- The “Anti-VIX” ETN ZIV is designed to increase in value when the volatility of the S&P 500 decreases, as measured by the prices of VIX futures contracts.
- The model buys ZIV only during up-markets when the VIX > 17 and rising, otherwise during up-markets it buys either QLD or DDM, or IEF when upmarket conditions are absent.
- A backtest of the model from Jan-2011 to Jul-2017 produced a high 60% annualized return with a maximum drawdown of -16% with only 41realized trades.
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Profiting from Market Volatility with the “Anti-VIX” ETN ZIV
Profiting from Market Volatility with the “Anti-VIX” ETF SVXY
- The “Anti-VIX” ETF SVXY is designed to increase in value when the volatility of the S&P 500 decreases, as measured by the prices of VIX futures contracts.
- Extended data of SVXY, the ProShares Short VIX Short-Term Futures ETF, from Jan-2006 to the fund’s inception date was calculated from its proxy, the S&P 500 VIX Short-Term Futures Index.
- SVXY is intended for short-term use. Using the extended price data, a buy-and-hold strategy of the hypothetical SVXY resulted in a huge loss of over 90% from 2007 to 2009.
- The model buys SVXY only during up-markets when the VIX > 17 and rising, otherwise during up-markets it buys either QLD or DDM, or IEF when upmarket conditions are absent.
- A backtest of the model from Jan-2007 to Jul-2017 produced a high 70% annualized return with a maximum drawdown of -27% with only 76 realized trades.
The iM-Capital Strength 20-Stock Universe of the Russell 1000: Performance
- This Universe holds well capitalized companies with strong market positions, which pay good dividends, have price appreciation potential, and provide a degree of downside protection during bear markets.
- The Universe is reconstituted weekly, and consists of 20 large-cap stocks with Capital Strength type characteristics from the Russell 1000 Index.
- A backtest, without any buy- and sell-rules, from Jan-2000 to end of Jun-2017 showed a 10.0% annualized return with a maximum drawdown of -41.5%.
- A comparison with Vanguard’s large-cap ETFs older than 10 years shows that for periods 1-year and longer the Universe would have produced higher returns than any of the five ETFs.
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Beating Vanguard’s Large-Cap ETFs with a Tax Efficient Capital Strength Portfolio of the Russell 1000
- This system invests in well capitalized companies with strong market positions, which pay good dividends, have price appreciation potential, and provide a degree of downside protection during bear markets.
- The portfolio is quarterly rebalanced and reconstituted, and consists of six large-cap stocks with Capital Strength type characteristics from the Russell 1000 Index, typically held for at least one year.
- A backtest, from Jan-2000 to end of Jun-2017, showed a 17.7% annualized return with a maximum drawdown of -23.3% and a low average annual turnover of about 70%.
- A comparison with Vanguard’s large-cap ETFs older than 10 years shows that for all listed investment periods the Portfolio would have produced higher returns than any of the five ETFs.
The iM-Standard 5 ETF Trader (Excludes Leveraged ETFs)
- This system always holds five ETFs (equity-, fixed income-, short equity-, and Gold-ETFs) selected according to stock market climate and rank.
- Typically, during good-equity markets it holds equity-ETFs, and during bad-markets fixed income-ETFs and/or short equity-ETFs. Also at times it can hold three gold-ETFs with other ETFs.
- A one factor ranking system selects five ETFs from a preselected list of 29 ETFs. A simulation from 2000 to 2017 shows a 24% annualized return with a maximum drawdown of -12%.
A Buy Signal from the iM-Enhanced Inflation Timer
- Stocks usually perform poorly when inflation is on the rise. We developed a market timer according to two inflation rate based rules. A buy signal has now emerged.
- Switching according to the signals between the S&P500 with dividends and a money-market fund would have provided from Aug-1953 to end of Jan-2017 an annualized return of 12.69%.
- Over the same period buy-and-hold of the S&P500 with dividends showed an annualized return of 10.08%, producing about a quarter of the total return of the Timer model.
- The Enhanced Inflation Timer uses one additional criterion in the buy rule for stocks (and sell rule for bonds); high-beta stocks must perform better than low-beta stocks.
How to Beat the First Trust Capital Strength ETF (FTCS) and Other Large-Cap ETFs with the Capital Strength Stocks of the Russell 1000
- This system invests in well capitalized companies with strong market positions, which pay good dividends, have price appreciation potential, and provide a degree of downside protection during bear markets.
- The portfolio holds six large-cap stocks selected from a universe of twenty Russell 1000 Index stocks with Capital Strength type characteristics, rebalanced quarterly in January, April, July and October.
- A backtest, from 7/6/2006 (inception of FTCS) to 5/31/2017, showed a 24.7% annualized return with a maximum drawdown of -25.7%, and low average annual turnover of about 80%.
- Over the same period the First Trust Capital Strength ETF (FTCS), which selects stocks from the NASDAQ Index, produced only 9.63% annualized return with a maximum drawdown of -53.6%.
- FTCS’s performance is not much better than that for SPY (the ETF tracking the S&P 500), which over this period returned 8.25% annualized, with a maximum drawdown of -55.2%.
Correlation between the iM ETF Models
Currently we have 12 different ETF models at iMarketSignals. The various models and their correlation between them are shown below.
The iM-5 ETF Trader
- This system always holds five ETFs (equity-, fixed income-, leveraged equity-, short equity-, and Gold-ETFs) selected according to stock market climate and rank.
- Typically, during good-equity markets it holds equity-ETFs and/or leveraged-equity ETFs, and during bad-markets fixed income-ETFs and/or short equity-ETFs. Also at times it can hold three gold-ETFs with other ETFs.
- A one factor ranking system selects five ETFs from a preselected list of 33 ETFs. A simulation from 2000 to 2017 shows a 35% annualized return with a maximum drawdown of -13%.
The iM-Minimum Drawdown Combo
In our continued effort to satisfy request for low drawdowns models with reasonable turnover and good returns we provide this model, which combines:
- the iM-Composite Timer (SPY-IEF),
- the iM-Composite Timer(GLD&SCHP+VTV&VOE+BIV&LQD) based on the iM-Composite (Gold-Stocks-Bond) Timer,
- the iM-Composite-(SH-RSP) Timer,
- the iM-Best7(HiD-LoV).
- This combination model always holds four ETFs approximately equal weight at any time and seven S&P 500 stocks.
The combo showed a simulated 22.2% annualized return with a maximum drawdown of -7.7% when backtested from Jan-2000 to Apr-2017.
With reference to Section 202(a)(11)(D) of the Investment Advisers Act:
We are Engineers and not Investment Advisers,
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