RS Chart of The Day

May 12, 2015

SPYVSIYR zpsnlaamy3o RS Chart of The Day

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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Daily DWA Indexes Wrap

May 11, 2015

As of the close, 5/11/15:

perf6 Daily DWA Indexes Wrap

Source: Yahoo! Finance

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

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

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Introducing the Virtus Trend Funds

May 11, 2015

The Virtus Trend Suite implements proprietary Dorsey, Wright & Associates technical analysis in rigorously constructed, risk-managed portfolios which seek to participate in rising markets, and limit losses during major market declines by systematically retreating to the safety of cash equivalents as market analysis indicates conditions warrant.

Learn more about the Virtus Trend Funds by click here for the fact sheets.

v Introducing the Virtus Trend Funds

Click here for the press release detailing the recent changes.

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Virtus to Use Dorsey Wright’s Relative Strength Capabilities for the Former AlphaSector Funds

May 11, 2015

Funds renamed Virtus Trend Funds

HARTFORD, Conn., May 11, 2015 /PRNewswire/ – Virtus Investment Partners, Inc. (NASDAQ: VRTS), which operates a multi-manager asset management business, today announced that it will employ the Relative Strength price momentum technical analysis of Dorsey, Wright & Associates, a leading provider of research to the investment management industry, in the management of five Virtus open-end mutual funds formerly known as the AlphaSector® funds.

 Virtus to Use Dorsey Wrights Relative Strength Capabilities for the Former AlphaSector Funds

The funds, which have been renamed the “Virtus Trend” funds, continue to employ rules-based strategies that seek to participate in rising markets and avoid large losses during major market declines by employing cash equivalents as market conditions dictate.

Dorsey Wright’s Relative Strength price momentum rankings will be used to identify eligible investments across asset classes, sectors, sub-industry groups and securities. In addition, the funds’ strategies will include certain rule changes that are intended to mitigate the impact of volatile markets, provide opportunities to participate more meaningfully in rising markets, and potentially move to more defensive positions during periods when analysis indicates higher-risk market conditions exist.

Warun Kumar, senior managing director, Virtus Investment Advisers, has been named co-portfolio manager of the funds and Euclid Advisors continues in its role as the funds’ subadviser, responsible for portfolio implementation and trading. F-Squared Investments, an unaffiliated former subadviser, no longer provides services to the funds.

“Investment professionals have relied on Dorsey Wright’s technical analysis for guidance in investing for more than 25 years. With their experience in price momentum strategies, Dorsey Wright is an ideal partner for Virtus and they share our commitment to producing quality outcomes for clients,” said Frank Waltman, executive vice president, product management at Virtus. “We believe Relative Strength price momentum is an attractive method for identifying meaningful patterns in daily share price movements to manage risk and concentrate investments in those areas of the market with the higher probabilities of future outperformance.”

“We are excited to begin a partnership with Virtus, bringing our longstanding Relative Strength expertise to the ‘Virtus Trend’ line-up of funds. Our collaboration with Virtus allows Dorsey Wright to further expand how it brings turn-key, quality solutions to the financial community,” said Tom Dorsey, Founder of Dorsey, Wright & Associates.

Virtus also announced that it has reduced management fees for the Equity Trend, Global Equity Trend, and Multi-Asset Trend Funds.

The funds are: Virtus Sector Trend Fund (Class A: PWBAX; formerly AlphaSector Rotation); Virtus U.S. Equity Trend Fund (VAPAX; formerly Premium AlphaSector); Virtus Global Equity Trend Fund (VGPAX; formerly Global Premium AlphaSector); Virtus Multi-Asset Trend Fund (VAAVX, formerly Allocator Premium AlphaSector); and Virtus Dynamic Trend Fund (EMNAX; formerly Dynamic AlphaSector).

About Dorsey, Wright & Associates
Dorsey, Wright & Associates is a registered investment advisory firm based in Richmond, Virginia. Since its founding in 1987, Dorsey Wright has been a leading advisor to Wall Street and investment managers worldwide. It provides three essential services for clients: comprehensive investment research and analysis, professional money management for financial advisors and individuals, and licensing services to mutual funds and ETF providers. Dorsey Wright is a Nasdaq Company. For more information, visit dorseywright.com.

