Our system is set up where you have a screen definition and optionally may have multiple backtests run against that screen. Once you name a Favorite Screen, that name applies to the screen and all related backtests. You have the option to flag the screen (current picks) as the favorite or one or more backtests. I’ve found it more useful to flag the backtest that I want to follow than to flag the Current Screen Picks, but your usage and experience may differ.

So what about those Published Screens? Published Screens are a great way for you to share some of your favorite screens with other users. This site is all about filtering down the universe of ETFs to the few we think are investment worthy. We all try various screen definitions to see how they have performed. Many of us duplicating efforts with one another. By publishing a screen you think has potential you present it to the group and open it up to critique. Users can rate your screen with a star rating system and can enter into a discussion about your screen. Hopefully such will lead to even better screens. Published Screens let us leverage the combined knowledge of our user base.

I’ve released this capability with a couple of basic screens published. My hopes are that you will check out what has been published, rate them, comment on them, and publish some screens of your own.

And to tie this all together, you can always flag a Published Screen as a Favorite so you can easily find it later.

p.s. In a related move, the Screener now supports symbol lists without the need to create a portfolio. That makes life easier.

Go to the Screener and get publishing!

From there lets take a look at equity funds around the world to see just how bad the stock markets performed this year. Considering how the market felt in the U.S., I would not have wanted to be in one of the BRIC countries this year. Clearly, the emerging markets got hammered.

Coming back home, let’s take a look at the U.S. market sectors through the Select Sector Funds. The only surprise on this table is the number of sectors in the green for the year. Of course the performers are utilities, consumer staples, and health-care. But that’s not a surprise given the year.

That reminds me of the last post on this blog prior to today, when on May 16th I commented about the then-current market leadership. By the way, the simple indicator I posted about then has been bearish since that date. It’s been close to switching a time or two, but not yet. No guarantees made then, and none now. But it does pay to pay attention to market leadership.

What are your thoughts for 2012?

Every package we reviewed had some limitation that prevented it from being a universal fit for all our users. In the end, we chose an HTML-5 based package that works with all new browsers, but has some limitations with older systems. Unfortunately, this means it does not work natively with IE versions prior to version 9. We have an FAQ Page with some options for those of you that are affected by this. Hopefully most of you will find a viable solution through an upgrade or browser add-on.

The Interactive Chart option is selected from the link at the top right corner of the normal price chart. Once selected your preference will be remembered for the duration of your visit, and you can always return to a static chart by a similar link on the interactive chart. Note there may be a small delay on the first use as the number of browser instructions is quite lengthy.

As always, we need some feedback so we can improve this further. We think it is a great foundation, but are looking to our users to tell us how to tailor it.

Enjoy, and Happy New Year to each of you.

Since this is an ETF site I wanted to look at it from that perspective, but ETF history is short.  For this reason I decided to pick a Select Sector SPDR for each industry and compare relative RSf to future performance of the market (SPY).  The three SPDR funds chosen were Consumer Discretionary(XLY), Consumer Staples(XLP), and Healthcare(XLV).  The test period covered the 10 year span from the beginning of 2001 through end of 2010.  This includes two bear markets, two recoveries, and the intermediate period.

Annualized Returns during Lead/Lag period.

The first test run was between Consumer Staples and Consumer Discretionary.  This didn’t produce any results to get excited about, but things got more interesting when the RSf of these three sectors were compared to the RSf of SPY.  As you can see in the chart to the right, the market performs significantly worse when either Consumer Staples, or Healthcare, has a higher RSf than does SPY.  Consumer Discretionary shows the same effect, though not as pronounced.   Consumer Staples lead SPY about 49% of the time, and Healthcare lead SPY about 44%, so either of these would be market bullish  something over 50% of the time.

If you are like me and wouldn’t want to rely on a single sector for your signal, you might look at combining the Consumer Staples and Healthcare signals.  Let’s say we are bullish when either of these ETFs has an RSf below that of SPY and bearish when both have higher RSf rankings.  Such a scenario has shown an annualized return when bullish of 10.2% for 68% of the time and a return of -14.6% for the 32% of the time when bearish.  Since a picture is worth a thousand words, they say, here is what such a scenario would have looked like.

Am I proposing this as a market timing strategy?  Not in it’s current form.  There are several issues lurking just beneath the surface.  For one, there are often near daily changes during the transitions from a bullish period to a bearish period, and back.   I plan to spend more time on this and hopefully find a way to define cleaner transition points.

