High RS Diffusion Index

April 14, 2016

The chart below measures the percentage of high relative strength stocks (top quartile of our ranks) that are trading above their 50-day moving average (universe of mid and large cap stocks.)  As of 4/13/16.

diffusion

The 10-day moving average of this indicator is 95% and the one-day reading is 93%.

The relative strength strategy is NOT a guarantee.  There may be times where all investments and strategies are unfavorable and depreciate in value.  Investors cannot invest directly in an index.  Indexes have no fees.  Past performance is no guarantee of future returns.  Potential for profits is accompanied by possibility of loss.

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Relative Strength Spread

April 12, 2016

The chart below is the spread between the relative strength leaders and relative strength laggards (top quartile of stocks in our ranks divided by the bottom quartile of stocks in our ranks; universe of U.S. mid and large cap stocks).  When the chart is rising, relative strength leaders are performing better than relative strength laggards.    As of 4/11/16:

spread

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

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The Market is a Zoo and March was a Lion!

April 11, 2016

By: Efram Slen, Global Index Product Development Manager, Nasdaq

March certainly roared like a lion this year following two difficult months at the start of 2016. Major U.S. indexes gained more than 6% each during the month of March:

Nasdaq-100 |+6.7%

S&P 500 |+6.6%

Dow Jones Industrial Average |+7.0%

During the month, Federal Reserve Chair, Janet Yellen, said the central bank will move cautiously as it weighs interest rate hikes in light of a weak global economy and stubbornly low inflation, raising questions about whether policymakers will make a rate move this spring.

Perhaps one of the more interesting stories of the month was the resilient comeback of Emerging Markets. Monetary easing by major central banks, as well as a firming of oil prices and other commodities during much of the quarter, powered emerging market stocks higher.

Nasdaq Emerging Markets Index | +12.7%

Figure A

 

Commodities also witnessed a surge:

Nasdaq Commodity Crude Oil ER Index |+8.2%

The Federal Reserve’s cautious stance on future tightening has dampened the U.S. Dollar, aiding a boost to broader commodities.

The Nasdaq Dividend and Income Family were also beneficiaries as yields on 10-Year U.S. Treasuries dropped sharply since mid-March, pushing investors to look elsewhere for yield.

 

Index BBG Ticker Name 1-Month Performance
DVG DVG NASDAQ US Dividend Achievers Select 6.0%
DAA DAAX NASDAQ US Broad Dividend Achievers 6.2%
DAY DAY NASDAQ US Dividend Achievers 50 7.9%
DAT DAT NASDAQ International Dividend Achievers 9.8%
NQMAUS NQMAUS NASDAQ US Multi-Asset Diversified Income 5.7%
NQ96DIVUS NQ96DVU NASDAQ Technology Dividend 9.4%

 

For more information, please click here and a member of our team will contact you directly.

Nasdaq has consolidated performance data for our top 50 most-watched indexes. View the full report here.

 

 

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Weekly RS Recap

April 11, 2016

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

Last week’s performance (4/4/16 – 4/8/16) is as follows:

ranks

This example is presented for illustrative purposes only and does not represent a past or present recommendation.  The relative strength strategy is NOT a guarantee.  There may be times where all investments and strategies are unfavorable and depreciate in value.  The performance above is based on pure price returns, not inclusive of dividends, fees, or other expenses.  Past performance is not indicative of future results.  Potential for profits is accompanied by possibility of loss.

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Most investing is simple, but we complicate it.

April 6, 2016

Morgan Housel, in a 2014 WSJ article, shared some wise words to help demystify the stock market.

Companies earn a profit.  When investors are in a good mood, they pay up for that profit.  When they are in a bad mood, they pay less.  Future stock returns will equal profit growth, plus or minus the change in investor attitudes.

That really is all that is going on in the stock market.  But we complicate it, scrutinizing every market detail for evidence of what is coming next.

At their core, market forecasts are an attempt to predict investor’s emotions—say, how happy people will be in 2024.  An there is just no reliable way to do that.

A sensible way to invest is to assume companies will earn a profit, and assume the amount investors will be willing to pay for that profit will fluctuate sporadically.  Those emotional swings will balance out over time, and over the long run the profits companies earned will accrue to investor’s pockets.

Everything else—what stocks might do next quarter, or when the next crash might come—can be needlessly complicating.  Investors should learn to take the simple route.

Housel’s description of how the stock market works is spot on.  However, investors still have to decide what to do with this information.  Perhaps, they will choose buy and hold index investments.  Perhaps, they will choose to employ active investment strategies in an attempt to improve the risk/return profile of a passive investment.  If they choose the latter, even for a portion of their overall allocation, they would be well served to choose active investment strategies that take into account the reality that stock prices are determined by a combination of factors that include corporate profits AND investor emotions.

Key to the rationale for momentum investing is that one never knows, nor does one necessarily care, the exact motivation of buyers and sellers in the marketplace.  For momentum investors, it is enough to see the net effect of all buying and selling pressure for stocks and then to rank a universe of securities by their momentum, buying the securities with the strongest momentum and holding them for as long as they remain strong.

What should investors avoid?  As Housel points out, forecasting is an exercise in futility.  Furthermore, expecting the stock market to be a simple math problem related to corporate profits is another way for investors to set themselves up for disappointment.

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

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High RS Diffusion Index

April 6, 2016

The chart below measures the percentage of high relative strength stocks (top quartile of our ranks) that are trading above their 50-day moving average (universe of mid and large cap stocks.)  As of 4/5/16.

diffusion

The 10-day moving average of this indicator is 96% and the one-day reading is also 96%.

The relative strength strategy is NOT a guarantee.  There may be times where all investments and strategies are unfavorable and depreciate in value.  Investors cannot invest directly in an index.  Indexes have no fees.  Past performance is no guarantee of future returns.  Potential for profits is accompanied by possibility of loss.