About Virtus Investment Partners
Virtus Investment Partners (NASDAQ: VRTS) is a distinctive partnership of boutique investment managers singularly committed to the long-term success of individual and institutional investors. Virtus offers access to a variety of investment styles across multiple disciplines to meet a wide array of investor needs, and provides products and services through affiliated managers and select subadvisers, each with a distinct investment style, autonomous investment process and individual brand. Its affiliates include Cliffwater InvestmentsDuff & Phelps Investment ManagementETF Issuer SolutionsEuclid AdvisorsKayne Anderson Rudnick Investment ManagementKleinwort Benson Investors InternationalNewfleet Asset ManagementNewfound InvestmentsRampart Investment Management and Zweig Advisers. Additional information can be found atvirtus.com.

Forward-Looking Information

This press release contains statements that are, or may be considered to be, forward-looking statements.  All statements that are not historical facts, including statements about our beliefs or expectations, are “forward-looking statements” within the meaning of The Private Securities Litigation Reform Act of 1995.  These statements may be identified by such forward-looking terminology as “expect,” “estimate,” “plan,” “intend,” “believe,” “anticipate,” “may,” “will,” “should,” “could,” “continue,” “project,” or similar statements or variations of such terms.  Our forward-looking statements are based on a series of expectations, assumptions and projections about our company, are not guarantees of future results or performance, and involve substantial risks and uncertainty as described in our most recent Annual Report on Form 10-K or in any of our filings with the Securities and Exchange Commission (“SEC”), which are available on our website at www.virtus.comunder “Investor Relations.”  All of our forward-looking statements are as of the date of this release only. The company can give no assurance that such expectations or forward-looking statements will prove to be correct. Actual results may differ materially. You are urged to carefully consider all such factors.

Fund Risks: Allocation: The fund’s exposure to different asset classes may not be optimal for market conditions at a given time. Asset allocation does not guarantee a profit or protect against a loss in declining markets. Equity Securities: The market price of equity securities may be adversely affected by financial market, industry, or issuer-specific events

Investors should carefully consider the investment objectives, risks, charges and expenses of any Virtus Mutual Fund before investing. The prospectus and summary prospectus contain this and other information about the fund. Please contact your financial representative, call 1-800-243-4361, or visitwww.virtus.com to obtain a current prospectus and/or summary prospectus. You should read the prospectus and/or summary prospectus carefully before you invest or send money.

Mutual funds distributed by VP Distributors, LLC, member FINRA and subsidiary of Virtus investment Partners, Inc.

There is no relationship between Dorsey Wright and Virtus other than a license by Dorsey Wright to Virtus of certain Dorsey Wright trademarks and trade names, and the Dorsey Wright technical analysis (“Technical Analysis”). The Technical Analysis has been created and developed by Dorsey Wright without regard to and independently of Virtus, its business, its development of this product, and/or any prospective investor. The licensing of any Technical Analysis to Virtus is not an offer to purchase or sell, or a solicitation or an offer to buy any securities. A determination that any portion of an investor’s portfolio should be devoted to any product developed by Virtus is a determination made solely by the investment advisor serving the investor or the investor himself, not Dorsey Wright or Virtus.

“AlphaSector®” is a registered trademark of F-Squared Investments, Inc.

Logo - http://photos.prnewswire.com/prnh/20121031/NE03346LOGO

SOURCE Virtus Investment Partners, Inc.

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RS Chart of The Day

May 11, 2015

SPYVSAGG zpsc6wzafsn RS Chart of The Day

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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Weekly RS Recap

May 11, 2015

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 (5/4/15-5/8/15) is as follows:

ranks1 Weekly RS Recap

This example is presented for illustrative purposes only and does not represent a past recommendation.  The performance above is based on pure price returns, not inclusive of dividends or all transaction costs.  Past performance is not indicative of future results. Potential for profits is accompanied by possibility of loss. 

