Here's another momentum rotation strategy I'm currently using that goes by the name "Simple GMR" (simple global market rotation). It is very similar to the "Global Market Rotation" model that I presented a few posts ago. Instead of the leveraged SSO (ProShares Ultra S&P500) this strategy uses the non-leveraged MDY (S&P MidCap 400); instead of FEZ (Euro Stoxx 50), IEV (iShares S&P Europe 350) and instead of EDV (Vanguard Extended Duration Treasury) a less volatile TLT (iShares 20+ Year Treasury Bond). The basket of ETFs therefore consists of: MDY, IEV, ILF, EPP, EEM and TLT. IJJ can also be used instead of MDY, but I like MDY because of the higher traded volume.
The advantage of this model is that the assets are old enough to be backtested to 2003.
Courtesy of Portfolio Visualizer, for the backtest period of 2003-2013 the CAGR (compound annual growth rate) is an excellent
The mechanics are similar as with "Global Market Rotation" and "Global Transportation with Commodities". At the beginning of each month the strategy invests into an asset that has outperformed the other assets with a look-back period of 3 months. At the beginning of the next month, if the new leading asset is different from the previous month, the current held asset is sold and the entire allocation is invested into the new asset. No cash-stop is used with this strategy.
As with the other rotation strategies, I've attached an Excel Sheet and a TOS study to help with figuring out which asset to rotate into at the beginning of each month:
Here are some links explaining more about similar models, including detailed backtests:
TrendXplorer
Varan (Seeking Alpha)
Good Morning
ReplyDeleteI was playing around with the TOS study and didn't see any TLT/MDY correlation displayed. I would think it would be pretty close to your SSO/EDV which for some reason shows 0.99, which seems almost impossible high.
Any input would be appreciated. Kurt
As mentioned in the post, no cash stop is used with this strategy. If however you want to use a cash stop, Edit the study and remove the "#" from the last two sections of the code. Current MDY-TLT correlation shows -4.89
ReplyDeleteThanks..Worked like a charm
ReplyDeleteKurt
Great work, Henri
ReplyDeleteThanks Frank. Btw. Nice new website, congrats!
DeleteGreat Work sir. I was wondering if we were able to add and equity curve in TOS like TrendXplorer uses. I have reached out to him before but he stated that he has since moved on to AMI. Any thoughts?
ReplyDeleteThanks Hunt - Please find a link to TrendXplorer's AAA v5 Allocation and Equity studies for TOS, under "Useful Tools" (on the right hand side of this page). In addition check out my Universal Rotation System Backtesting Tool or Portfolio Visualizer for equity curves (links to these also under "Useful Tools").
DeleteWill do thanks,
ReplyDelete