ETF Update: Groundhog Month

Whether you are a trader or an investor you need to have a method and to follow it in a disciplined fashion.  You also need to understand your system, having patience when necessary.

Every system has strong and weak points.  Most methods are either momentum (where you play the trend) or mean reversion (where you fade the trend).  There is also a matter of time frame.  One leading technical commentator uses four (!) different time frames for trend determination.

As background, I recognize this by using three different programs.

  • One is always invested, with only a few defensive moves.  The edge comes not from market timing, but from superior stock selection.  This has actually been our best method over 12 years.  I occasionally write about some of our best picks.  (The Jeff Model)
  • Another is the TCA-ETF method, described in my weekly updates.  This has a three-week time horizon.  We try to be ahead of the moves with this method.  It can be very defensive or a little short, as it is now.  (The Vince Model)
  • The slow momentum method captures the long-term market shifts.  It corrects your position if you are long and wrong.  It regards short-term moves as noise.  It can be completely short in a big correction. At the moment it is long, emphasizing the big (and continuing) winners from the last year  (The Bill Model).

Some combination of approaches makes sense.

The TCA-ETF Model

I understand that every investor would like to move effortlessly from winner to winner, calling tops and bottoms with precision.  Our TCA-ETF sector model has some (C)yclicality and (A)nticipation but it is mostly a momentum model.  While stocks have moved higher, it has been a slow grind after a sharp correction.  Our ratings are also changing slowly.

The model is designed to be on the right side of the big moves, not to catch turning points.  In our friendly office competition, the Vince model identified danger (probably wisely), but has been slow on the rebound.  The Bill model saw it all as noise and the Jeff model was not trying to time the market.

I have written frequently that there are many roads to profitable investing.  If I had to predict which of our approaches would do best for the rest of the year, I really could not say. 

Meanwhile, this week's update looks very similar to what we saw a month ago when I featured one of my favorite actors, Slim Pickens.  There are few attractive choices and plenty of risk.


The weekly ETF update is available  over the weekend for those subscribing to the email list (etf at newarc dot
com).  Here are the ratings as of Thursday's close.  (There has been little change).

Those interested in a more complete description of our methodology can
check any of our prior updates.

There are some signs of improvement.  If the market holds on, we expect to see some fresh buys this week.


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