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Daily DWA Indexes Wrap

May 8, 2015

As of the close, 5/8/15:

perf5 Daily DWA Indexes Wrap

Source: Yahoo! Finance

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

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

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Sector Performance

May 8, 2015

The chart below shows performance of US sectors over the trailing 12, 6, and 1 month(s).  Performance updated through 5/7/2015.

sector1 Sector Performance

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

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Sector Rotation with PnF Matricies

May 7, 2015

Watering the flowers and pulling the weeds.  Letting your winners run and cutting your losers short.  There are different expressions for sector rotation, but it is among the most profitable investment strategies we have found, when done in a disciplined way.  Sector rotation is based on the idea that there tends to be differences—sometimes large differences—in performance between various sectors of the market.  For example, so far this year Healthcare has been among the best performing sectors and Utilities has been among the worst.  One application of relative strength is to rank the broad macro sectors (Healthcare, Utilities, Energy, Consumer Cylclicals…), buy the top ranked sectors and avoid the weakest.  However, there are different ways to classify stocks in a sector.  Sub-industry groups (Distiller & Vintners, Technology Hardware, Airlines, Household Appliances…) can be evaluated to get a more granular look at strength and weakness in the market.  The next logical question is which sector classification should be used.  The answer will depend upon your objectives, because there are trade offs.  Consider the following excerpt from John Lewis’ 2014 white paper Sector Rotation with Point and Figure Matrices.

Macro sectors are blunt tools for sector rotation. Investors can purchase targeted funds providing more granular exposure within each macro sector.  We ran similar tests on the GICS Sub Industry indexes to illustrate the power of getting more granular with a sector rotation strategy. Figure 4 shows the summary results of testing rotation strategies using the 130 sub industry groups. (Please see Tables 6-10 for more detailed performance.) As with the macro sectors, we ran point and figure matrices at multiple box sizes. Each month the universe of sub industry groups is broken into quintiles based upon their scores in the point and figure matrix. Groups in the 80-100 quintile have the highest scores, and are the groups with the best momentum characteristics.

John’s white paper included a test of two approaches to sector rotation.  The first strategy involved trading the 10 broad macro sectors and the second strategy involved trading the 130 sub-industry groups.  Both tests were done over the period Dec 1995 – Jun 2014.  In the table below, we see the cumulative return for a sector rotation strategy that involved buying 1-5 of the top ranked sectors, using various box sizes in a PnF relative strength matrix.  The red-shaded boxes signify the worst performing model and the green-shaded boxes signify the best performing model.

1 Sector Rotation with PnF Matricies

Key takeaways from macro sector model:

  • Using a very sensitive relative strength box size (1%) typically led to the worst returns, while using a box size of 3-4% tended to work much better.
  • The fewer sectors held the better the performance was over time.  However, this will also likely be accompanied with greater volatility
  • A sector rotation strategy that trades the broad macro sectors has shown the ability to outperform the S&P 500 over time

In the table below, we see the cumulative return for a sector rotation strategy that involved buying quintiles of the sub-industry groups, using various box sizes in a PnF relative strength matrix.  For example, a sector rotation strategy that buys the top quintile (80-100 rank) of the sub-industry groups will hold approximately 26 (130 divided by 5) sub-industry groups.  As with the previous model, evaluations and necessary rebalances were done on a monthly basis.

2 Sector Rotation with PnF Matricies

Key takeaways from sub-industry group model:

  • Again, using a very sensitive relative strength box size (1%) typically led to the worst returns, while using a box size of about 6% tended to work much better.
  • The model focused on buying the top quintile of the sub-industry groups performed significantly better than the other groups.
  • A sector rotation strategy that trades the sub-industry groups has shown the ability to outperform the S&P 500 over time
  • A comparison of the cumulative returns generated from the macro sector model vs. the sub-industry group model makes it clear that there is significantly more return potential from the sub-industry group model

For a more complete description of the testing completed for this study, please read Sector Rotation with Point and Figure Matrices.  We believe that a careful study of this white paper will lead an investor to understand best practices as it relates to implementing sector rotation strategies using a Point and Figure relative strength matrix.

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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Daily DWA Indexes Wrap

May 7, 2015

As of the close, 5/7/15:

perf4 Daily DWA Indexes Wrap

Source: Yahoo! Finance

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

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

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More CAPE Limitations

May 7, 2015

Brutal take-down of CAPE:

The only problem is they’ve been getting expensive for awhile now. “According to CAPE,” Crossing Wall Street’s Eddy Elfenbein told me, “stocks have been valued above average for most of the last 25 years.” Part of that is accounting standards are different than they used to be, so valuations are too—they’re higher. Another part is that interest rates having been falling the last three decades, and, all else equal, lower rates should mean higher stock valuations. And the last part is that CAPE overweights what happened before to what’s happening now. Think about it like this. Today’s 27.2 CAPE ratio is so high, in part, because earnings were so bad during the financial crisis. But it’s a little funny to say that a historically crummy economy seven years ago means stocks are overvalued now.

