- GB like safety on the whole. I can handle a 20-30% drawdown max, with 2-3 year recovery.
- Flexibility built in to allow me to follow long term trends within the framework.
- Trend following must be long term, I do not want to churn short term term trend swings.
- I'm not a fan of the momentum trend styles like GEM, that use blind percentages based on an arbitrary date.
- I'm skilled with reading charts, and I generally have a good feel for trends in the market, so I would like to use these skills.
- Rules built in to cater to my personal strengths/weaknesses as a trader
- PP variation for core holdings with minimum asset thresholds.
- Stocks, Gold, Bonds - 15-20% minimum each (target is 20%, 15% means rebalance needed)
- Cash - 3-6 months expenses minimum
- All the above ratios always have to be held at all times. This essentially leaves 60-65% in a PP and 35-40% in a VP.
- Flexibility:
- Long term trend using charts - Use *weekly* spread charts. Only make a trade on the breakdown of a current long term trend.
- Track trend changes using 20, 50, and 200 week moving averages, long term trend lines, and weekly RSI.
- Changing from one asset to another should be done in multiple trades over time, not an all at once deal.
- All assets in both the PP and the VP can be swapped out with trend.
- Stocks - hold 1-3 of: large cap (S&P or QQQ), small cap, emerging markets, international, growth, value, momentum, and all combos.
- Bonds - 1-2 of Long, Intermediate, Short treasuries, or Corporate (short or intermediate)
- Commodities - 1-2 of gold, silver, REIT
- Cash - 90 day treasuries, 1 year treasuries, treasury money market, I-Bonds
- Long term trend using charts - Use *weekly* spread charts. Only make a trade on the breakdown of a current long term trend.
- Rules to address personal strengths and weaknesses
- I'm very strong on picking buy points in long term trends. Allow some discretion here to follow my gut.
- I'm not as good at picking sell points. So changing to one asset to another must be done over time in DCA manner, not all at once.
- I'm much better at picking changes in the big long term trends than picking changes in short term trends. Stick to weekly charts only.
Currently where am I? I am currently in a run of the mill GB with 5% cash traded for 5% REIT. I also have a big expense next year, so I need to keep cash more overweight than I normally would.
What do I see in the charts that is catching my eye?
SPY/TLT: RSI is the most oversold on this spread since Oct 2008. Pretty much every spread I look at looks very similar to Oct 2008. So in general, I'm using this time period as my template. I'm expecting a bounce in stocks in the coming weeks/months. I'm expecting another down leg at some point though. Ideally somewhere around the 1900-1950 range on S&P will be the ultimate bottom. Because of this, I am looking to dabble in trading some bonds for stocks in the coming weeks.
Small-cap/Large-cap: Record over sold level here on RSI. I am expecting small to mean revert and out perform large on a relative basis in the short term. So I am going to keep my small caps since I already have them, this would be a poor time to swap. But I am keeping a close eye when we get back near the trend line. The large cap up-trend is strong, and when we retest the trend line next if it holds I'll start moving some small to large.
Value/Growth: Same as small/large. Record oversold level is being registered this week. I am expecting a mean reversion. Growth's uptrend vs value goes all the way back to 2002 without violating the trend line a single time. This is an extremely strong trend and should be taken very seriously. I'm looking to swap from value/blend funds to growth funds on the next trend line test (looking at QQQ or SLYG depending on how small/large resolves) assuming that the trend will stay in place as it has for the last 18 years and counting.
GLD/SLV: We also have a record overbought level here, highest read since Oct 2008. Could silver start to come to life? The gold uptrend is strong, so it won't resolve quickly, but dabbling in some silver might be something to consider when metals start their next up leg. The gold $1350 breakout last year was the start of a new bull market. I do not expect to see prices ever get below $1350 ever again at this point. I would be very surprised if this happened. $1350-1400 range looks like a really good buying opportunity in metals, if we should get so lucky.
US/International - I have no international and the uptrend is intact. We are currently in the middle of the range. Staying fully U.S. until trend tells me otherwise.
Emerging/Developed - Emerging is surprisingly looking lively vs developed. I would have thought the virus would hit emerging harder, especially with the USD skyrocketing. There was a trend line break out for emerging 4 weeks ago that so far has held. Is this a prairie dog or is it for real? However, Emerging/SPY is still in a downtrend, though right at the very top of the range. Right now I'm simply observing, but I do expect sometime in the coming years for emerging to come back to life and I want to be a part of that trend when it does happen.
long bonds/intermediate bonds - Long bonds broke above the trend line that has been in place since 2011 a few weeks ago. It fell back below it this week for a bit, but closed back above. RSI is showing overbought, but it's signaled overbought a few times since 2011 and long has continued to out perform. Tracking this, but nothing actionable currently.
So based on the above, really the only near term actionable trend that I'm looking to make a change on is moving some TLT to S&P. Waiting for the right moment. I'm also watching small/large and value/growth very closely. I'm going to continue to ride my large/SCV barbell for the moment as I expect some mean reversion for both small and value in the short term. I wouldn't be surprised to see a trend change here, as bear markets tend to signal rotation of leadership. Could this finally be the time for SCV to come back to life? Everyone has forgotten it exists, so it certainly would a be a good time to catch everyone off guard. So I'm hoping I can hold my SCV for awhile longer, hopefully into a new multi-year trend. I'm using long term weekly charts here so it will likely be weeks before there is any resolution either way on any of these. I'm also eyeing with curiosity emerging markets to see if their relative strength is a fake out or a break out, as well as long/intermediate bonds. These two are more for curiosity at this point, but something actionable may come in the next few weeks to months. This is not going to be a fast paced system, sticking to weekly charts means most trends I trade will be in the timeframe of months to years. I'm basically hoping to take advantage of those long term, decade or higher trends that always seem to emerge. Things like, tilting to growth from 2002 -2020, or tilting from gold to silver from 2009-2011, and back to gold from 2011-2020. The indicators and spreads I am tracking going back as far as I can would have worked and added a ton of alpha to the portfolio, as well as further reduced drawdowns. It also keeps ~60% of my funds in a PP (modified to allow for tilts to similar trending assets) where they are safe. I'll try to update this with any new updates, moves, etc I make for anyone that is curious.