The more the stock markets fall, the better the performance of the ETF2X models relative to their benchmarks given that our Canadian and US timers took us out of the market in June. Since the US timer took us out of the market on June 11, the Nasdaq has fallen 31.1%. Meanwhile, since the Canadian timer took us out of the market on June 12, the S&P/TSX composite index has fallen 37.9%.
I don’t normally advocate attempting to short the market so I present the QLD/QID equity curve below for entertainment only!
Had you invested $100,000 based on the QLD/QID model on 08/02/06, that investment would be worth $431,655 today. Of course that couldn’t have happened since I started publishing the ETF2X models only recently.
{ 2 comments… read them below or add one }
I’m very interested in your timer system.How do you think it will work in a sideway ar bull market?
The performance of the ETF2X timers relative to the market is somewhat dependent on the type of market we are in. For example, my Canadian timer wasn’t of much help from mid-2002 to 2007 when applied to a 1X ETF because of the strength of the bull market. In such a strong market, buy-and-hold works well. The problem is that if you follow a buy-and-hold strategy, eventually a strong bear market comes along and wipes out a lot of your gains.
Since the 2X ETF’s are so new, I can’t backtest the models through a bull market. If you go through some of the other posts you will see how well the timers worked since 2000 when applied to IWM and QQQQ (US ETF’s).
In order for the timers to go long, an upward trend has to develop plus some other factors have to be met. The timers should work well in a sideways market provided there is a sufficient difference between the peaks and valleys thereby allowing us to ride up the market and get out shortly after a peak. However, if the market stays in a tight range then there may not be enough of rise in the markets to gain much.
There is no such thing as a perfect timer given the degree of randomness in the markets. However, a timer need not be perfect to beat a buy-and-hold strategy especially when 2X ETF’s are used. I am comfortable enough with these timers and models to put my own investments behind them.