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Relative Strength Spread

April 5, 2016

The chart below is the spread between the relative strength leaders and relative strength laggards (top quartile of stocks in our ranks divided by the bottom quartile of stocks in our ranks; universe of U.S. mid and large cap stocks).  When the chart is rising, relative strength leaders are performing better than relative strength laggards.    As of 4/4/16:

spread

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

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Systematic RS Portfolios Update

April 4, 2016

Equity markets staged an impressive rally in March, putting broad indexes in reach of their all-time highs.  For relative strength strategies, March was also a month where we started to once again see relative strength leaders perform favorably compared to relative strength laggards.

We also reached a couple noteworthy milestones for our family of Systematic RS Portfolios in March.  First, our International portfolio reached a 10-year track record, having outperformed the MSCI EAFE by 6.08% annually on a net basis since its inception.  Second, our Tactical Fixed Income portfolio reached a 3-year track record, having outperformed the Barclays Aggregate Bond Index by 1.35% annually on a net basis since its inception.  Tactical Fixed Income also happens to be our best performing portfolio so far this year.

Detailed performance is shown below:

perf

To receive the brochure for these portfolios, please e-mail andy@dorseywright.com or call 626-535-0630.  Click here to see the list of platforms where these separately managed accounts are currently available.

Total account 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.  Information is from sources believed to be reliable, but no guarantee is made to its accuracy.  This should not be considered a solicitation to buy or sell any security.  Past performance should not be considered indicative of future results. The S&P 500 is a stock market index based on the market capitalizations of 500 leading companies publicly traded in the U.S. stock market, as defined by Standard & Poor’s.  The Barclays Aggregate Bond Index is a broad base index, maintained by Barclays Capital, and is used to represent investment grade bonds being traded in the United States.  The 60/40 benchmark is 60% S&P 500 Total Return Index and 40% Barclays Aggregate Bond 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.  The Dow Jones Moderate Portfolio Index is a global asset allocation benchmark.  60% of the benchmark is represented equally with nine Dow Jones equity indexes.  40% of the benchmark is represented with five Barclays Capital fixed income indexes. Each investor should carefully consider the investment objectives, risks and expenses of any Exchange-Traded Fund (“ETF”) prior to investing. Before investing in an ETF investors should obtain and carefully read the relevant prospectus and documents the issuer has filed with the SEC.  ETFs may result in the layering of fees as ETFs impose their own advisory and other fees.  To obtain more complete information about the product the documents are publicly available for free via EDGAR on the SEC website (http://www.sec.gov)  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.

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Q2 2016 PowerShares DWA Momentum ETFs

April 4, 2016

The PowerShares DWA Momentum Indexes are reconstituted on a quarterly basis.  These indexes are designed to evaluate their respective investment universes and build an index of stocks with superior relative strength characteristics.   This quarter’s allocations are shown below.

PDP: PowerShares DWA Momentum ETF

 pdp

DWAS: PowerShares DWA Small Cap Momentum ETF

dwas

DWAQ: PowerShares DWA NASDAQ Momentum ETF

dwaq

PIZ: PowerShares DWA Developed Markets Momentum ETF

piz

PIE: PowerShares DWA Emerging Markets Momentum ETF

pie

Source: Dorsey Wright, MSCI, Standard & Poor’s, and NASDAQ, Allocations subject to change

We also apply this momentum-indexing methodology on a sector level:

sector momentum

See www.powershares.com for more information.  

The relative strength strategy is NOT a guarantee.  There may be times where all investments and strategies are unfavorable and depreciate in value.

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Weekly RS Recap

April 4, 2016

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

Last week’s performance (3/28/16 – 4/1/16) is as follows:

ranks

RS laggards went back to lagging last week, although even the bottom quartile saw strong returns in absolute terms for the week.

This example is presented for illustrative purposes only and does not represent a past or present recommendation.  The relative strength strategy is NOT a guarantee.  There may be times where all investments and strategies are unfavorable and depreciate in value.  The performance above is based on pure price returns, not inclusive of dividends, fees, or other expenses.  Past performance is not indicative of future results.  Potential for profits is accompanied by possibility of loss.

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Corporate Profits and Stock Market Returns—It’s Complicated

April 4, 2016

There is never any shortage of big scary things to worry about when it comes to the stock market.  Savita Subramanian from Bank of America recently weighed in on her current concerns on earnings growth:

Publicly traded companies have seen negative earnings growth two quarters in a row and there are no fundamental underpinnings for the rally, Savita Subramanian, BofAML’s head of U.S. equity and quantitative strategy, said on CNBC’s “Fast Money” this week.

“We are in a profits recession. There (are) no two ways around it,” said Subramanian, whose S&P 500 price target of 2,000 is among the lowest on Wall Street. She is also concerned about how Federal Reserve monetary policy could affect stocks.

“You have the Fed embarking on a long, slow tightening cycle. Tightening into a profits recession doesn’t sound like anything to throw a big party about,” she said.

Ben Carlson saw her comments and decided to take a closer look at the historical relationship between profit growth and stock market returns.

One of the biggest problems in the world of finance is that people make proclamations without backing it up with evidence. So I wanted to see what the historical relationship looks like between profit growth and stock market returns. Using Federal Reserve data on corporate profits, I looked back at the historical growth rate of profits by decade and compared them to that decade’s stock market returns (using the S&P 500):

Carlson1

Now let’s break things down even further by market type:

Carlson2

(Although the S&P 500 was up 6% per year in the 1966-1981 period, many consider this a sideways market because the Dow went nowhere from a price perspective and once you take inflation into account real returns were basically zero.)

There’s really not much of a discernible pattern that can be detected here. High profit growth has led to both high and low stock market returns throughout the post-WWII period. There were also times of low profit growth with high stock market returns.

The greatest profit growth was seen in two of the worst-performing stock market decades — the 1970s and 2000s. But those periods were markedly different as the 70s saw sky-high inflation with rising interest rates while the 2000s had low inflation and falling rates.