So why publish it?  There appears to be significant value in knowing these relationships, and since the three relevant RSf values are published daily on this site, the effort to track this indicator is fairly minimal.  Also there is timeliness, the Healthcare indicator went bearish on April 19, followed by the Consumer Staples indicator on May 2.   It might be an interesting time to watch what happens.

Here is a link to the Portfolio of the three relevant symbols.

Several of you have requested something like this over the past few years, and we’ve been putting it off. Finally, we took your requests and built something around them. Alerts are built on top of Portfolios so you can easily create Alerts for one or more of your existing Portfolios. Or, if you create a special Portfolio for your Alerts, you still have all the functionality of standard Portfolios such as performance reports and screening.

There is a link to the Alerts Page under the My Pages tab on the navigation bar. From there you can choose to Create New Alerts or Manage Existing Alerts. Whether you are creating new Alerts based on an existing or new Portfolio, you start by selecting ‘Create New Alerts’.

From there you will be queried for symbols if creating a new portfolio or taken straight to the alert definition page if using an existing portfolio. On the alerts definition page you can set alerts for the entire portfolio and/or for each symbol individually. Noting the image above, just click the pencil to edit an alert rule, the red ‘X’ to delete a rule, and the green ‘+’ to add another rule for a symbol. There is a maximum of 2 portfolio level rules and four symbol level rules.

Alerts are processed each evening after the closing prices are booked, and then emails are sent. An email will be sent summarizing the alerts for each portfolio, but only when an alert is triggered that day. If a portfolio has no alerts triggered that day, no email will be sent.

I should point out that this system is still being fine tuned and probably has some bugs. If you notice something not working, please let us know by replying to this post. Some common questions have been answered on the FAQ’s Page, but I’m sure there will be more.

If page flow or messages can be simplified, please don’t hesitate to point it out.

Be ALERT-ed!

If you have links saved to either of the two screeners they should still work.   At some point the older version of the screener will be discontinued but we will give people plenty of time to transition over before that happens.  We’re in no hurry.

Have  a nice weekend, and if you see something that’s not working right, or just needs to be changed, let us know.

But don’t just think about price and moving averages with crossovers.  This could just as well be used to flag symbols where RSI-2 just crossed under 10,  or +DI just crossed above -DI.  Oh yes, we have now broken out the sub-indicators that make up the ADX and the MACD indicators.  This allows for some unique short term filtering.

Backtesting of cross-overs and cross-unders is not very meaningful since they don’t always have selections, but it is available if desired.  Try out this new capability and let us know how you plan to take advantage of it.

Technical notice:  For those of you that had MACD defined in your portfolio views, that has now been changed to MACD-osc, for MACD-oscillator, but the calculation has not changed.  This is usually referred to as the MACD histogram when charted, but when no chart is used it is often referred to as the oscillator.  The field MACD is now used to reference the actual MACD line, and MACD-sig is the Signal Line.  By definition, [MACD-osc] =[MACD] – [MACD-sig] .

First and foremost, focus on the group of funds you start with.  Most of us want to begin with all funds and let our filter rules and our sorting rules determine the best from the rest.  That’s asking a lot from our simple rules, especially if we include a number of overlapping, highly correlated, funds.   So the first suggestion is to narrow your list down to the basics and let each fund represent it’s sector of the market solely.  

If you look at the groups of funds in the Sector Strategy and the International Single Country Strategy, you will see funds with generally lower correlations.   Yes, the Russell funds have high correlations and a few of the European countries are a bit high, but most are in the .70 to .90 range (Corr. for Sector Strategy / Corr. for Int’l Strategy).

Let’s look at some simple examples by beginning with a basic model.  We’ll filter for [Price] > [SMA-200] and order by [RSf].  We’ll hold 5 positions and rebalance every 21 market days,

All Traditional Funds

or about monthly.   First lets look at all traditional funds (non-inverse and non-leveraged).     You can see from the graph on your left (or here) that the performance has been unimpressive, having a CAGR of 2.5% and an Ulcer Index of 30.6.  A taste of that 50% drawdown and you’ll have heartburn for sure.

Now lets take those same rules applied to a portfolio of funds created by combining both the Sector and International Strategies.  Shown below  is the result of this model.

