Misunderstanding The Trend Tracking Index

Reader Tom had this comment:

A provoking question I thought about is: How do I get a fund or ETF based on your TTI? An ETF or fund with the return of your Domestic TTI of 8.53% would be nice.

Tom is missing the purpose of the Trend Tracking Index (TTI). It is designed to determine market direction so that we can easily identify whether the overall long-term trend is up or down. Nothing more and nothing less.

The TTI does not have a return. The percentage stated is simply its current position above or below its trend line, which changes daily with the market movement. It does not represent any gain or loss.

To see how domestic ETFs have fared since our latest Buy signal on 6/3/09, simply reference the StatSheet. If you look at the latest issue, you will note the second column from the right titled “Since 6/3/09.” That represents the performance for this cycle.

To sum it up, use the TTI first to determine market direction and then the StatSheet to select funds based on momentum rankings. Keep in mind that it is not always advisable to pick the top ranked funds/ETFs. While they will give you great firepower, if the markets move your way, they will also give back any gains the fastest when a pullback occurs.

I personally always drop down in the fund/ETF pecking order to find those that give me the best of both worlds: Decent gains and some resistance to sell offs.

About Ulli Niemann

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