After accounting for inflation, the 1980s only saw profit growth of roughly 1.6%, but stocks returned more than 17% per year (12% real). The 1950s and 1960s saw one of the greatest bull markets of all-time, but profit growth was basically average. Profits growth has been non-existent during the latest bull market cycle, but stocks are up gangbusters anyways.

This may seem highly blasphemous to die hard fundamentalists who often fall into the trap of thinking that success in the stock market is mostly a matter of accounting.  It is not.  Rather, it all comes back to what investors are willing to pay for those earnings.  Thus the need for technical analysis!

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Advisors Warm to Allocation ETFs

April 1, 2016

Nice article by Jackie Noblett of Ignites, highlighting the successful trend toward wrapping strategies in an ETF—a trend which Dorsey Wright is leading.

While funds of funds have their niche in the mutual fund marketplace, ETFs allocating to other exchange-traded products have struggled to catch on with advisors who pride themselves in their ability to build low-cost and efficient ETF portfolios.

But ETF sponsors say advisors are starting to pay more attention to ETFs of ETFs with embedded asset allocation strategies for parts of their practices where the efficiencies of buying a single stock outweigh additional management fees.

“Advisors could go out and do a similar thing [to the ETF] but then they are incurring turnover costs, commissions and may not be able to track the strategy as well, so the management fee overlay [of an ETF of ETFs] is very reasonable,” says Jeff Beeson, product development manager at Invesco PowerShares.

PowerShares is among the firms looking to tap into demand for products with prepackaged allocations. Both it and First Trust launched ETFs this month that invest in a portfolio of their own products based on research methodologies developed by Dorsey, Wright & Associates.

State Street Global Advisors, meanwhile, has filed registration statements to add the SPDR SSGA Flexible Allocation ETF and SPDR SSGA U.S. Sector Rotation ETF to its line of actively managed asset allocation ETFs of ETFs launched in 2012.

Most of these products remain relatively small compared with funds of mutual funds and separately managed accounts composed primarily or exclusively of ETFs.

iShares launched a range of asset allocation ETFs in 2008, and rebranded them under its core series.

The four funds totaled just under $1.8 billion at the end of February, according to Morningstar. State Street launched the actively managed SPDR SSGA Global Allocation ETF, SPDR SSGA Income Allocation ETF and SPDR SSGA Multi-Asset Real Return ETF in 2012, but combined those products hold about $237 million in assets.

A handful of such products have had greater success in gathering assets, however. The $3.4 billion Dorsey Wright Focus 5 Fund is among the largest asset allocation ETFs of ETFs, and critical to its success is the “intellectual capital and following” that comes with partnership with the Richmond, Va.-based research and model shop, says Ryan Issakainen, senior VP at First Trust.

First Trust has worked with Dorsey on building other models that allocate among the Wheaton, Ill.-based sponsor’s ETFs, but offering the strategy in a stand-alone ETF provides another way for advisors to access the research and models.

“Dorsey Wright has demonstrated expertise in helping advisors use ETFs in portfolio construction, either in sector rotation or some other kind of model, and there were already a number of financial advisors that had significant buy-in to the strategies,” Issakainen says.

Similarly, PowerShares sees significant value in the Dorsey name. In the case of the DWA Multi-Asset Income Portfolio, it is the first time the research shop has put together a product using a multi-asset income-focused model, Beeson notes. The firm is positioning the product as a way for advisors to enhance income generation without having to “reach” into asset classes they may be unfamiliar with, such as master limited partnerships, he adds.

Advisors also benefit from the efficiencies that come with the fund-of-funds model, particularly for more tactical strategies, sponsors and analysts say. Investors often incur trade commissions and bid-ask spread costs in buying and selling ETFs on an exchange, which can add up when tracking a portfolio of many ETFs that rebalance frequently. Those trades can also have tax consequences, but an ETF can use in-kind creation and redemption to reduce the capital gains hit.

While some ETF-using advisors believe part of their value to clients is in evaluating the broad array of ETFs and using them as building blocks for custom portfolios, there are a growing number of investors new to ETFs who are looking for “simple solutions” that increasingly include ETFs of ETFs, says Todd Rosenbluth, director of mutual fund and ETF research at S&P Capital IQ. “They are gaining attention because they are doing the work for the investor or advisor in terms of sorting through the universe of ETFs based on whatever characteristics or outcome they are looking for.”

By comparison, more than $73 billion was held in ETF managed portfolios tracked by Morningstar at the end of 2015. But the ETF managed account business has shrunk nearly 30% from its peak of $103 billion at the beginning of 2014, in part due to poor performance and in part because of reverberations from the collapse of F-Squared Investments and management turnover at Windhaven — two of the biggest ETF strategists.

ETF sponsors have spent years forging close ties with this market, but also supplementing their efforts to help advisors put together ETF asset allocation strategies with paper models and individual ETFs. “We see utility in a lot of different mechanisms for asset allocation,” says Dave Mazza, head of research for SPDR ETFs and SSgA Funds.

“There’s going to be a group of clients out there that are not going to be interested in a one-stop-shopping solution for their client portfolios. But that doesn’t turn them off from being engaged with the [asset allocation] products,” either as a tool for smaller accounts or within a sleeve of a portfolio that mixes various asset allocation strategy funds with an advisor’s choice of ETFs or other products to serve as core holdings, he says.

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What To Make Of International?

March 28, 2016

Dorsey Wright’s main asset allocation tool, Dynamic Asset Level Investing (DALI), currently has International Equities ranked dead last from a relative strength perspective:

dali_intl

As of 3/23/16

Another way to get a sense for how poor International equities have done is to look at the PnF chart of MSCI EAFE (EFA):

efa

As of 3/23/16

This ETF remains well below its early 2014 highs, even with the rally of the last couple of weeks.

From an asset allocation perspective, this type of weak performance from an asset class can cause an investor to question how International equity exposure should be handled.  Should International equity be reduced?  eliminated? actively managed?