Select Sector and Single Country Funds

The CAGR has improved to 12.1% and the Ulcer Index has dropped to 16.0%. The drawdown is still a little steep at 30% or so, but much better than 50% and we have no bond funds in this  portfolio.  Remember both of these backtests use the same screening rules.

So hint one is to start with a pre-selected group of funds.  If you don’t want to create your own, Ameritrade did a pretty good job with their list of commission free funds.   The same backtest applied to that list is here, it returned 16.3% with an Ulcer index of 10.7 and a 20% max. drawdown.  Of course, in all of this we have to remember that backtests aren’t perfect and the future will always be different from the past.

Hint 2 is a quick one.   Do not mix leveraged funds in a backtest with non-leveraged funds because they are different animals.  Leveraged funds are much faster acting and therefore timing signals must be tuned accordingly.

Hint 3 is similar.  Use short funds cautiously in a backtest involving long funds.  Most every trader will tell you how bear markets behave differently from bull markets, and they are right.  The market generally falls much faster than it goes up, so again a system tuned to bull markets will generally not perform so well in bear markets.

I’ll leave testing these final two hints to you, they’re easy enough.   To wrap up, you will see some new links showing up on the left panel of the screener pages that will show you your recent activity.   This should make it easier to go back to a screen you ran a few minutes earlier.  If you see a way to improve it let us know.

If there are no major problems the next few days, this new screener will likely replace the old one sometime this weekend.

The user interface will be familiar to you, but there are a few significant changes.  First is the ability to screen from a portfolio, or other predefined group of funds.  As the fund universe has grown with many overlapping funds,  and brokerage firms have offered commission free trades on select funds, it has become more important than ever to do some initial screening of the fund universe.  By beginning your screening process with a portfolio of funds, you are in control from the first step forward.

From here you can further refine your screen by filtering on all the customary fields.  Leverage, Inverse, and Name filters have been moved out to a more intuitive interface.  The other filter rows, while looking familiar, have been improved to allow equations on either side of the logic field.   Just mouse over the text box and a drop down menu system will guide you to the data field you are looking for, or click on the text box and type the field name in directly.  Speaking of field names, the new system uses more friendly field names, but requires fields to be enclosed in square brackets, like [SMA-200].

A new feature is User Defined Variables.  These are designed for more complex calculations and these values are always presented in the data tables.  The new screener also allows sorting by these calculated fields, so you can test a combination of fields, like [Rtn-1mo] + [Rtn-3mo] + [Rtn-6mo] + [Rtn-1yr].  For those that don’t recognize that formula, it is rumored to be the formula used by a top rated mutual fund newsletter, although I’ve not confirmed that.

Like the legacy system, you can select to see data from the current intra-day data or from the previous closing data.   Unlike the prior system, a backtest of the screen gives you graphs of equity and drawdown, and statistics including CAGR, Standard Deviation, and Ulcer Index.

I should point out that the statistics are the average results from a Rolling Start backtest.  By this I mean that a series of backtests is run for each independent starting date, and then the results are summarized.  This utilizes all the available data and provides a much more stable result.  I’ll go in to this more in another article, but for the moment let me explain with an example.  For the model depicted in the chart above (results here), the CAGR’s ranged from 11.6% to 20.6% on the 21 rolling start tests.  If you had run a single test with a random start date you could have gotten either of these results, or something in-between.   We average the 21 results and report a CAGR of 16.3%, which we believe is a more realistic expectation.  The graphic image is based on the median test, since average results underestimate drawdown.

There is a lot more to be said about the new screener, but this post is long enough.  Try it out here and let me know what you think.  Weird results, let me know.  Same for odd error messages.  Think it should work differently, let’s discuss it.

We’ll be adding cross-overs and cross-unders in the near future.  We’re also looking at ways for you to peruse your recently viewed screens and maybe those that others have run.  A ‘favorites’ list is also on the agenda so you can view those important screens with a mouse-click or two.  Other ideas, let us know.

If you see any issues with these new layouts please let us know with a comment or an email.

Also, beginning tomorrow we will be updating data every 30 minutes during the trading day. This has been an issue for a while for some of you and we are glad to be able to add these additional updates due to your continued support.  The schedule will begin with our current 9:55 am ET update and continue through 3:25 pm.  Then we will have our regular 3:45 update prior to market close and our 4:16 update after market close.  The nightly update will continue as it has, at about 10:30 ET.

Enjoy, and let us know what you would like to see.  We have some changes coming for the Screener next.