More On the International Buy Signal

As I mentioned in last Friday’s weekly update, the International TTI (Trend Tracking Index) crossed its long-term trend line to the upside, and a new buy signal was generated effective Monday, July 26, 2010.

If you decide to participate, be sure to use ETFs (as opposed to mutual funds), if you can, should this cycle to turn out to be a head fake.

Reader Ken had the following question regarding this latest buy signal:

Can you tell me a little more about the makeup of the International TTI so that I can pick the most representative Funds/ETF’s for the buy signal? For example, does it represent the Global Market ex U.S., or is it more narrowly focused? Does it include an Emerging Markets component that would make an ETF like VWO appropriate?

In the absence of any information about the make-up of the International TTI, I have been considering VEU, GWL or CWI but have been wondering if they are too broad based and if something a little more narrowly focused and matching the TTI would be a better choice.

While the TTI composition is proprietary, I want to point out again that the international signal applies to all “broadly diversified international equity funds/ETFs.” That means from your list VEU, CWI and GWL are suitable for this signal, but VWO is not. I would classify VWO to belong into the Country Fund category, for which a fund’s individual trend line crossing should be used as a signal.

No matter which fund/ETF you decide to use, it’s imperative that you implement my recommended 7% trailing sell stop discipline in case this buy signal turns out to be short-lived.

Disclosure: No holdings at time of writing

About Ulli Niemann

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