A strong argument for the latter (actively managed) would be our Systematic RS International Portfolio.  While International equities have been weak for some time, our Systematic RS International portfolio has been able to create significant separation from its benchmark, as shown below:

srs intl performance

See performance disclosures below (1).  As of 2/29/16.  Inception 3/31/2006.

As shown above, Systematic RS International has performed well versus the MSCI EAFE over the time periods shown (YTD, 1 year, 3 years, 5 years, and since inception).

One of the keys to this performance is that Systematic RS International is a fairly concentrated portfolio of ADRs.  Our starting universe includes about 500 small, mid, and large cap ADRs from both developed and emerging international market.  From that broad investment universe of ADRs, our model narrows it down to 30-40 stocks that will go into the portfolio.  We rank that universe of stocks by relative strength, buy stocks out of the top quartile of our ranks, and sell them when they fall out of the top half of our ranks.

dispersion

Source: Dorsey Wright. Performance over period 3/22/2013 – 3/22/2016.  Performance is price only, not inclusive of dividends or transaction costs.

When you look at the cumulative 3-year performance for the stocks in the investment universe for our Systematic RS International portfolio, you will notice that the returns range from -100% to 775%.  A large percentage of the stocks in the investment universe performed quite poorly over this period of time.  However, you’ll also notice that a sub-set of the securities performed quite well.  In fact, there were over 50 stocks in this investment universe that were up over 50 percent over this 3-year period of time.  Certainly a relative strength strategy does NOT guarantee that you’ll capture all those winners.  However, it has the potential to increase the odds that you’ll capture a bunch of them.  Also, what you don’t own is every bit as important as what you do own.  Seeking to avoid the losers can have a meaningful impact on returns as well.

When an asset class is out of favor, investors have some choices to make.  Should they reduce exposure, eliminate exposure, or actively manage that exposure.  We believe that our Systematic RS International portfolio is a good argument for the latter.

If you would like to see the Systematic RS International portfolio added to a UMA platform at your firm, please have your managed accounts department contact Andy Hyer at andy@dorseywright.com or 626-535-0630.

(1)The performance represented in this article is based on monthly performance of the Systematic Relative Strength International Model.  Net performance shown is total return net of management fees, commissions, and expenses 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 2A 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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Weekly RS Recap

March 28, 2016

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

Last week’s performance (3/21/16 – 3/24/16) is as follows:

ranks

RS leaders outperformed the RS laggards for the first week in a while last week.  Energy names pulled back particularly sharply last week.

This example is presented for illustrative purposes only and does not represent a past or present recommendation.  The relative strength strategy is NOT a guarantee.  There may be times where all investments and strategies are unfavorable and depreciate in value.  The performance above is based on pure price returns, not inclusive of dividends, fees, or other expenses.  Past performance is not indicative of future results.  Potential for profits is accompanied by possibility of loss.

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Sector Performance

March 24, 2016

The table below shows performance of US sectors over the trailing 12, 6, and 1 month(s).  Performance updated through 3/23/16.

sector

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

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Relative Strength Spread

March 22, 2016

The chart below is the spread between the relative strength leaders and relative strength laggards (top quartile of stocks in our ranks divided by the bottom quartile of stocks in our ranks; universe of U.S. mid and large cap stocks).  When the chart is rising, relative strength leaders are performing better than relative strength laggards.    As of 3/21/16:

spread

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

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Crowdsourcing Investment Decisions

March 21, 2016

crowdsourcing

When one of our clients–a financial advisor–recently presented a relative strength strategy to one of their clients, the client’s response was enlightening.  “So, relative strength investing is basically like crowdsourcing, right?”  As the advisor thought about it, the similarities were striking.

Crowdsourcing, a business term coined in 2006, continues to gain traction as a way to obtain desired ideas or services by soliciting contributions from large groups of people rather than by a smaller group of employees.  From Wikipedia, to genealogy research, to KickStarter and beyond, people and institutions are becoming aware of the benefits of engaging the masses.  Take Wikipedia as an example of the benefits of crowdsourcing.  Encyclopedias aimed to convey the accumulated knowledge of experts on a broad range of subjects.  They were a great resource for sure, but quickly became outdated and were often limited in scope.  Enter Wikipedia, launched in 2001.  In contrast to the experts that were engaged to compile the information for encyclopedias, Wikipedia, at least originally, was open to anyone to create articles on any topic (now only registered users can make contributions).  Obviously, many of those contributors to Wikipedia were far from experts on the topic that they were writing about.  However, errors were relatively quickly corrected.  Today, Wikipedia has over 38 million articles in over 250 languages—massively larger than any set of encyclopedias.  Wikipedia is a giant leap forward, and is based on the “wisdom of the crowds.”  The masses over a relatively smaller group of experts.

It is probably obvious why this person made the connection between crowdsourcing and relative strength investing.  Relative strength calculations are derived from prices of securities.  Those prices are simply the equilibrium point of aggregate supply and demand activity in the market.  In a very real sense, prices include the market activity of every market participant in that security.  This stands in stark contrast to typical investment management firm that has an investment committee comprised of a team of portfolio managers and analysts.  This sample investment management firm may see it as their objective to identify securities that they deem to be worth more than its current market price.  In other words, their objective is to identify opportunities where the market is wrong and they are right.  They are relying on a panel of experts whereas a relative strength approach engages the masses.  A relative strength approach to investing doesn’t “argue” with the current market price.  It simply accepts it for what it is and then sorts a universe of securities by their momentum versus a broad market benchmark or versus the momentum of its peers.

Why limit yourself when making buy and sell decisions to a small group of people, even if those people are “experts,” when you can benefit from the wisdom of the crowd?

