s decision making process if the advisor were actually managing client money.  Back-testing also differs from actual performance because it is achieved through retroactive application of a model investment methodology designed with the benefit of hindsight.  

Neither the information within this email, nor any opinion expressed shall constitute an offer to sell or a solicitation or an offer to buy any securities, commodities or exchange traded products.  This article does not purport to be complete description of the securities or commodities, markets or developments to which reference is made. 

The relative strength strategy is NOT a guarantee.  There may be times where all investments and strategies are unfavorable and depreciate in value.  Relative Strength is a measure of price momentum based on historical price activity.  Relative Strength is not predictive and there is no assurance that forecasts based on relative strength can be relied upon.

 

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Combining Equity Momentum (PDP) & Managed Futures (CSAIX)

July 11, 2016

One of the more surprising themes for many market participants thus far into 2016 has been the impressive strength of the commodities asset class.   What started off as a sharp rally from the lows in the energy sector quickly flowed into other commodities such as precious metals, softs (sugar) and ags (soybeans).   A lack of trend in US equities has helped funds flow into commodities as market participants search for yield in other asset classes.   Another tailwind for commodities has been the range bound activity in the US Dollar.  This in turn makes them cheaper to export overseas and therefore increases demand.

Although it may not be the most popular asset class amongst traditional fund managers, there is certainly demand for commodities markets among institutional traders.   For example, managed money (CTA’s and Macro Hedge Funds) is often focused on looking for trending markets in both foreign exchange and commodities to allocate toward their portfolios.  Given the size and leverage these funds have access too, the commodities and foreign exchange markets are often subject to large trending moves which can continue for extended periods of time.  Although momentum and trend following are often used interchangeably, they actually differ in the fact momentum (ex. 12 mo. trailing return) is typically thought of as relative while trend following techniques (ex. moving averages) are more absolute in nature.  Our main point in mentioning CTA’s and Hedge Funds is that given their ability to rotate through various asset classes and take both sides of the market (long or short) they typically have a negative correlation to long only equity managers.

Assuming the negative correlation between the two strategies holds true, combining a long only equity momentum portfolio with some type of managed futures strategy would certainly seem make sense in terms of reducing volatility and drawdowns while maintaining alpha above a related benchmark.  Let’s investigate this matter further by using the Power Shares DWA Momentum Portfolio (PDP) and combining it into a portfolio with the Credit Suisse Managed Futures Strategy Fund (CSAIX).   Note we will be using the returns of the underlying index (CSTHFMF0 – Credit Suisse Hedge Fund Index Managed Futures) in order to pull the historical data for CSAIX since its inception was 9/28/12.

Here is a brief summary of each strategy side by side.     As shown below, PDP outperforms both the Credit Suisse Hedge Fund Index Managed Futures Strategy CSAIX and SPX over the allotted time frame in this study.  However, as we saw in our previous posts it does so with slightly elevated volatility.   All other performance metrics aside, the main concept we want to emphasize is the differences in returns each year between PDP (momentum) and CSAIX (managed futures).  The most obvious example is 2008, when CSAIX posted an impressive 18.33% gain while both PDP and the SPX suffered steep double digit losses.

Click on graphic for larger version

ANNUAL RETURNS

PDP inception date: March 1, 2007, CSAIX inception date: Sept 28, 2012 – data prior to inception is based on a back-test of the underlying indexes Please see the disclosures for important information regarding back-testing.  PDP returns do not include dividends.  Returns do not include all potential transaction costs.  Past performance is not indicative of future results.  Potential for profits is accompanied by possibility of loss. 

The graphic below shows a comparison of annual returns using the time period 1998 and 2015 in which the correlation of excess returns between momentum and managed futures  was  (-0.91)  A few of the outlier years to take note of which contain major differences in performance are 1999, 2008, 2009, and finally 2014.   Some of the largest differences in performance can be attributed to periods of heighted equity market volatility (ex 2008).   Excess volatility tends to create more opportunities for managed futures strategies.  On the other hand, the past 5 years (with the exception of 2014) showed equity momentum outperforming managed futures as the stock market continued its strong bull market while many commodities and foreign exchange rates were lacking volatility and any type of sustained trend (up or down).

Click on graphic for larger version

correlations

PDP inception date: March 1, 2007, CSAIX inception date: Sept 28, 2012 – data prior to inception is based on a back-test of the underlying indexes Please see the disclosures for important information regarding back-testing.  PDP returns do not include dividends.  Returns do not include all potential transaction costs.  Past performance is not indicative of future results.  Potential for profits is accompanied by possibility of loss. 

