Reader Mr. G had this to say about my post from last Tuesday:
Ulli: Yesterday you wrote, “Other asset classes have rallied strongly above their respective trend lines issuing a buy of their own. Today, we added a small holding in Latin America and in an Intermediate-term bond ETF.”
This seems in conflict with your advice to follow the TTIs before buying. Yesterday, the International TTI was a -3.07%
Please advise; thanks!
To clarify, I have always said that most country funds are a leveraged play on the United States. As such, I have used my domestic TTI, currently slightly above its long-term trend line, as my guide to determine whether to be invested in that arena or not.
Additionally, in my advisor practice, I also look at how an individual country ETF is situated in regards to its own long-term trend line and how it has performed in the past. Let’s take a look at a chart of ILF, in which now we have a small position:
Click to enlarge
As you can see, the price of ILF (green) has broken above its trend line (red) and pierced the upper envelope line (yellow) designed to minimize (but not eliminate) whip-saw signals.
Looking back over the past 4 years, we had 6 buy signals, of which 3 of them (50%) turned out to be profitable. In addition, the ratio from average wins to average losses was 1.9. In other words, for every dollar we lost, we gained almost two.
While it’s too early to tell how this position will work out, it details some of my thoughts and discipline I use to determine if a trend is in place or not. In this case, our sell stop is set and, if it gets triggered, we will head back to the sidelines.