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« The Illinois Tax Increase: Why Investors Around the Country Should Care | Main | Weighing the Week Ahead: All Eyes Turn to Earnings »

January 14, 2011

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oldprof

Bill - I can see that you have done some work on this subject. You are correct that, in general, rising and falling markets behave differently. The inverse ETFs add something to performance, but not as much as we capture in a sideways or uptrending market.

Our "penalty box" concept helps us to get out more quickly in declines, but it does not trigger the inverse ETFs more rapidly.

Good observation, and good luck with your method. I hope that comparing notes with us is helpful.

Jeff

Bill

Jeff, Great methodology. One day I must succumb to letting someone be a better me and without the stress...and I have to say that I like what I see.
Defining the data set is an important foundation for what follows. For the network etf I had been using HHH and for an actual position I made the exception to use a stock..qualcom. But, darn I was one day too late last week trying to substitute qcom for your choice. And, it was one of those days that I should have made a market order. Perhaps, your article at SA was persuasive and led to a strong bid? In defeat, I added more telecom for the dividend. Urrr.
Back to the data set, I was a little surprised to see shorts included. Personally, I have found when using trend following strategies in the context of relative strength ranking that it is very difficult to capture the timing of a short position. The market tends to climb slowly, but to fall out of bed rather quickly.
With all the volatility over the past few years, whether it was the great fall in 2008 or the spring correction of 2010..or whenever, is it a short or cash that has helped return or to limit the maximum drawdown?

Bill

oldprof

Muckdog - Yes, I do think that different technology ETFs are helpful, but I try not to include too many. Even though we have narrowed the field quite a bit, we still get situations like the current one, where we have similarity -- Dow Jones Tech, Global information tech, tech spider, etc.

When trading these we maintain five positions. If there is a close call for the last spot or two we sacrifice a rating point or two in favor of more diversity.

A problem with the Q's relates to weighting and rebalancing. When a large cap stock like Apple has a dramatic price increase, it becomes even more important. At the end of October Apple was up to 20%. It keeps moving higher until the rebalancing, which I think is only twice a year. As a result, I include the Q's but do not rely on that choice.

Great question and comment. I see Maribeth was on the job:)

Jeff

oldprof

Generic Viagra is not our audience (I don't think anyway) Ha!

I deleted

Maribeth (Mrs. Old Prof)

muckdog

LOL, buy generic viagra. "This article kept me up all night."

Anyway.

Dr. Jeff, do you think that the different technology ETFs individually, or even collectively as part of a diversification strategy (eh, really?), provide an advantage over just using the QQQQ?

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