Seeking Alpha
What is your profession? ×
Long only, ETF investing, portfolio strategy, momentum
Profile| Send Message|
( followers)

Approximately once a month I post the "Delta Factor" projections for a list of international ETFs. Below are two sets of data. One covers a three-year period and the second expands to four years. What is the outlook over the next six to twelve months if we use this type of probability projection?

In the following tables I use two different time frames. The first table is a three-year period that begins near the bottom of the last bear market. Note there are no Buy signals for any of the international ETFs. The future projections are unlikely to exceed the great market run we experienced over the last three years. The "Delta Factor" uses a reversion-to-the-mean analysis so it only makes sense to be cautious.

In the second table, we use a four-year time frame. Looking down over the Historical returns column, we see the percentages are significantly modified compared to the three-year historical values. For this reason, the future projections look much better compared to the historical values and that is why we see a few Buy signals crop up.

While the probability projections look much better when using four years of data compared to three years, the current market is still overbought. Going back to market minimum points, we see lots of "green" in both the Delta and Delta Factor columns. If anything, the current market is priced on the high side and it behooves investors to protect the corpus of their investments. For this reason, we are closely watching the various ETFs held in various portfolio. This is a time to pay attention to the ITA Risk Reduction model.