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Buy Don't Hold V2

 

Overview

This strategy is based on a modified version of the strategy described in Leslie Masonson's book "Buy - Don't Hold". Read it on your tablet for only $9.41. You don't need a Kindle - just download the Kindle software for your Android device here or your iPad here.

The strategy is called V2 (version2) to distinguish it from the original. Masonson's version 2 was started 3/12/11.

This page will track Masonson's most aggressive strategy which ranks his entire selection of 42 ETFs excluding fixed income ETFs on the their 6 month performance and buys the top 5 ETFs on a market "buy" signal. The ranking of the ETFs is checked daily as long as the market remains in an uptrend and an ETF is only sold if it falls below rank # 20. After an ETF is sold, it is replaced with the highest ranked ETF that is not already held in the portfolio as long as there is still a "buy" signal in effect. If a market "sell" signal is issued then all ETFs are sold

The strategy only buys selected ETFs when the market is in an uptrend and sells all ETFs when the market is in a down trend. The direction of the market is determined by the 4 indicators described below in "Signal Criteria".

The 42 ETFs used for this strategy are listed at the bottom of the page.

Signal Criteria

The streamlined modifed strategy is based on checking the following 4 indicators (in lieu of the original 8) and awarding points (+1, 0, -1) to each depending on the indicator status.

1) NASDAQ Composite Index 100 Moving Average Crossover: A buy signal (+1) is generated when the Nasdaq Composite index rises above the 100-day moving average. A sell signal (–1) is generated when the index crosses below the moving average.  (If both 100 day and 200 day moving averages are close then the 200 day moving average may also be considered).

2) MACD On NASDAQ Composite Index: A buy signal (+1) is generated when the MACD line crosses above the signal line. A sell signal (–1) is generated when MACD line crosses below the signal line.

3) AAII Investor Sentiment Survey Bullish Percentage: A buy signal (+1) is generated when the percentage bullish signal drops to 25% and then rises the following week. A sell signal (–1) is generated when the percentage bullish signal rises to 50% and then drops the following week. If no new signal is generated in the last six months then a neutral (0) signal is generated. Check the BDH Signals page to view the AAII Sentiment chart.

4) NASDAQ Summation Index Moving Average Crossover With MACD Confirmation: A buy signal (+1) is generated when the $NASI moves above its 5 day EMA and that is confirmed by the MACD crossing its signal line on or near the same day. A sell signal (–1) is generated when the index falls below the 5 day EMA and the MACD has a confirming sell signal on or near the same day.

A "buy" signal is generated when any 3 or more indicators are positive and a "sell" signal is generated when any 3 or more indicators are negative. There is a "hold" signal between these 2 extremes.

Portfolio Changes

Portfolio changes following a new market signal or ETF ranking change are made at the market open on the following trading day.

Signal History

The reading is based on the number of positive indicators only.

  • An indicator reading of 0 or 1 means "Sell"
  • An indicator reading of 2 means "Hold" - no action
  • An indicator reading of 3 or 4 means "Buy"



Current Holdings and Trade History

The author recommends using a trailing stop or stop limit - check website for current recommendation.

 










 

 

 


 

 


6 Month Performance Of ETFs

The table below shows the performance of the 42 ETFs over the last 6 months. (6 months is taken as 126 trading days). This table can be used to select the top 5 ETFs when a "buy" signal is issued and then monitor their relative ranking during the hold period. Please note that the ETF prices rely on google quotes which intermittently does not work for certain ETFs, consequently if there is an ETF at the top of the table without a performance percentage, please check back later. Any ETFs missing a quote price are automatically sorted to the top of the table so this means that it is probably not the best performing ETF over the last 6 months.

A more detailed selection process is shown on etfscreen.com's website.  This considers other parameters noted in the book. 
www.etfscreen.com/buydonthold/bdh-decision-page.php

ETFs

The 42 ETFs used for this strategy are:

Sector / Industry
SPDR Consumer Discretionary XLY
SPDR Consumer Staples XLP
SPDR Healthcare XLV
SPDR Industrial XLI
PowerShares QQQ QQQ
SPDR DJIA Trust DIA
SPDR Utilities XLU
SPDR Energy XLE
SPDR Financial XLF
SPDR Homebuilders XHB
SPDR Materials XLB
SPDR Retail XRT
Vanguard U.S. REIT VNQ
Vanguard Information Technology VGT
iShares NASDAQ Biotech IBB
iShares DJ Transportation IYT
MarketVectors Semiconductor SMH
PowerShares WilderHill Clean Energy PBW
PowerShares Water Resources PHO
PowerShares DWA Technical Leaders PDP

Style

iShares Russell 1000

IWB

iShares Russell 2000

IWM

SPDR S&P Midcap 400

MDY

SPDR SP 500

SPY


International
iShares MSCI EAFE EFA
iShares MSCI Emerging Markets EEM
iShares MSCI Taiwan EWT
iShares MSCI Australia EWA
iShares MSCI Canada EWC
Market Vectors Brazil Small Cap BRF
WisdomTree India Earnings Fund EPI
PowerShares Int’l Dividend Achievers PID
SPDR DJ Wilshire Int’l Real Estate RWX

Commodities
iShares Silver
SLV
Market Vectors Gold Miners GDX
PowerShares DB Commodity Index DBC
PowerShares DB Agricultural Commodities DBA
Market Vector Agribusiness MOO
SPDR S&P Oil/Gas Exploration &Prod XOP
United States Gasoline UGA

Currency
CurrencyShares EuroTrust FXE
PowerShares DB U.S. Dollar Index Bullish UUP

 
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