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Cliff Smith
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I am currently a retired Aerospace Engineer. I am married with three children and seven grandchildren. I was born in San Francisco, CA in 1949 and moved to Newport News, VA in 1951 where I lived until I went to college. By God's grace, I received a B.S. degree from Virginia Tech (1972), a M.S.... More
  • ETF Recommendations For July 16, 2014 9 comments
    Jul 15, 2014 9:39 PM | about stocks: GURU, EEM, RWX, EMB, BABS, BKLN, HYLD, CWB, PCY, SCHE, SCHH

    Please realize you use these recommendations at your own risk. I am not a registered financial advisor. If for any unforeseen reason I do not post the recommendations for the next period, please sell the ETFs and go to cash.

    Shown below are the July 16, 2014 ETF updates for the tactical strategies I have discussed in my Seeking Alpha articles. July 16th is the day to make your trades on these strategies. More information on the strategies can be found in the linked articles.

    The figures shown below are taken from ETFreplay calculations, and the entire 2014 selections and results are presented. I have been tracking most of these strategies in real time since the beginning of 2014. All of the strategies have been backtested, some as far back as 2000, but all have been backtested to 2008 (except RRBS3).

    Here are the strategies that are presented below:

    Equity Strategies:

    SSSEquity4 Strategy

    AllAssetsExceptBonds Strategy

    Bond Strategies:

    Bond-Only Strategy

    Low Volatility Bond Strategy, LVB

    Rising Rates Bond Strategy, RRBS3

    Simple Bond Strategy on HYLD/SHY

    Municipal Bond Strategy, MBS

    Combined Strategies:

    Schwab Commission-Free Strategy -60% Equity/40% Bonds

    Unified Tactical Strategy, UTS - 60% Equity/40% Bonds

    Unified Bond Strategy, UBS - 100% Bonds

    SSSEquity4 Strategy

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    AllAssetsExceptBonds Strategy

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    Bond-Only Strategy

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    Low Volatility Bond Strategy, LVB

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    RisingRatesBondStrategy, RRBS3

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    Simple Bond Strategy on HYLD/SHY

    Trade on Day of 3 Day & 25 Day Moving Average Ratio Crossover

    Please note: If you are interested in this strategy, I can send you an alert the day it occurs. Please send me a Seeking Alpha message asking to be included on the HYLD/SHY alert list. Please include your email address (no one can see it but me).

    Buy: Jan. 2, 2014 Sell: Open Trade (but we could be close)

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    Municipal Bond Strategy, MBS

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    Schwab Commission-Free Strategy

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    Unified Tactical Strategy

    This strategy combines SSSEquity4 (30%), AllAssetsExceptBonds (30%), and LVB (40%).

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    Unified Bond Strategy

    This strategy combines Bond-Only Strategy (25%), LVB Strategy (25%), and RisingRatesBondStrategy, RRBS3 (50%).

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    These strategies have been backtested over a limited timeframe and shown to produce good growth with minimum risk, but future results may be dependent on factors not considered. Use these recommendations at your own risk.

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Comments (9)
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  • Herbert R. Haynes
    , contributor
    Comments (43) | Send Message
     
    Thanks, Cliff, your good thinking and hard work are certainly appreciated.

     

    Your new Municipal Bond Strategy (NYSEARCA:MUB) is a good idea, but I'm a little confused about your initial recommendation on July 3. In it, you stated:

     

    "I plan on giving semi-monthly updates for this strategy on my Seeking Alpha Instablog, starting July 16, 2014. The next provisional pick is SHM (as of July 3, 2014)."

     

    But the July 15 ETFreplay results show that BABS should have been selected back then. I assume that you simply misread something as you were preparing your SA article?

