Trend Line Clarification

In a follow up to my post “Which Trend Line Should You Use,” one reader had this to say:

I am a bit lost. Since your TTI is proprietary, how would one know when the, say the Latin America index and the EWZ as the fund to select crosses your TTI? One must develop their own TTI. Your TTI, to my understanding is not just a MA (Moving Average).

Could you please clarify?

There are many new readers to this blog and my newsletter, so let me review some of the particulars to avoid confusion.

First, there are only two Trend Tracking Indexes (TTIs), the domestic and the international TTI. While the composition is proprietary, they both are to be used with their own individual 39-week moving averages (M/A).

In general, the domestic TTI generates a Buy signal when it crosses its own 39-week M/A to the upside. This Buy signal only applies to widely diversified domestic equity funds and ETFs.

The international TTI generates a Buy signal in the same way when it crosses its own 39-week M/A to the upside. Here the Buy signal applies to widely diversified international funds/ETFs only.

The numbers for both TTIs are announced in my free weekly newsletter and in this blog, when critical points are reached and action is required.

Second, investing in sector and country funds is independent of the position of the TTIs. I use each sector’s or country’s own 39-week M/A to arrive at a Buy signal in conjunction with the momentum figures as outlined in the weekly StatSheet. You can read the latest issue here.

No matter which market we invest in, we always prepare our exit strategy at the time of the purchase. For the domestic and international TTIs, I currently use a 7% trailing stop loss point and for sector and country funds, I use 10%. Be aware that these sell stops are based on closing prices only and not intra-day market action.

About Ulli Niemann

Ulli Niemann is the publisher of "The ETF Bully" and is a Registered Investment Advisor. Learn more
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