What is MarketTiming
MarketTiming is a financial advisory service that issues share market trading signals designed to help you ride market rallies and avoid market crashes. It has operated since 2009.
Our advice is general not personal since we do not know your individual financial needs and circumstances and our AFSL authorisation is confined to general not personal advice.
Our clients are investors who don’t want the roller coaster ride that comes with buying and holding a portfolio of shares regardless of market conditions.
Specifically, we provide our clients with ‘Buy‘ and ‘Sell‘ signals for trading exchange traded funds (ETFs) with a view to letting profits run, but cutting losses short.
Our trading signals are not based on guesswork or forecasts, but on objective measures of the direction and speed of a market sector represented by an ETF. This could be the Australian stock market as a whole (e.g. the Australian All Ords index) or a particular segment of a local or global market (e.g. the Australian finance sector or internationally the Emerging markets sector).
We don’t try to pick the top or bottom of a market’s cycle. Instead we measure the market’s long term trend and momentum to confirm when it has troughed and when it has peaked. If the market whipsaws (i.e. suddenly reverses direction after establishing a new trend) we change signal so as to limit any loss or opportunity cost. The overriding priority is to grow and preserve capital through ridding rallies and abandoning busts.
MarketTiming’s trend-following approach to generating Buy and Sell signals for an Exchange Traded Fund
An ETF is a trust fund listed on the Australian Securities Exchange that invests in a portfolio of tradeable assets (such as shares) that often mirrors a well-known stock market index (such as the SPDR/ASX 200 share index).
|For an explanation of ETFs visit and read this comprehensive beginners’ guide provided by mymoneycalculator.com.au (no affiliations):
MarketTiming has a dedicated website which provides detailed information about how our trading signals are generated, how they have performed and a frequently asked questions and answers section.
Changes to our trading strategy signals are communicated weekly via email for both our Conservative Share Strategy and our Local and Global ETF Rotation Strategies.
- A ‘Buy’ signal flags when it is beneficial to be ‘In‘ the market (via an exchange traded fund).
- A ‘Sell’ signal flags when it is prudent to be ‘Out‘ of the share market (by shifting to a safe cash management account linked to your stock broking account).
Our ETF Trading Strategies
We publish market signals for three ETF trading strategies, each of which involve a different number of expected signal changes per year and different risk and return characteristics. These strategies are:
- Conservative Share Strategy which trend-follows the general Australian share market as represented by the All Ords share index. This trading strategy generates an average of two signal changes per year;
- Local ETF Rotation Strategy which covers three local share sectors (finance, property and resources) and backs the one with the strongest price momentum, This strategy generates about three ETF switches a year.
- Global ETF Rotation Strategy, which covers three global share sectors (USA, other developed markets and emerging markets) and recommends the one with the strongest price momentum. It generates about three ETF switches a year.
How to Begin with MarketTiming’s Signals
For the Conservative Share Strategy (around 2 signals a year), we would suggest that an existing Buy signal be phased in slowly over two months, say 20% initially and then 20% each two weeks thereafter so that you don’t find yourself buying at the top or selling at the bottom of an intermediate wave cycle in the market. Or if the strategy has been on a Sell signal just wait for it to change to a Buy signal.
For the ETF Local and Global Rotation Strategies (each expected to have about three ETF switches a year), only buy an ETF after MarketTiming’s Weekly Update bulletin has advised you to do so.
How to Respond to Subsequent Signal Changes
Our latest market timing signals are shown as either ‘Buy’ or ‘Sell’.
- It is always best to enter the share market on a ‘Buy’ signal.
- It is always best to exit the share market on a ‘Sell’ signal.
For all of our strategies, entering or exiting should be done the first trading day after a signal is issued by MarketTiming.
MarketTiming monitors whether a change in trading signal has been triggered on a weekly basis, and all subscribers to The Constant Investor are informed of such in a MarketTiming Weekly Update bulletin email each Sunday unless they have opted out of this service. Any signal changes are also posted on the “Our Signals” section of this website.
Best Practice for Investors
The best way to remove emotions and subjectivity from the investing process is to use a fully mechanical strategy signalling service like MarketTiming’s.
Fastidiously applying the signals and strategies of our computerised timing system should enable you to avoid much of the downside of a market contraction while gaining much of the upside of a market expansion. But you will need self-discipline to succeed and be prepared to accept occasional losses (because no market timing system is perfect) so as to win over the medium to longer-term.
This strategy trend-trades general equity ETFs in order to ride booms and abort busts on the Australian stock market. The Conservative strategy gauges the underlying price trend of the Australian All Ordinaries index’s so as to navigate its long term price cycles.
