VL4% 126-dma & NC6% 20-dma

Be fearful when others are greedy and greedy only when others are fearful.
-- Warren Buffett

Almost all Exchange-Trade Funds are listed on the American Stock Exchange (AMEX). The official definition of ETFs is "registered investment companies under the Investment Company Act of 1940, which have received certain exemptive relief from the SEC to allow secondary market trading in the ETF shares. ETFs are index-based products, in that each ETF holds a portfolio of securities that is intended to provide investment results that, before fees and expenses, generally corresponding to the price and yield performance of the underlying benchmark index."

Some of the heavily traded ETFs are:
SPY - the Standard & Poor's Depositary Receipt (SPDR) Trust Series securities, tracks the price and yield of the S&P 500 Index. The S&P 500 Index which is calculated as the number of common shares outstanding multiplied by the stock's price, is market-capitalization-weighted. Therefore, the big market cap stocks exert a larger influence on the index.

QQQ - the Nasdaq-100 Trust Series I, tracks the price and yield of the Nasdaq 100 Index.

DIA - Diamonds Trust Series I, Tracks the price and yield of the DJIA. The DJIA is price-weighted by each of the 30 components. Therefore, the highest-priced stocks have the most impact on the average.

iSHARES - pooled-securities with an open-ended investment structure issued by Barclays Global Investors. There are over 50 different iShares index funds that trade like stocks. Each share tracks a specific portfolio.

Value Line Composite Index
The Value Line Composite Index (VLCI), also known as the Value Line Geometric Index, is a geometrically weighted index of 1700 stocks in 90 industries. It was first appeared in 1961 to provide the "median" performance of all the stocks tracked. About three-fourths of the stocks are traded on the New York Stock Exchange, 20 percent are traded on the Nasdaq, and the remainder on the AMEX and in Canada.

On February 1, 1998, Value Line published a new index dubbed the Value Line Arithmetic Index (VLAI). The index provides the average performance of all stocks in the index. It is based on summing up the percentage price increase in every stock each day and dividing that total by the number of stocks in the index. Therefore, it is an equally weighted index of 1700 stocks.

VL4% Strategy
The VL4% strategy uses a daily chart of the VLCI. If the VLCI rises 4% from its last market low, based solely on its weekly Friday closing price, that is a buy signal. On the other hand, if VLCI declines from its last market top by 4% based on the weekly Friday closing price, that is sell signal. You cannot buy or sell VLCI because it is an index. Therefore, you should invest in an index fund or ETF instead.

Leslie N. Masonson, in the back-test, found that performance can be improved by adding the 20-dma (day-move-average) to the VL4% VLAI daily strategy. With the 20-dma, we add:
A buy signal occurs when the VLAI pierces its 20-dma to the upside, from below.
A sell signal occurs when the VLAI drops below its 20-dma to the downside, from above.
If the other strategy issued a buy/sell signal while the current buy/sell signal was in place, no action would be necessary.

Nasdaq Composite Index (COMPX) NC6% and Nasdaq 100 Index (NDX) NDX6% Strategy
The COMPX contains about 3500 companies. It tends to be more volatile and has wider prices swing than the VLCI and VLAI. Based on the back-test results, Leslie N. Masonson found that the weekly 6% signals are superior to the daily 6% signals as the latter are much more frequent because of the volatility of their respective indexes.

Back-test results in choosing the best dma
Michael McDonald, Predict Market Swings with Technical Analysis (Wiley, 2002)
S&P 500 Index - 72-dma and 132-dma.

Robert W. Colby, The Encyclopedia of Technical Market Indicators (McGraw-Hill, 2003)
DJIA - 66-dma and 126-dma

Leslie N. Masonson, All About Market Timing (McGraw-Hill, 2004)
Nasdaq Composite - 20-dma and 25-wma

US Presidential Cycle and ETFs

In US, there is a four-year cycle in the stock market accompanies by the presidential election years. Usually, the market rises more in the pre-election year (95, 99, 03) than in the election year (96, 00, 04). The election year is the second best of those four years. The worst performance year is the post-election year (97, 01, 05) and the next worst is the midterm year (98, 02, 06).

The investment vehicles to use for both the seasonal and presidential cycle strategies are index funds, leverage funds and ETFs (such as the SPY and QQQs).

Mark Vakkur done a research in 1996 to analyze the optimum return of investment of the presidential cycles. He tested a number of different strategies to determine their profitability and had shown the comparison of Buy-and-hold to Presidential Election Cycles scenarios Jan 1950 - Dec 1995, in the descending order, are shown as below (value of $10,000 at the beginning):

Optimal Months: $5,189,384
Leverage Best Months: $2,183,257
2:1 Leverage: $1,272,369
Pre-election and election years: $733,605
Buy-and-Hold: $372,388 (8.4% ave annual return, 14.4% std dev)
100% Cash: $110,905 (5.5% ave annual return, 2.8% std dev)
Post-election and midterm years: $56,297

Strategies explained
Pre-election and election years - investing only in these two years of the presidential cycle and remaining in cash for the other two years.

Post-election and midterm years - the opposite of above.

2:1 Leverage - 50% margin in the pre-election year and 100% invested in election year.

Leverage Best Months - 2:1 leveraged (Nov - April) in the pre-election and election years; 100% invested during these same months in the post-election and midterm election years, and 100% invested during the May - Oct period during the same two years.

Optimal Months - 2:1 leverage in pre-election and election years in the following months in those years: Jan to April, July, Nov and Dec; 100% cash in May and Sept of all 4 years, and Jun and Aug of the post-election and midterm years; and 100% invested in all the other months not mentioned: Jan to April, July, Nov and Dec in the post-election/midterm years, and Jun and Aug in the pre-election years.

Vakkur found that the best seven months in the pre-election year and election years were Jan - April, July, Nov and Dec. The worst months in all the four election cycle year were May and Sept. Two more worse months occured in Jun and Aug of the post-election and midterm election years. All the other months not mentioned in these two years were considered average.

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物性

對於人來說，動物的可愛和可怕都可能在於其率性而為。北極熊 - 陸上最大的食肉動物，水中玩球。

攝於日本北海道旭川動物園。