By John Hollahan
This week, our model triggered the first signal in the model in over two years, with the last one being a Global Buy signal on March 17, 2016. The current buy signal is a Confirmed Up signal at which point the models are designed to sell all current holdings and replace them with new securities selected from the top 5 asset classes at the time of the signal. The difference between the Global Buy signal and Confirmed Up signal in the Model is as follows. A Global Buy triggers following a bear cycle. From the high in mid-2015 to the low in early 2016 the MSCI All Country World Index dropped approx. 20.9%. During that time the Model triggered a Global Sell Signal indicating a potential bear cycle was underway. The Global Buy Signal on March 17, 2016 indicates the bear cycle is probably over and a new bull cycle was underway. A Confirmed Up signal occurs following a correction within a bull cycle. From the high in January to the low in the 2018 correction, the MSCI Index dropped approx 10.7%. The current Confirmed Up signal indicates the correction likely is either over or in the later stages and the next upleg in the bull cycle that started in 2016 is potentially underway.
This is an important time in the strategy. With a Confirmed Up signal, all current positions from the previous campaign are sold and new positions are selected for a new campaign. For the asset selection, we turn to our Asset Class Ranking System (ACRS) and select the top ranked asset classes according to our confirmed up signal selection criteria. From those 5 asset classes, we select the ETFs that best represent those asset classes.
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