     

    One aspect of the MUB strategy worries me: Most of the decision (75%) of which MB fund to be in is made on the basis of what happened during the past week (5-day returns), but you only check for changes every 15 days. I realize that you have back-tested this strategy, but wonder whether also considering 2-week or 3-week returns should be considered. Have you back-tested anything like that?
    16 Jul 2014, 09:42 AM Reply Like
  • Cliff Smith
    , contributor
    Comments (589) | Send Message
     
    Author’s reply » Hi Herbert,

     

    I may have misread something, but strategies like this sometimes change day-to-day, so it is certainly possible for the strategy to pick BABS at the end of the month, pick SHM on July 3, and pick BABS at the end of yesterday.

     

    And, yes, I have tried many variations on the parameters, including 10-day and 20-day returns and volatility. This was by far the best combination.

     

    Thanks,
    Cliff
    16 Jul 2014, 02:16 PM Reply Like
  • Herbert R. Haynes
    , contributor
    Comments (43) | Send Message
     
    What you suggested may have happened actually did; you didn't misread anything. I ran my ETF comparison spreadsheet for July 1 and then July 3, and the top ranking when to BABS on the 1st and then SHM on the 3rd.

     

    Herb
    17 Jul 2014, 09:57 AM Reply Like
  • ron lazar
    , contributor
    Comments (14) | Send Message
     
    Cliff,
    Re:Tactical hedge strategy
    I was thinking about combining TMV and SPXS.
    I'm a little confused as to the best 3 month return and the 7 month filter. What symbols do you put in to your relative strength rank ?
    Or is this just a rebalancing system ?
    Thank you in advance of your response.
    Ron Lazar
    20 Aug 2014, 09:08 PM Reply Like
  • Cliff Smith
    , contributor
    Comments (589) | Send Message
     
    Author’s reply » Hi Ron,

     

    You are referring to the tactical bond sub-strategy that uses TMF and SHY. These two ETFs are ranked based on 3-month return, and the top-ranked ETF is selected for that period. But then the top-ranked ETF has to pass a 7-month moving average filter. If it doesn't, then SHY is selected. Semi-monthly updates are used.

     

    For the tactical equity sub-strategy, there is no ranking, but the equity has to pass a 5-month moving average filter to be selected. Otherwise, SHY is selected.

     

    The above system is based on TMF and SPY/SSO.

     

    If you want to use TMV and SPXS, you would have to short them, but you could still use the results of the THS to get you out of TMV and/or SPXS in bear markets. Or you could go with a constant split between short TMV and short SPXS with periodic rebalancing.

     

    Hope that helps,
    Cliff
    20 Aug 2014, 10:09 PM Reply Like
  • ron lazar
    , contributor
    Comments (14) | Send Message
     
    Cliff,
    Thanks for the response. If using short TMV 45% and short SPXS 55% , when either one goes above it's 100 day sma , then would you suggest shorting TMF and or SPXL ?
    21 Aug 2014, 08:25 AM Reply Like
  • Cliff Smith
    , contributor
    Comments (589) | Send Message
     
    Author’s reply » Hi Ron,

     

    Could be risky. I haven't found any tactical strategy using returns or moving average that can switch between pure inverses. And I have tried many, many times. It seems logical, but it doesn't work for some reason. The tactical switching strategies seem to only work between equity and long-term treasuries, or equity and SHY, or long-term treasuries and SHY. That's my experience anyway.

     

    Best regards,
    Cliff
    21 Aug 2014, 08:50 AM Reply Like
  • ron lazar
    , contributor
    Comments (14) | Send Message
     
    So if either TMV or SPXS go above the 100day sma , then where do you suggest moving that portion ?
    21 Aug 2014, 09:25 AM Reply Like
  • Cliff Smith
    , contributor
    Comments (589) | Send Message
     
    Author’s reply » I would say SHY. Of course that means no growth in both bond and equity markets go bearish. But I think that is O.K.

     

    Another question to ask is what duration MA should be used. In my TMF/SHY strategy, I use a 3-month return and a 7-month (147 day) MA to select between TMF and SHY. Another option might be to use something like a 5/15 MA crossover point to make your decision.

     

    Please realize these are only suggestions and you are responsible for your own decisions.
    21 Aug 2014, 09:55 AM Reply Like
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