The relative strength strategy is NOT a guarantee.  There may be times when all investments are unfavorable and depreciate in value.  Image source: www.blog.sermo.com

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Weekly RS Recap

March 21, 2016

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

Last week’s performance (3/14/16 – 3/18/16) is as follows:

ranks

This example is presented for illustrative purposes only and does not represent a past or present recommendation.  The relative strength strategy is NOT a guarantee.  There may be times where all investments and strategies are unfavorable and depreciate in value.  The performance above is based on pure price returns, not inclusive of dividends, fees, or other expenses.  Past performance is not indicative of future results.  Potential for profits is accompanied by possibility of loss.

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GOLD GETS ITS SHINE BACK

March 18, 2016

GOLD GETS ITS SHINE BACK

By Efram Slen / Product Development Manager, Nasdaq Global Information Services

In light of the market volatility over the first two months of 2016, there have been some real winners as of late. Gold is one of them. In the month of February, gold stocks, as represented by the PHLX Gold/Silver Sector Index were up north of 39%. During that same period, the price of Gold increased from $1,116/oz to $1,234/oz, which is more than a 10.5% return. It is not surprising and highly natural to see investors flock to the asset that is seen as an alternative to cash in highly volatile markets.

Beyond physical ownership, there are many ways to gain exposure to the gold market through the use of equities, futures and options, each of which have been assembled and delivered to investors through indexes.

Equities-Based Gold Indexes

Equities-based gold indexes typically include companies that are involved in the mining or processing of gold. For example, the Nasdaq OMX Global Gold & Precious Metals Index (Ticker: QGLD) is designed to track the performance of the largest and most liquid companies engaged in the gold, silver, and other precious metals mining industries. This index had 47 securities as of February 29, 2016, the largest of which were Barrick Gold Corp, Newmont Mining Corp, and Newmont Mining Corp. Also, theNasdaq Global Index family offers ICB subsector indexes, one of which is based on the subsector Gold Mining in the U.S. The Nasdaq U.S. Benchmark Gold Mining Index (Ticker: NQUSB1777) had just 3 securities as of February 29, 2016. Further, the PHLX Gold/Silver Sector Index (Ticker: XAU) is a specialized index that tracks 30 securities that are involved in gold and silver mining. Launched in 1979, it is among the first sector indexes to be focused on this market. The previous month’s performance of the PHLX Gold/Silver Sector Index ranks among one of the strongest performing months in history. Over the last 30 years, the performance in February 2016 ranks second, only outpaced by a 53.39% monthly gain in September of 1998.

graph 1

The one-year index performance for these indexes, along with the spot price of gold, is shown in Figure 1.

 

FIGURE 1: EQUITY-BASED GOLD INDEXES

figure2

 

Futures-Based Gold Indexes

The Nasdaq Commodity Index incorporates 32 different futures contracts listed in the U.S. or U.K. The Nasdaq Commodity Gold Index is based on gold futures contracts traded on the COMEX and rolls from one contract to another based on a predetermined schedule. This index very closely and consistently tracks the price of gold over time, as shown in Figure 2.

FIGURE 2: FUTURES-BASED GOLD INDEXES

fig3

 

Options-Based Gold Indexes

ETFs have become a very popular vehicle for gaining exposure to gold. To mitigate some of the risk associated with that exposure, the Credit Suisse Nasdaq Gold FLOWS 103 Total Return Index (Ticker: QGLDITR) was designed to track a portfolio consisting of a long position in SPDR Gold Shares (Ticker: GLD), which is the largest and most liquid of the gold ETFs, and a monthly rolling short position in call options against that same ETF. This indexed “buy-write” approach typically results in lower volatility than GLD itself, and converts some of the option premium into a payout stream. Figure 3 illustrates the downside protection afforded by the index against the price of gold.

ETFs have become a very popular vehicle for gaining exposure to gold. To mitigate some of the risk associated with that exposure, the Credit Suisse Nasdaq Gold FLOWS 103 Total Return Index (Ticker: QGLDITR) was designed to track a portfolio consisting of a long position in SPDR Gold Shares (Ticker: GLD), which is the largest and most liquid of the gold ETFs, and a monthly rolling short position in call options against that same ETF. This indexed “buy-write” approach typically results in lower volatility than GLD itself, and converts some of the option premium into a payout stream. Figure 3 illustrates the downside protection afforded by the index against the price of gold.

FIGURE 3: OPTIONS-BASED GOLD INDEXES

fig3

For more information, please click here and a member of our team will contact you directly.

 

Source: Nasdaq Global Indexes Research. Bloomberg. FactSet.

Nasdaq® is a registered trademark of Nasdaq, Inc. The information contained above is provided for informational and educational purposes only, and nothing contained herein should be construed as investment advice, either on behalf of a particular security or an overall investment strategy. Neither Nasdaq, Inc. nor any of its affiliates makes any recommendation to buy or sell any security or any representation about the financial condition of any company. Statements regarding Nasdaq-listed companies or Nasdaq proprietary indexes are not guarantees of future performance. Actual results may differ materially from those expressed or implied. Past performance is not indicative of future results. Investors should undertake their own due diligence and carefully evaluate companies before investing. ADVICE FROM A SECURITIES PROFESSIONAL IS STRONGLY ADVISED.

 

 

 

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Thinking Tactically About Income

March 16, 2016

Scott Eldredge, Director of Fixed Income and Product Strategy at PowerShares, discusses a compelling new option for accessing multiple income strategies in one portfolio (DWIN):

For fixed income investors, we’re not in Kansas anymore. There is a witch’s brew of trends working against fixed income investors – including an economy mired in the weakest recovery since World War II, negative interest rates in Europe, the Federal Reserve having targeted 0% interest rates for seven consecutive years, quantitative easing, and the explosion of the Fed’s balance sheet – with no clear path for unwinding. These trends sow confusion, stress and uncertainty for investors struggling to construct a portfolio that can generate sufficient income.

