Relative Strength Models Are Getting Defensive

I track various relative strength rotational models using different security populations and ranking methodologies. Almost all of these models have been turning defensive.

One model tracks 126 ETFs and ranks them by 79 day return. The model invests in the top ranked ETF and uses a sell ranking cutoff of #25, and/or a trailing stop loss of 7%. When a sell occurs because of a trailing stop loss, the model can repurchase the same ETF if it is still the highest ranked. This simple model has produced a 16% annualized return since 2005.

On the July 2 close, the model gave a sell for ICF (iShares C&S Realty) based on the 7% trailing stop loss and purchased TLT (iShares 20 Year Treas Bond) which is now the highest ranked ETF in the group.

Full disclosure: No positions in above securities.


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