This strategy has about two signal changes a year, typically one every six months. It uses the SPDR S&P/ASX 200 share fund ETF (ASX code STW) for timing the Australian share market, though it is possible to use alternative ETFs such as:
- Vanguard Investments Australia Ltd – Australian Shares Index Fund (code VAS)
- State Street Global Advisers, Australia Services Ltd – SPDR S&P/ ASX 50 Fund (code SFY)
- iShares MSCI Australia 200 ETF (code IOZ)
- BetaShares and BetaShares FTSE RAFI Australia 200 ETF (code QOZ)
- VanEck Vectors Australian Equal Weight ETF (code MVW)
In addition there are high yielding ETFs that move in sympathy with the wider market so are also suitable for being timed using the Conservative strategy’s signals. They are:
- Russell Investments – High Dividend Australian Share ETF (code RDV)
- State Street Global Advisers – SPDR MSCI Australia Select High Dividend ETF (SYI),
- Vanguard – Australian Shares High Yield ETF (VHY)
- iShares – S&P/ASX High Dividend ETF (IHD)
How the Conservative Strategy Works
The Conservative strategy works on the basis that the share market price index’s trend is our friend until it bends and when investing in an ETF to let profits run and cut losses short.
The Conservative strategy aims to stay on the right side of the All Ords share index’s long term trend line. A good analogy is a ship’s Plimsoll line, which is a reference mark located on its hull that indicates the maximum depth to which the vessel may be safely immersed when loaded with cargo. As long as the ship floats above that line it is safe to be on-board, but if it sinks below that line it is not.
Likewise when the All Ords share index stays above its long term trend line MarketTiming recommends holding a listed equity fund, but when the share index falls below that trend line it recommends exiting the share market and holding cash.
Using the Conservative Strategy
When the Australian share market is attractive we issue a ‘Buy’ signal in MarketTiming’s Weekly Update bulletin which you will receive by email on a Sunday and in the “Our Signals” section of this website. You then invest in a general Australian equity fund listed on the Australian Securities Exchange (such as those listed above) using an online trading platform offered by a discount stockbroker such as CRM Markets, E-Trade or Comsec).
When it’s not safe to be in shares, we issue a ‘Sell’ signal so that you can divert your hard earned savings from shares to a cash management account where they are sheltered from stock market contractions. Online share trading accounts usually offer a linked cash management account.
There is both a Local and a Global ETF Rotation strategy. You may use both or only one. The Local Rotation strategy focuses on three local industry sector ETFs (finance, resources and property) and the Global Rotation strategy uses three regional market ETFs (USA, other developed countries and emerging economies). Each rotation strategy also uses Gold and Cash as defensive assets for market busts.
On average each Rotation strategy rotates (i.e. switches) its preferred ETF about three times a year (or around once every four months). In practice the frequency of such switches may vary from this average.
These strategies use the weighted relative price increases of the different ETF’s over a suitable time frame to decide which ETFs exhibit the strongest price momentum. It then backs the winning local ETF and global ETF in market rallies or retreats to cash or gold in market corrections.
There are eight funds we time within MarketTiming’s Global and Local ETF Rotation strategies. Six are used for equity bull markets (three Global regional share funds and three Local industry sector share funds) while two are used in equity bear markets (gold and cash funds). The ASX codes for each ETF (other than CASH) are shown in parentheses.
Global Regional Market Share Funds
- USA Shares: iShares Core S&P 500 Fund (IVV)
- Other Developed Market Shares: iShares MSCI EAFE Fund (IEU)
- Emerging Market Shares: iShares MSCI Emerging Markets Fund (IEM)
Australian Industry Sector Share Funds
- Australian Finance Shares (ex-Property): SPDR S&P/ASX 200 Fin (ex-Prop) Fund (OZF)
- Australian Resources Shares: BetaShares S&P/ASX 200 Res Fund (QRE)
- Australian Listed Property Trusts: SPDR S&P/ASX 200 Listed Property Fund (SLF)
Bear Market Refuge Funds
- A Bank Cash Management Account (CASH).
- ETFS Physical Gold Fund (GOLD)
How Rotation Strategies Work
The beauty of the first six funds is that in a bull market at least two of them should be rallying and hence ideal candidates for holding based on their relative positive price momentum. The gold fund is used for profiting in bear markets (since gold normally rallies in a share crash) and the cash fund is used if none of the other funds exhibits positive price momentum.
Think of a Rotation strategy as a diverse asset class race where you always back the Global ETF doing best and the Local ETF doing best or in a share market crisis (like 2008) using a gold or cash fund for protection. Its construction makes an ETF Rotation strategy the closest thing to an all-weather portfolio.
Using the Rotation Strategies
We use a momentum measuring model to time each ETF on a weekly basis. We then list the best performing Global and Local ETFs in our Weekly Update bulletin as Buys and signal any changes to them as Sells. When commencing a Rotation strategy, equal amounts of capital should be used to buy each ETF. At the end of each financial year the Rotation Strategy’s portfolio can be rebalanced so that its two ETFs are equalised in value.