A dearth of yield opportunities in a low interest rate environment

Given today’s low interest rates, fixed income investors clinging to a buy-and-hold mentality are hard-pressed to find yield opportunities – particularly those with aggregate bond allocations. This is because the aggregate bond universe, which has traditionally comprised a broad cross-section of investment grade securities, now looks strikingly similar to a US Treasury portfolio.

As the mortgage agencies like Fannie Mae and Freddie Mac have come under federal conservatorship, markets are pricing in little difference between agency risk and US Treasury risk. This has meant increasingly lower income for investors. How many of us could live off of a retirement income of around 2%? Well, that’s what the Barclays US Aggregate Bond Index currently has to offer.1

Pursuing income can mean taking on more risk

In a quest for higher income, many investors have taken on additional risk in the form of master limited partnerships (MLPs), high yield bonds and real estate investment trusts (REITs). These non-traditional sources of income may offer greater yields than aggregate bond portfolios, but can leave investors vulnerable to shifting market momentum – underscoring the need for credit diversification. By diversifying a non-aggregate income allocation across a broad range of investments with disparate drivers of return, investors can potentially enhance performance, while diluting the impact of market volatility.

So how does one do that? Through a “set it and forget it” allocation to a basket of income solutions with low correlation? Or is there an opportunity to be more tactical with income investing? The answer may lie in one’s interpretation of the following chart, which maps total returns by asset class over the past 10 calendar years:

This year’s winners can be next year’s losers: A decade of income performance (%)

ELDRIDGE-BLOG-0310_chart

Source: Bloomberg L.P., Barclays Capital, BofA Merrill Lynch as of Dec. 31, 2015. Data is from Dec. 31, 2006 through Dec. 31, 2015, and reflects calendar year performance. Past performance is no guarantee of future results. An investor cannot invest directly in an index. Agg. bonds are represented by Barclays US Aggregate Bond Treasury Index, EM bonds by JPM EMBI Global Index, Preferreds by S&P US Preferred Stock Index, US REITS by Wilshire US REIT Index, Bank loans by Credit Suisse Leveraged Loan Index, MLPs by Alerian MLP Index, Municipals by Barclays Municipal Bond Index, High yield corp. by Barclays US Corporate High Yield Index, IG corp. by Barclays US Corporate Investment Grade Index, Dividend growers by S&P 500 Dividend Aristocrats Index and High dividend payers by DJ US Select Dividend Index.

As you can see, what works well one year might not work so well the next. Sometimes a poor performer can jump to the top of the heap in a relatively short amount of time, and vice versa.

A potential solution to a static income allocation

As interest rates cycle and as credit markets fluctuate, there may be an advantage to a strategy that attempts to rotate out of the weakest-performing income segments. The PowerShares DWA Tactical Multi-Asset Income Portfolio (DWIN) is a newly launched smart beta exchange-traded fund (ETF) whose underlying index methodology seeks to do just that. DWIN tracks the Dorsey Wright Multi-Asset Income Index, which invests in other ETFs and rotates between income-oriented market segments based on relative strength and yield criteria. This means investors can access market segments with high current income potential, but also attempt to defend themselves from shifting market whims.

Here’s how it works. DWIN’s underlying index starts by ranking a universe of income-oriented ETFs based on relative strength, with the top 50% of these ranked again by yield. The five top-ranking ETFs are then given equal weighting. Constituents are evaluated monthly and replaced if not among the top-yielding ETFs.

DWIN is a multi-asset portfolio that offers exposure to both the equity and fixed income markets – including investment grade and high yield bonds, fixed-rate preferred shares, dividend paying equities, US Treasuries, MLPs and real estate investment trusts (REITs). The portfolio can even convert to up to 80% US Treasuries in cases of extreme market turbulence – offering the potential for upside participation and downside risk mitigation.2 We believe DWIN is a compelling potential one-ticket rotation solution – tailor made for today’s low interest rate environment.

Learn more about the PowerShares DWA Tactical Multi-Asset Income Portfolio (DWIN).

1 Barclays US Aggregate Bond Index current yield: 2.37%. Source: Bloomberg L.P., March 7, 2016
2 Periodically, US Treasuries will rank highest in relative strength. In these cases, fewer than
five ETFs may be held, and the Treasury allocation can be up to 80% of the fund.

Important information

The Barclays US Aggregate Bond Index is an unmanaged index considered representative of the US investment-grade, fixed-rate bond market.

Barclays US Aggregate Bond Treasury Index tracks the performance of Treasury securities, government agency bonds, mortgage-backed bonds and corporate bonds.

JPM EMBI Global Index is an unmanaged index which tracks the total return of US dollar-denominated debt instruments issued by emerging market sovereign and quasi-sovereign entities.

S&P US Preferred Stock Index represents the US preferred stock market.

Wilshire US REIT Index measures US publicly traded Real Estate Investment Trusts (REITs).

Credit Suisse Leveraged Loan Index represents tradable, senior-secured, US dollar-denominated, non-investment grade loans.

Alerian MLP Index is a composite of the 50 most prominent energy master limited partnerships calculated by Standard & Poor’s, using a float-adjusted market capitalization methodology.

Barclays Municipal Bond Index is an unmanaged index considered representative of the tax-exempt municipal bond market.

Barclays US Corporate High Yield Index is an unmanaged index considered representative of fixed-rate, non-investment grade debt.

Barclays US Corporate Investment Grade Index is an unmanaged index considered representative of publicly issued, fixed-rate, nonconvertible, investment grade debt securities.

S&P 500® Dividend Aristocrats Index tracks the performance of 40 companies in the S&P 500® Index that have had an increase in dividends for 25 consecutive years.

DJ US Select Dividend Index represents the United States’ leading stocks by dividend yield, subject to screens for dividend-per-share growth rate, dividend payout ratio and average daily dollar trading volume.

There are risks involved with investing in ETFs, including possible loss of money. Shares are not actively managed and are subject to risks including those regarding short selling and margin maintenance requirements. Ordinary brokerage commissions apply. The fund is subject to certain other risks. Please see the prospectus for more information regarding the risks associated with an investment in the fund.

