AlphaDow S.W.A.N. Portfolio: 20% SPY; 0% BND; 10% GLD; 20% IWO; and 20% ACWX (30% cash)

Sean Gallagher Has Had Over 25 Followers Rank: 59 Followers: 48 Votes: 34 Years Member: 9 Last Update: 19 February 2018, 5:24 Categories: ETFs
General Market Commentary
Canadian Stocks

Password is AlphaDow (no caps)

* Added green vertical 'buy' lines as per user feedback. Thanks JG
* Clarified commentary on AlphaBond legend. Thanks FC
* Clarified notation on Dual Momentum. Thanks JG

On Jan 29th we said: 'Caution may be warranted...Stocks in the U.S. are rising faster than Bruno Mars' career, however, we are starting to see some signs that the parabolic rise could be cresting.'

Now we feel the correction has run its course. The undercut low on Friday (from Tuesday's panic selling) has held. Add to longs.

The Call For The Week of Feb 19th:

Stocks sprang back to life last week along with bonds, gold and oil. This type of snap back rally occurs after a correction occurs. Whether we bottom here or test the lows remains to be seen, however, the weight of the evidence suggests that this is a 'good' bottom.

Send feedback for details on our systems or to receive our ETF Focus List. Our SWAN Formula (sleep well at night) has been keeping people on the right side of the major trend since 1997.

Our model portfolio with corresponding Chart #'s:

1. 20% SPY
2. 20% HXT.TO (for Canadians)
3. 10% GLD
4. 30% Cash (not BND or TLT)
5. 20% IWO
6. 20% ACWX

Each position is managed by a unique system, namely 1. and 2. AlphaDow, 3. AlphaBond, 4. AlphaGold, 5. ValueMentum and 6. Dual Momentum respectively.

AlphaDow is a 100% mechanical Inter-Market Strategy consisting of FIVE systems: 3 trend following, 1 breadth and 1 based on interest rates.

Add up the numbers in the dots in each indicator pane. A BULLISH state first occurs when the count reaches 5 out of 5. Can be used as a 'regime filter' to signal when the odds are in your favour of going long your favourite stocks or as a system to go long SPY or move to cash/bonds (AGG).

Our systems turned:

BULLISH on the U.S. stock market (SPY) 1999.99 on 4th March '16 (5 out of 5).
BULLISH on HXT.TO as of $26.46 on the 18th May '16 (5th June '15 was BEAR signal).
BULLISH on GLD as of $122.02 on 12th April '17

Less

1. AlphaDow -- Five points possible. 5=BUY 2=SELL. Use SPY or the strongest (Alpha) ETFs.

Bullish when 5 out of 5 are true (+1) for each condition:


1. $SPX is trending up (trend is up)

2. Advance/Decline Line is trending up (buying power)

3. $TRAN is trending up (Dow Theory confirmation)

4. Utility Average MA rises (interest rate sensitive Utilities lead)

5. Bonds are trending up (interest rates are low)


74% winning trades (13/18) since 1970. Beats buy and hold with less volatility.


Past performance is no guarantee of future results. This is not investment advice, but is for educational purposes only. Consult your investment advisor for additional information regarding suitability, fees, expenses and short term trading costs.

2. AlphaDow TSX -- 'Canadian Dow Theory' -- send feedback for current ETF Advisor Portfolio

Bullish when 5 out of 5 are true (+1). Stay long HXT.to or XIU.to until 3 turn false (+0).

1. $TSX is trending up (trend is up)
2. Advance/Decline Line is trending up (buying power)
3. $TRAN is trending up (Dow Theory confirmation)
4. Utility Average MA rises (interest sensitive)
5. Bonds are trending up (interest rates are low)

67% winning trades since 1980 - beats buy and hold with lower volatility. Buy and Hold the strongest ETFs or stocks when in BULLISH state. Otherwise hold cash or bond proxy.

Past performance is no guarantee of future results. This is not investment advice, but is for educational purposes only. Consult your investment advisor for additional information regarding suitability, fees, expenses and short term trading costs.

3. AlphaBond - Intermarket System 3=BULL, 1=BEAR (TLT)

Bullish on BOND, JNK or TLT when 3 systems are on BUY. FLAT (go to cash) when count drops to 1 :

1. If Fidelity Financial RS is positive add +1 to model count
2. If Utility RS is positive add +1 to model count
3. If Chemical RS is negative add +1 to model count
4. If Nickel ROC is negative add +1 to model count

Financial assets and utilities lead. Inflation is bad for bonds. Source: Formula Research Intermarket Bond Strategy. Send feedback for complete details.

4. AlphaGold - Intermarket System 3=BUY, 1=SELL (GLD or GDX)

Bullish on GLD or CGL.TO when all three systems are on a BUY. Score +1 for each of the following TRUE statements:

1. US Dollar Index 12 wk EMA
2. Oil > 12 wk EMA
3. Dow > 48wk EMA

Buy Gold (GLD) if score is +3 (all three TRUE). Stay invested (long GLD or GDX) until 2 systems turn false (0).

14.8% CAGR with 13.8% max drawdown 1954-1995. *Source: Wall Street Journal - Divining Gold's Next Move 2006

Past performance is no guarantee of future results. This is not investment advice, but is for educational purposes only. Consult your investment advisor for additional information regarding suitability, fees, expenses and short term trading costs.

5. ValueMentum -- 3 Point System developed by Nelson Freeburg

Bullish on SPY when all 3 systems are TRUE. Sell and go to SHY or cash when all 3 are FALSE.

Logic: when the Nasdaq is outperforming the S&P500 and Growth is outperforming Value, the US Stock market outperforms.

11.7% drawdown and 9.1% CAGR since inception vs. 47% drawdown for S&P500.

Of 17 long entries, 14 were profitable, an 82% batting average. Source: Formula Research December 30, 2003.

6. Dual Momentum 1yr SPY, ACWX or BND

This system looks at two types of momentum. Time series (1yr) momentum for SPY must be greater than T-Bill rates AND greater than ACWX else buy bonds (BND).

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