The table below goes through similar allocation structure of how we set up our low volatility and value portfolios in combination with momentum in previous posts.  Our main goal here is to stay consistent and create a robust process that has very few moving parts.  The portfolios are all re-balanced annually but each allocation remains consistent each year.   The main goal is to emphasize the benefit of combining two negatively correlated strategies in order to take advantage of the performance differences each will achieve throughout different market cycles.

Click on graphic for larger version

HISTORICAL ALLOCATIONS

The returns above are based on hypothetical back-tests of the various allocation options.  PDP inception date: March 1, 2007, CSAIX (inception date: Sept 28, 2012 – data prior to inception is based on a back-test of the underlying indexes. Back-tested performance results have certain limitations.  Such results do not represent the impact of material economic and market factors might have on an investment advisor’s decision-making process if the advisor were actually managing client money.  Back-testing performance also differs from actual performance because it is achieved through retroactive application of a model investment methodology designed with the benefit of hindsight.  PDP returns do not include dividends.  Returns do not include all potential transaction costs.  Past performance is not indicative of future results.  Potential for profits is accompanied by possibility of loss. 

Let’s take it a step further and add one simple risk metric to our portfolio and see if we can reduce volatility even further.   Over time, it’s typically been the case that a long only equity momentum/trend following based strategy tends to perform better while the SPX is above its 200 day moving average.   On the flip side, when the SPX is below its 200 day moving average, periods of heightened volatility are more frequent and can lead to steep draw downs in these portfolios.   This is not always the case but over the years research has shown that the 200 day moving average is often considered a reliable proxy for a risk on/risk off environment.

Interestingly enough, this “risk off” environment is often where managed futures strategies thrive and tend to see their best results.  One main reason for this is the abundance of “fat tail” trades that seem to occur during these market cycles.  The below table compares a model we have created using a 200 day moving average as a risk proxy to determine how we will allocate our portfolio using equity momentum (PDP) and a managed futures strategy (CSAIX).   The allocation will be 80% equity momentum/20% managed futures when the S&P is above its 200 day moving average and 80% managed futures/20% equity momentum when it is below.  In order to reduce turnover, the portfolio will only be re-balanced on a month-end basis.

Click on graphic for larger version

CSAIX

PDP inception date: March 1, 2007, CSAIX  inception date: Sept 28, 2012 – data prior to inception is based on a back-test of the underlying indexes Performance of the switching strategy is the result of back-testing.  Back-tested performance results have certain limitations.  Such results do not represent the impact of material economic and market factors might have on an investment advisor’s decision-making process if the advisor were actually managing client money.  Back-testing performance also differs from actual performance because it is achieved through retroactive application of a model investment methodology designed with the benefit of hindsight. PDP returns do not include dividends.  Returns do not include all potential transaction costs.  Past performance is not indicative of future results.  Potential for profits is accompanied by possibility of loss. 

Let’s take it a step further and add one simple risk metric to our portfolio and see if we can reduce volatility even further.   Over time, it’s typically been the case that a long only equity momentum/trend following based strategy tends to perform better while the SPX is above its 200 day moving average.   On the flip side, when the SPX is below its 200 day moving average, periods of heightened volatility are more frequent and can lead to steep draw downs in these portfolios.   This is not always the case but over the years research has shown that the 200 day moving average is often considered a reliable proxy for a risk on/risk off environment.

Interestingly enough, this “risk off” environment is often where managed futures strategies thrive and tend to see their best results.  One main reason for this is the abundance of “fat tail” trades that seem to occur during these market cycles.  The below table compares a model we have created using a 200 day moving average as a risk proxy to determine how we will allocate our portfolio using equity momentum (PDP) and a managed futures strategy (CSAIX).   The allocation will be 80% momentum/20% managed futures when the S&P is above its 200 day moving average and 20% equity/80% managed futures when it is below.  In order to reduce turnover, the portfolio will only be re-balanced on a month-end basis.

