ETF Momentum Swing Portfolio Note To Subscribers 3/3/2019


It should not be assumed that the methods, techniques, or indicators presented here will be profitable or that they will not result in losses. Past results are not necessarily indicative of future results. There is a high degree of risk in trading.

Hypothetical or simulated performance results have certain inherent limitations. Unlike an actual performance record, simulated results do not represent actual trading. Also, since the trades have not actually been executed, the results may have under- or over-compensated for the impact, if any, of certain market factors such as lack of liquidity. Simulated trading programs in general are also subject to the fact that they are designed with the benefit of hindsight. No representation is being made that any account will or is likely to achieve profits or losses similar to those shown.


Note for 3/3/2019:

I decided to publish a note for subscribers on my thoughts regarding the ETF Momentum Swing Portfolio over the last couple of months. I will likely do this every few months. So far, the trade ideas have struggled. A few thoughts:

Correlation with SPY Big Time Swing System is about 70%. Unfortunately, the current SPY BTS trade is short and there is a good chance this short trade will close out as the worst trade the SPY Big Time Swing System has ever had. So for the ETF Swing Momentum System to be suffering a drawdown at this time is not entirely unexpected.

I noted in the webinars in January that the biggest risk I felt at the time was that the market could take off. The ETF Momentum Swing was more inclined to look for short trades at the time because the market was in an obvious downtrend. It is the transitions from downtrends to uptrends where it has struggled the most. Unfortunately, that transition has turned out to be tough. The market is now in a place where longs will be easier to come by than shorts for the most part. But shorts will occur when the security is both overbought and overdue a pullback from a time perspective. Those kind of shorts have continued to trigger, and will continue to do so until we get a decent pullback.

It is worth keeping in mind that the ETF Momentum Swing System has a slight negative correlation with the SPX (-0.26). In other words, it does not really matter what the market does. It will not necessarily follow the market. Sometimes that is a good thing, and sometimes that is a bad thing. In the last couple of months that was a bad thing. In December it was a good thing. But the slight negative correlation over time will hopefully help to smooth out returns of a larger portfolio that may contain other types of strategies.

I am not very concerned that the recent struggles are due to the system being “broken”. Based on the correlation with the SPY Big Time Swing System, the historical difficulty during transitions from downtrends to uptrends, and the non-correlation to the SPX, performance does not appear out of character with what might be expected in this environment.

So we’ll see how the trades play out over the next few months. While I am disappointed so far, I am not discouraged. I’m looking forward to a pullback here in the market to reset things and hopefully help get the market back into more normal rhythms that the Portfolio can take advantage of.

Feel free to contact with any comments, questions, or concerns.