Shares are not individually redeemable and owners of the shares may acquire those shares from the Fund and tender those shares for redemption to the Fund in Creation Unit aggregations only, typically consisting of 50,000 shares.

Beta is a measure of risk representing how a security is expected to respond to general market movements. Smart beta represents an alternative and selection index based methodology that may outperform a benchmark or reduce portfolio risk or both. Smart beta funds may underperform cap-weighted benchmarks and increase portfolio risk.

The momentum style of investing is subject to the risk that the securities may be more volatile than the market as a whole, or that the returns on securities that have previously exhibited price momentum are less than returns on other styles of investing.

The Fund is subject to the risks of the underlying funds. Market fluctuations may change the target weightings in the underlying funds and certain factors may cause the Fund to withdraw its investments therein at a disadvantageous time.

Fixed-income investments are subject to credit risk of the issuer and the effects of changing interest rates. Interest rate risk refers to the risk that bond prices generally fall as interest rates rise and vice versa. An issuer may be unable to meet interest and/or principal payments, causing its instruments to decrease in value and lowering the issuer’s credit rating.

The values of junk bonds fluctuate more than those of high quality bonds and can decline significantly over short time periods.

The risks of investing in securities of foreign issuers can include fluctuations in foreign currencies, political and economic instability, and foreign taxation issues.

Most MLPs operate in the energy sector and are subject to risks relating to commodity pricing, supply and demand, depletion and exploration. MLPs are also subject the risk that regulatory or legislative changes could eliminate the tax benefits enjoyed by MLPs which could have a negative impact on the after-tax income available for distribution by the MLPs and/or the value of the portfolio’s investments.

Preferred securities may be less liquid than many other securities, and in certain circumstances, an issuer of preferred securities may redeem the securities prior to a specified date.

Investments in real estate related instruments may be affected by economic, legal, or environmental factors that affect property values, rents or occupancies. Real estate companies, including REITs or similar structures, tend to be small and mid-cap companies and may be more volatile and less liquid.

The Fund is non-diversified and may experience greater volatility than a more diversified investment.

About Dorsey, Wright & Associates, LLC (DWA)

The relative strength strategy is not a guarantee. There may be times where all investment and strategies are unfavorable and depreciate in value. Investors should not act on any recommendation (express or implied) or information in this material without obtaining specific advice from their financial advisor and should not rely on the information herein as the primary basis for investment decisions. There is no relationship between Dorsey, Wright & Associates, LLC (“Dorsey Wright”) and Invesco PowerShares (“PowerShares”) other than a license by Dorsey Wright to PowerShares of certain Dorsey Wright trademarks, tradenames, investment models, and indexes (the “DWA IP”). DWA IP has been created and developed by Dorsey Wright without regard to and independently of PowerShares, and/or any prospective investor. The licensing of any DWA IP is not an offer to purchase or sell, or a solicitation of an offer to buy any securities. Information contained herein is based on data obtained from recognized statistical services, issuer reports or communications, or other sources, believed to be reliable. However, such information has not been verified by DWA or the information provider and DWA and the information providers make no representations or warranties or take any responsibility as to the accuracy or completeness of any recommendation or information contained herein. DWA and the information provider accept no liability to the recipient whatsoever whether in contract, in tort, for negligence, or otherwise for any direct, indirect, consequential, or special loss of any kind arising out of the use of this document or its contents or of the recipient relying on any such recommendation or information (except insofar as any statutory liability cannot be excluded). PowerShares® is a registered trademark of Invesco PowerShares Capital Management LLC, investment adviser. Invesco PowerShares Capital Management LLC (Invesco PowerShares) and Invesco Distributors, Inc., ETF distributor, are indirect, wholly owned subsidiaries of Invesco Ltd.

Investors cannot invest directly in an index.  Indexes have no fees.  The relative strength strategy is NOT a guarantee.  There may be times where all investments and strategies are unfavorable and depreciate in value.  Neither the information within this blog post, 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 blog post does not purport to be a complete description of the securities or markets to which reference is made.  Each investor should carefully consider the investment objectives, risks and expenses of any Exchange-Traded Fund (“ETF”) prior to investing.  Before investing in an ETF investors should obtain and carefully read the relevant prospectus and documents the issuer has filed with the SEC.  ETFs may result in the layering of fees as ETF’s impose their own advisory and other fees.  To obtain more complete information about the product the documents are publicly available for free via EDGAR on the SEC website (http://www.sec.gov).

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High RS Diffusion Index

March 16, 2016

The chart below measures the percentage of high relative strength stocks (top quartile of our ranks) that are trading above their 50-day moving average (universe of mid and large cap stocks.)  As of 3/15/16.

diffusion

The 10-day moving average of this indicator is 86% and the one-day reading is 92%.

The relative strength strategy is NOT a guarantee.  There may be times where all investments and strategies are unfavorable and depreciate in value.  Investors cannot invest directly in an index.  Indexes have no fees.  Past performance is no guarantee of future returns.  Potential for profits is accompanied by possibility of loss.

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The Goal of Tactical Allocation

March 15, 2016

What is the ultimate objective of any tactical asset allocation strategy?  It is to adapt, is it not?  Getting “all of the up and none of the down” is a fairy tale, but investors would like to see changes in the allocations in order to seek to capitalize on those asset classes that are in favor and to seek to minimize exposure to those asset classes that are out of favor.  The exact percentage of a client’s overall portfolio that should be allocated to a tactical allocation strategy will be up to each financial advisor and their client, but I would suggest that investors could benefit from making tactical allocation part of the mix.  Whether an advisor uses our Global Macro strategy, one of the other Dorsey Wright tactical allocation strategies, or a tactical allocation strategy of their own making, I believe that there will be some common themes as it relates to communicating the objectives of this type of strategy to clients and prospects.  Our goal with this article is to touch on some of those themes.  See below for a description of our Global Macro portfolio.