 

 

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Factor Investing: The Benefits of Combining Momentum & Value

June 2, 2016

After our previous write up regarding the idea of combining momentum and low volatility into a portfolio, we had a few requests asking about the concept of combining momentum and value. As long time Dorsey Wright readers know, while we absolutely believe momentum can work as a stand-along strategy in a portfolio, combining momentum with a value based strategy does have certain advantages.   As is the case with low volatility, a value based approach can also typically be thought of as a reversion to the mean type of trade as market participants seek value in underperforming stocks or asset classes.   Obviously, a momentum based approach is focused on finding stocks that have outperformed their peers over a certain period (ex. 12 month trailing), hoping those strong trends continues to maintain leadership in the market.

Here is a brief summary of each strategy side by side.   Note we are using total return for the RPV (Pure Value) and SPX (Benchmark).  As shown below, PDP (Momentum) outperforms both RPV and SPX over the allotted time frame in this study, but not without slightly higher volatility.   We can also see a number of years in which momentum and value have substantially different performance numbers.   Let’s take this a step further and dive into some of the details on the correlation of excess returns between the two strategies.

PDP

As we pointed out in our previous post, the correlation of excess returns between low volatility and momentum came in at roughly -.70.  Given what we mentioned about the underlying theme of momentum investing (trend following) while compared to value investing (mean reversion), it’s logical to think a similar type of figure would exist between these two strategies as well.   The table below shows a comparison of annual returns using the time period 1998 and 2015 in which the correlation of excess returns between value and momentum comes out to be -.50.  A few of the outlier years to take note of which contain major differences in performance are 1998 – 2002, 2007, 2009, and finally 2015.  The main concept again being not only does having the ability to rotate or combine these two factor based strategies help improve performance; it also helps in reducing volatility. (click on below graphic to enlarge)

PDPVSRPV CORR

PDP inception date: March 1, 2007, RPV inception date: March 3, 2006 – data prior to inception is based on a back-test of the underlying indexes. Please see the disclosures for important information regarding back-testing.  PDP returns do not include dividends.  Returns do not include all potential transaction costs.  Past performance is not indicative of future results.  Potential for profits is accompanied by possibility of loss. 

Let’s take this a step further to answer the one question that is usually on most market participants minds.   “How do I implement these products into a portfolio for my clients?”   The number of possibilities is endless but to keep things simple we set up a “static allocation” model that rotates through a number of different portfolio’s starting with a 90% PDP/10% RPV and all the way to 10% RPV/90% PDP during our time period stated above.   This gives a very detailed description of how each one of these portfolios would have performed on a cumulative, annual, and risk –adjusted (volatility) basis.   However, what if we could improve on these returns and be more flexible in our allocations.   We know that often times combing some sort of trend following proxy (typically a moving average) in addition to a stand-alone momentum strategy can often times help improve these numbers.    This will be part of our final discussion. (click on below graphic to enlarge)

pdprpvhistorcials

Over time, it’s typically been the case that a momentum/trend following based strategy (assuming a long only portfolio) tends to perform better while the SPX is above its 200 day moving average.   On the flip side, a choppy market with a lack of sustained leadership (which can favor a value based strategy) is more likely to presents itself when the SPX is below its 200 day MA.  This is not always the case but over the years research has shown that the 200 day moving average is often considered a reliable proxy for a risk on/risk off environment.  The below table compares a model we have created using a 200 day moving average as a risk proxy to determine whether or not we will invest in a momentum (PDP) or value (RPV).   We thought it would be interesting to take these allocations to the extreme, relying on a 100% momentum based strategy when the SPX is above its 200 day MA, while flipping to Value when the SPX is below its 200 day moving average.   Our momentum/trend following model which incorporated the 200 day risk proxy averaged just over 10% annual return, while minimizing volatility to just 21%.   Comparing these towards using PDP or RPV as stand-alone vehicles as was in table 1, we can see the benefits when it comes to having access to both products. (click on below graphic to enlarge)

200ma NEW

PDP inception date: March 1, 2007, RPV inception date: March 3, 2006 – data prior to inception is based on a back-test of the underlying indexes. Performance of the switching strategy is the result of back-testing.  Back-tested performance results have certain limitations.  Such results do not represent the impact of material economic and market factors might have on an investment advisor’s decision-making process if the advisor were actually managing client money.  Back-testing performance also differs from actual performance because it is achieved through retroactive application of a model investment methodology designed with the benefit of hindsight. PDP returns do not include dividends.  Returns do not include all potential transaction costs.  Past performance is not indicative of future results.  Potential for profits is accompanied by possibility of loss. 