HT: Abnormal Returns

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Daily DWA Indexes Wrap

May 6, 2015

As of the close, 5/6/15:

perf3 Daily DWA Indexes Wrap

Source: Yahoo! Finance

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

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

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RS Chart of The Day

May 6, 2015

SPYVSGCC zpsnf7bx4jq RS Chart of The Day

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

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

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High RS Diffusion Index

May 6, 2015

The chart below measures the percentage of high relative strength stocks that are trading above their 50-day moving average (universe of mid and large cap stocks.)  As of 5/5/15.

diffusion High RS Diffusion Index

The 10-day moving average of this indicator is 51% and the one-day reading is 38%.  Dips in this index have often provided good opportunities to add money to relative strength strategies.

This example is presented for illustrative purposes only and does not represent a past recommendation.  The performance above is based on pure price returns, not inclusive of dividends or all transaction costs.   Investors cannot invest directly in an index. Indexes have no fees. Past performance is not indicative of future results. Potential for profits is accompanied by possibility of loss. 

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Daily DWA Indexes Wrap

May 5, 2015

As of the close, 5/5/15:

perf2 Daily DWA Indexes Wrap

Source: Yahoo! Finance

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

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

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Relative Strength Spread

May 5, 2015

The chart below is the spread between the relative strength leaders and relative strength laggards (universe of mid and large cap stocks).  When the chart is rising, relative strength leaders are performing better than relative strength laggards.    As of 5/5/15:

spread 05.05.15 Relative Strength Spread

This example is presented for illustrative purposes only and does not represent a past recommendation.  The performance above is based on pure price returns, not inclusive of dividends or all transaction costs.   Investors cannot invest directly in an index. Indexes have no fees. Past performance is not indicative of future results. Potential for profits is accompanied by possibility of loss. 

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Tactical Diversification in Global Multi-Asset Portfolios

May 4, 2015

Dorsey Wright’s systematic macro approach to portfolio construction empowers momentum and relative strength versus forecasting and market timing. With tactical diversification and enhanced returns as the goal, advisor interest in these global strategies has surged. Join us for this webcast with on Tactical Diversification in Global Multi-Asset Portfolios.  Replay of this webcast is available here.

arrow Tactical Diversification in Global Multi Asset Portfolios

Sponsors of this webcast may contact registrants. This webcast is for financial professionals only.

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Daily DWA Indexes Wrap

May 4, 2015

As of the close, 5/4/15:

perf1 Daily DWA Indexes Wrap

Source: Yahoo! Finance

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

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

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Quote of the Week

May 4, 2015

Bill Belichick on New England’s Draft Picks:

The strong will survive. The other ones will fall off. And we’ll keep going.

Pretty much like a relative strength-driven portfolio…

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RS Chart of The Day

May 4, 2015

SPYVSAGG zps7a85xnmr RS Chart of The Day

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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Weekly RS Recap

May 4, 2015

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 (4/27/15 – 5/1/15) is as follows:

ranks Weekly RS Recap

This example is presented for illustrative purposes only and does not represent a past recommendation.  The performance above is based on pure price returns, not inclusive of dividends or all transaction costs.  Past performance is not indicative of future results. Potential for profits is accompanied by possibility of loss. 

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Daily DWA Indexes Wrap

May 1, 2015

As of the close, 5/1/15:

perf Daily DWA Indexes Wrap

Source: Yahoo! Finance

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

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

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Sector Performance

May 1, 2015

The chart below shows performance of US sectors over the trailing 12, 6, and 1 month(s).  Performance updated through 4/30/15.

sector Sector Performance

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

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Daily DWA Indexes Wrap

April 30, 2015

As of the close, 4/30/15:

perf12 Daily DWA Indexes Wrap

Source: Yahoo! Finance

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

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

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Finding Emerging Market Winners

April 30, 2015

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

YTD Finding Emerging Market Winners

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

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

Emerging Markets Finding Emerging Market Winners

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

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

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

weights1 Finding Emerging Market Winners

 Source: PowerShares.  As of 4/30/15.

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

em dispersion Finding Emerging Market Winners

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

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

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

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