Global Macro strategy description:

The Dorsey Wright Systematic RS Global Macro strategy provides broad diversification across markets, sectors, styles, long and inverse domestic and international equities, fixed income, currencies, and commodities using Exchange Traded Fund (ETF) instruments.  The strategy holds approximately ten ETFs that demonstrate, in our opinion, favorable relative strength characteristics.  The strategy is constructed pursuant to Dorsey Wright’s proprietary basket ranking and rotation methodology.  This strategy is uniquely positioned from an investment opportunity perspective because it is not limited to a specific market.  This allows for the flexible allocation of investments globally to opportunities where we believe potential returns are particularly compelling. 

As shown below, the Global Macro portfolio can invest in a broad range of asset classes.  The following table highlights the asset class exposure ranges for each asset class in the Global Macro portfolio.  There may be deviations outside the bands based on market fluctuations.

ranges

The allocations to this strategy are driven by relative strength (RS).  Over the nearly 7 years that we have been running this strategy, we have seen a variety of market environments and changes in asset class leadership.  The following chart highlights historical asset allocation exposure for the Global Macro portfolio.

gm_allocations

Period: 3/31/09 – 2/29/16

You will notice that there were times with very little U.S. equity exposure and times where U.S. equities constituted the bulk of the portfolio.  Again, those changes are driven by relative strength.

One of the interesting benefits of an asset class rotation strategy based on relative strength is how it manages volatility.  As investment themes come in and out of favor, an RS strategy rotates to themes that are currently in favor.  When volatile assets, such as stocks, are declining, an RS strategy might rotate into a much less volatile asset class, like bonds or currencies, that is holding up better.  This rotation helps make the portfolio more volatile when volatile asset classes are performing well, and less volatile when risky assets are out of favor.  The chart below shows the trailing-18 month beta of Global Macro and a 60/40 equity bond portfolio compared to the S&P 500.  The beta of the 60/40 strategy remains very stable over time.  The beta of the Global Macro strategy, however, changes dramatically.

changing volatility

Returns are total returns, inclusive of dividends.  Net returns were used for Global Macro.  The 60/40 portfolio is 60% S&P 500 and 40% Barclays Aggregate Bond Index.

More recently, the beta of the Global Macro strategy has been declining and is now approaching the beta of a 60/40 portfolio.

Current holdings (as of 3/10/16) of the Global Macro portfolio are shown below:

gm 03.10.16

Clients want adaptability in their asset allocation and Dorsey Wright provides the tools and solutions to empower financial advisors to be able to provide this to their clients — and to set them apart from the competition in the process.

Global Macro is available on the Masters and DMA platforms at Wells Fargo as well as on a number of other UMA and SMA platforms.

E-mail andy.hyer@dorseywright.com for more information.

The performance represented is based on monthly performance of the Systematic Relative Strength Global Macro Model.  Net performance shown is total return net of management fees, commissions, and expenses 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.  All returns since inception reflect reinvestment of dividends and other earnings. Returns of Accounts, since inception, are a composite of all Accounts of that style that were managed for the full quarter. All returns since inception are compared against the Dow Jones Moderate Portfolio Index and the S&P 500 total return index.  The volatility of the Models and of actual Accounts may be different than the volatility of the Dow Jones Moderate Portfolio Index and the S&P 500 index.  The Dow Jones Moderate Portfolio Index is a global asset allocation benchmark.  60% of the benchmark is represented equally with nine Dow Jones equity indexes.  40% of the benchmark is represented with five Barclays Capital fixed income indexes.  The S&P 500 is a stock market index based on the market capitalizations of 500 leading companies publicly traded in the U.S. stock market, as defined by Standard & Poor’s.  The Barclays Aggregate Bond Index is a broad base index, maintained by Barclays Capital, and is used to represent investment grade bonds being traded in the United States.  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.  The Dow Jones U.S. Real Estate Index invests in U.S. real estate stocks and real estate investment trusts (REITs).  The Reuters Commodity Index comprises 17 commodity futures that are continuously rebalanced.  Investors cannot invest directly in an index.  Indexes have no fees.  Dorsey, Wright’s advisory fees are described in Part 2A of its Form ADV.  Each investor should carefully consider the investment objectives, risks and expenses of any Exchange-Traded Fund (“ETF”) prior to investing. Before investing in an ETF investors should obtain and carefully read the relevant prospectus and documents the issuer has filed with the SEC.  ETFs may result in the layering of fees as ETFs impose their own advisory and other fees.  To obtain more complete information about the product the documents are publicly available for free via EDGAR on the SEC website (http://www.sec.gov) 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. The relative strength strategy is NOT a guarantee.  There may be times where all investments and strategies are unfavorable and depreciate in value. Investors should have long-term financial objectives when working with Dorsey, Wright & Associates.

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Relative Strength Spread

March 15, 2016

The chart below is the spread between the relative strength leaders and relative strength laggards (top quartile of stocks in our ranks divided by the bottom quartile of stocks in our ranks; universe of U.S. mid and large cap stocks).  When the chart is rising, relative strength leaders are performing better than relative strength laggards.    As of 3/14/16:

spread

The RS Spread has pulled back sharply so far in 2016 as the RS laggards have outperformed the RS leaders.

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

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Weekly RS Recap

March 14, 2016

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

Last week’s performance (3/7/16 – 3/11/16) is as follows:

ranks

This example is presented for illustrative purposes only and does not represent a past or present recommendation.  The relative strength strategy is NOT a guarantee.  There may be times where all investments and strategies are unfavorable and depreciate in value.  The performance above is based on pure price returns, not inclusive of dividends, fees, or other expenses.  Past performance is not indicative of future results.  Potential for profits is accompanied by possibility of loss.

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Sector Performance

March 11, 2016

The table below shows performance of US sectors over the trailing 12, 6, and 1 month(s).  Performance updated through 3/10/16.

sector

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

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