As this paper shows, there are a number of ways to combine both momentum and value into a portfolio.   For those investors willing to accept slightly higher volatility to achieve higher returns, a portfolio with a larger allocation towards momentum certainly is favorable.   The same can be true for those investors looking to low annualized volatility who might not be as concerned about achieving a certain level of excess return.   Finally, we showed adding a trend following proxy (the 200 day moving average) can help aide in substantial performance over the benchmark (SPX), and also help achieve better risk management when using a momentum or value based strategy as a stand-alone vehicle.

Performance data for the model is the result of hypothetical back-testing.  Performance data for RPV prior to 03/01/06 and PDP prior to 3/01/2007 is the result of backtested underlying index data.  Investors cannot invest directly in an index, like the SPX.  Indexes have no fees.  Total return figures are used in RPV and SPX calculations.  Back-tested performance is hypothetical (it does not reflect trading in actual accounts) and is provided for informational purposes to illustrate the effects of the strategy during a specific period.  Back-tested performance results have certain limitations. Back-testing performance differs from actual performance because it is achieved through retroactive application of an investment methodology designed with the benefit of hindsight. Model performance data as well as back-tested performance do not represent the impact of material economic and market factors might have on an investment advisor’s decision making process if the advisor were actually managing client money. Past performance is not indicative of future results. Potential for profits is accompanied by possibility of loss.

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Combining Momentum & Low Volatility for Enhanced Alpha

May 2, 2016

Most market participants would agree that four of the most popular factor based investment methods used today are often considered to be momentum, value, growth, and low volatility.   At Dorsey Wright, we are often asked the best way to combine Dorsey Wright strategies (momentum/relative strength) with these other commonly used factor strategies.      Proponents of any smart beta strategy will often support all of these strategies, even admitting that there are pros and cons to each factor.  Momentum, for example, is the idea of investing in securities or asset classes using a previous time period that has performed well, most commonly a 12 month trailing return.  This type of strategy tends to do well during periods of sustained trends, but lags others such as value and low volatility during choppy markets.

During the 1st quarter of 2015, the majority of momentum/relative strength based strategies tended to fare better than the other factor based strategies mentioned above.  One of the largest contributing factors to this alpha generation during Q1 of 2015 was the dispersion which existed amongst US equities.   For example, the energy sector saw a sharp decline while sectors such as healthcare, biotech, and consumer discretionary fared much better.    Fast forward to the Q1 of 2016 and we have a different story on our hands.   Momentum strategies have struggled due to a lack of sustained sector leadership, while investment themes such as low volatility and value have performed much better.

Given the recent changes in sector leadership, we thought it would be interesting to go back and take a look how a few of these factor methods have compared to each other in terms of performance, volatility, etc.  The table below is a simple study complied over the last 18 years comparing PDP (Momentum), SPLV (low volatility), and SPY (benchmark).   Although momentum (PDP) outperforms both SPLV (low volatility) and SPY (benchmark), the added alpha generation came with a few drawbacks (mainly the potential for elevated volatility).   While periods such as these can be difficult, there are certainly ways to minimize the downside when they do come about in the market.   For example, using a systematic process can be a huge advantage, as it helps remove the human emotion which often times is magnified during periods of heightened market volatility.   Let’s take a look at the table below and see what type of results each of these portfolios (momentum, low volatility, and the equity index) generated over the allotted time period.

pdp

PDP inception date: March 1, 2007 – data prior to inception is based on a back-test of the underlying index.

SPLV inception date: May 5, 2011 – data prior to inception is based on a back-test of the underlying index.

When we take a closer look at the returns, we can see just how much the momentum and low volatility factors  differ in terms of performance at various cycles in the market (note 1999, 2003, and 2008 just to name a few).   The idea of implementing both momentum and low volatility into a portfolio would then sure seem logical to most money managers.   After all, any type of low volatility factor investing can typically be thought of as a reversion to the mean type of trade, which most would agree is the exact opposite goal of momentum investing (i.e.  looking for “fat tail” trades that deviate from the mean).    More simply stated, combining two different factor allocations in a portfolio which tend to do well during different market cycles would certainly seem to be an added benefit for any portfolio manager looking to reduce volatility and continue to generate alpha.

pdpsplv

The graphic above does a good job of displaying the differences returns year in and year out.  In fact, the correlation of excess returns between momentum and low volatility ends up at roughly-.70.    We plan to further visit this topic in our next blog post in order to give readers an a better idea on the type of results seen when combining these two factors in both a static and flexible allocations.   For now, the important thing to keep in mind is that in today’s investment world market participants should take full advantage of the full suite of products out there in order to help achieve alpha for their clients.    Using momentum and low volatility is just one way this can be done.   More detailed performance and risk analysis to follow in our next post on this topic.

