Monday, April 24, 2017

ETF Rotation for Couch Potatoes


This is my new book and it could be the last one for a long while. Initially it is my research for my own use. It does not take too much time to include the ideas in a book with many chapters copied from my other book "Sector Rotation 3rd Edition". This one is super easy to use.

There will not be any promotion. No experience is required but it requires less than an hour every month. Has been tested from 2003 to today. Most ETF rotation strategies do not work all the time and I have suggestions to change all these. Paper copy should be available by the end of this week.

Click here for more info.
or enter https://www.amazon.com/dp/B072L1NZVB

Wednesday, April 19, 2017

Rotation of 4 ETFs



We can beat the market by rotating one ETF that represents the market such as SPY and cash (or short-term bond ETF) via market timing.

During market uptrend, rotate the following four ETFs could be more profitable. Be warned that short-term capital gain in taxable accounts is not treated as favorably as the long-term capital gain; check current tax laws.

The allocation percentages depend on individual risk tolerance. You can use indexed mutual funds. Compare their expenses and restrictions. Some mutual funds charge you if you withdraw within a specific period.

Select the best performer of last month (from Seeking Alpha, cnnFn, or the ETF/mutual fund site). I prefer 45 days instead of one month as they are not too volatile. Add sector ETFs to the four ETFs such as XLY, XLP, XLE, XLF, XLU, IYW, XHB, IYM, OIL and XLU to expand your selection.


ETFs
Money
Market
US
International
Bond
Fidelity

Spartan Total Market
Spartan
Global
Market
Spartan US
Bond
Vanguard

Total
Stock Market
Total
International
Market
Total Bond
Market
My choice
Fidelity
SPY
Vanguard
Fidelity





Suggest %




During Market plunge
90%
0%
0%
10%
After plunge
10%
60%
10%
20%


Explanation
·         The above are suggestions only. If your broker offers similar ETFs, consider using them.
·         Check out any restrictions of the ETFs.
·         4 ETFs (one actually is a money market fund) are enough for most starters. They are diversified, low-cost and you do not need balancing except during market plunge (refer the chapter on Detecting Market Plunges).
·         The percentages are suggestion only. If you are less risk tolerance, allocate more on money market fund and/or bond ETF.
·         Have at least 10% allocated to the money market fund. When there is a mild market dip, move the money market fund to the US equity fund. Move it back to money market when there is a mild market upsurge. If you do not have time to check the market, allocate this 10% to the bond ETF.
·         When the market is risky, reduce stock equities (i.e. increase money market and bond allocations).
·         The symbols for Fidelity ETFs are FSTMX, FSGDX and FBIDX.
·         The symbols for Vanguard ETFs are VTSMX, VGTSX and VBMFX.
·         To boost performance, add GLD, the gold ETF.
·         Again, do not invest during market plunge as indicated by my market timing techniques.

If you are more advanced, use additional sector ETFs to rotate. Find out the current winners from many sources including CNNfn.com. Also buy long-term bond funds (such as 30-year Treasury) when the interest rate is 10% or more. I have covered the basics in sector rotation.





---------------This is from my new book Swing Trading  3rd Edition. Click here for more detail.

Market timing as of 4/15/2017



When you pay between virtually nothing to $10 for an e-book on investing, most likely you do not follow what it preaches especially from the book written by an unknown author. It is just a human nature. My friends do not take it seriously on the market timing from my book which is given to them free. I am no exception. Before the fierce correction in August, 2015, I had only 50% cash. It should be 100% if I followed my charts.

It is easy to say “I told you so” today. I just want to see how the technical indicators and fundamental metrics tell us today. The technical indicators today (as of 4/15/2017) tell us not to exit the market. However, the fundamental indicators tell us the market is over-valued and be careful. For me, I will repeat the market timing test more often.

This is my educated guesses and the market is not always rational. I am not responsible for any loss. Market timing is based on educated guesses. Even the best guesses may not be correct all the time, but in the long run, there should be more rights than wrongs.

Personally I bet against the falling oil price since 1/15/2015. Here is my 4/15/17 market timing:

Indicator
Pass
Current Value
Indicating
·         Technical



Death Cross1

SMA-50   = -1% &
SMA-200 =  5%
Pass
Technical Analysis:
350 SMA%2
>0
9%
Pass
RSI(14)
<70 span="">
37.50
Pass
Duration
<5 span="">
9
Fail




·         Fundamental



Valuation



  P/E3
<15 span="">
26
High by 73% Fail
  Shiller P/E3
<17 span="">
29
High by 93% Fail




Oil price
30-120
51
Pass




Interest rate6
<5 span="">
1
Pass
T-Bill 3 months
Yield
0.82

T-Bill 30 years
  curve
3.87
Pass




Flow to Equity4

-8  B
Info only
Flow to bond4

+4 B





USD5

Strong
Fail
Gold

High
Fail
Bubble

Several
Fail
Market experts

Fear long term
Neutral
Politics

Trump
Fail
Misc.

None






1 This is the market timing technique without using chart.
2 I tried to use SMA-400% to reduce false signals without success.

4 Get it from https://www.ici.org/research/stats. It is based on 4-1-17. “Flow to Equity” is based on domestic ETF estimate. Treat it as two phases in moving to equity. First phase of moving excessively to equity indicates the market is peaking. The second phase indicates the market is plunging when flow of equity is excessively negative.
  
5 Global corporations will suffer in profits converted back to USD and hard to sell to foreign countries. 4 Get it from the above link.
6 Rising interest is bad for corporations and high-ticket products, but good for lenders

Check the validity of our charts

It seems the metrics vary. It could use after hour trading. It could be the “Days” may be “Sessions” – calendar day is different from trading session. I selected 10 years for most charts and StockCharts let me select 5 years only. Today is 4/14/2017 and some use the metrics based on 4/13/2017. When they are not a lot of differences, they are OK. The blanks indicate data not available or not applicable. 

Here is a list of sites for charts. 

These are the three sites I use: Fidelity (customers only), StockCharts and Finviz.com (missing some metrics). 

--------------------

This will be added to my book Profit from 2017 Market Crash from Amazon. Click here for detail.

As of today, I do not know any reviewers personally. You can tell many reviews were written by their friends and family members.


Still not convinced? Check out the good predictions from 2000-2010 by clicking here.  Since then, there are more false signals that tell you to exit but tell you shortly to return to the market.