Strategies · Library · ETFs
§4.1.2Trend
Dual-momentum sector rotation
A variant of §4.1 Sector momentum rotation
Pick the best sector ETFs by past return, but only while the broad market ETF is in an uptrend. When the market trend is down, move everything into an asset that does not move with stocks, such as gold or Treasuries.
Open in the builderAs the book sets it out, long only.
- Asset class
- ETFs
- Held for
- Months
- Data
- ARCANE has the data
- Symphony
- Builds in the symphony builder
The rule
- Signal
- Sector ETF cumulative return rank; broad-market ETF price versus its long moving average
- Entry and exit
- Hold top sectors if the market ETF is above its average, else hold the uncorrelated ETF; check monthly.
- Sizing
- Equal across the chosen sectors, or all in the safe ETF
How it fails
- Late exits and re-entries
- Safe asset can also fall
- Few sectors to rank
Data it needs
- daily adjusted closes
Daily closes for sector ETFs, SPY, TLT, GLD are available.
How ARCANE uses it
Fits a Call that equities will or will not beat Treasuries over a quarter (paper only).
Builds in the symphony builder. Direct fit for the dual-momentum block with SPY trend as the gate.
Filed under the trend card
Hold each market in the direction of its own return over the past year, and size every position to the same expected volatility.
A paper plan from this card holds 21 to 252 days, stops at 2× the expected move and uses at most 100% of your risk budget. The card
Source: Kakushadze and Serur (2018), 151 Trading Strategies, §4.1.2, p. 63 of the SSRN version. Described in our words. Trend is ARCANE’s filing, not the book’s.