Performance data for SPLV prior to 05/05/2011 and PDP prior to 3/01/2007 is the result of backtested underlying index data.  Investors cannot invest directly in an index.  Indexes have no fees.  The returns of the ETFs above do not include dividends, or all transaction costs.  Back-tested performance is hypothetical (it does not reflect trading in actual accounts) and is provided for informational purposes to illustrate the effects of the strategy during a specific period.  Back-tested performance results have certain limitations. Back-testing performance differs from actual performance because it is achieved through retroactive application of an investment methodology designed with the benefit of hindsight. Back-tested performance does not represent the impact of material economic and market factors might have on an investment advisor’s decision making process if the advisor were actually managing client money. Past performance is not indicative of future results. Potential for profits is accompanied by possibility of loss.

Neither the information within this post, nor any opinion expressed shall constitute an offer to sell or a solicitation or an offer to buy any securities  This article does not purport to be complete description of the securities to which reference is made.

DWA provides the underlying index for the PDP, discussed above, and receives licensing fees from PowerShares.

           

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RS Charts of The Week

October 2, 2015

 photo SPYVSAGG_zpsrimmuxz8.png

 photo spyvsiyr_zpsfqgysswb.png

 photo spyvsgcc_zpsusirdyyn.png

 photo spyvseem_zps22lzuioy.png

 photo SPYVSEFA_zps9s7axjg6.png

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 Charts of The Week

September 18, 2015

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 photo SPY VS EFA_zpscie5x9fh.png

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 Charts of The Week

September 11, 2015

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 photo SPYEFA125_zpsq2zsd50k.png

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 Charts of The Week

August 28, 2015

 photo SPYVSAGG_zpslznymynz.png

 photo SPYVSIYR_zpsm5wkuzdf.png

 photo SPYVSGCC_zpsz13lt2jx.png

 photo SPYVSEEM_zpsjbermarh.png

 photo SPYVSEFA_zpsh9ykkwx6.png

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 Charts of The Week

August 21, 2015

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 photo SPYVSEEM2_zps8n7lznbe.png

 photo SPYVSEFA_zpsfpwl5b7w.png

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 Charts of The Week

August 14, 2015

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 photo SPYVSEEM_zpsb8nnztjo.png

 photo SPYVSEFA2_zpsvyfcrcma.png

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 Charts of the Week

July 31, 2015

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 photo SPYVSEEM_zps5cn3nci1.png

 photo SPYVSEFA_zpsh1nga0h5.png

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 Charts of The Week

July 24, 2015

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 photo SPYVSIYR_zpseyq1jwj4.png

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 photo SPYVSEEM_zps2degwxvt.png

 photo SPYVSEFA_zpsiljjarcr.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 Charts of The Week

July 17, 2015

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 photo SPYVSEEM_zpss7nhx4ut.png

 photo SPYVSEFA_zpsulqn7drx.png

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 Charts of The Week

July 10, 2015

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 photo SPYVSEEM_zpsooslac1f.png

 photo SPYVSEFA_zpswhu65app.png

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 Charts of The Day

June 19, 2015

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 photo SPYVSIYR_zps9w8v1gpq.png

 photo SPYVSEEM_zpsjwrxzhft.png

 photo SPYEFA_zpsdtkkujwe.png

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

June 11, 2015

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 photo SPYVSEFA_zpsqijnvhsv.png

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.

http://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

June 4, 2015

 photo SPYVSEEM_zps4votqfzi.png

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

June 3, 2015

 photo SPYVSGCC_zpskarc4mw5.png

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

June 2, 2015

 photo SPYVSIYR_zpsoxi5jxm1.png

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

June 1, 2015

 photo SPYVSAGG_zps6oklrsuu.png

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

May 29, 2015

 photo SPYVSEEM_zpsknaxolpf.png

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

May 28, 2015

 photo SPYVSGCC_zpssj6wch6g.png

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

May 27, 2015

 photo SPYVSIYR_zps2zlvleun.png

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

May 26, 2015

 photo SPYVSAGG_zps846hno4w.png

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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