This post provides a 2016 ETF Performance summary. It also provides the momentum rankings for January (this is a transaction week or trade day).

2016 ETF Performance — TN1

The 2016 ETF performance for Trading Normal style with one trade per month (TN1) is detailed below. Concise summaries of the other trading styles are dealt with later.

Results for TN1 were outstanding. A $10,000 investment grew to $17,171 over the year.

Eleven trades were made (1 trade was held for two months).  A buy and hold strategy, represented by SPY (S&P500 ETF),  investing $10,000 at the beginning of the year grew to $11,147. The TN1 strategy produced profits between six and seven times more than this benchmark.

Each of the trades is shown below. Each trade represents the highest momentum (highest ranked ETF) for that month. Entry and exit prices and profits are shown in the table below:

TN1

Note: The date shown as entry is the closing date of a weekly bar. Entry is always made on the Open of that bar. Thus, the actual entry date for the first trade was at the open on 1/4/2016.

Comments on TN1 2016 ETF Performance

Some comments on the TN1 2016 ETF Performance follow:

1. Despite the very high return, trading was quite conservative. Three of the twelve months were in TLT, a ten-year treasury bond fund. Two of the months were actually in cash (or its equivalent, BIL). Thus, higher risk assets were only in play for seven of the 12 months.
2. Losses were incurred in three of months. These were relatively small except for IYR  in August which lost 4.15% (emboldened red).
3. Profits tended to be large,  with four of the months exceeding 4% (emboldened green).
4. One profit, GDXJ, was huge at 43.29%. A second, SLV, exceeded 10%.

The ability of the proprietary momentum rankings to find ETFs aggressively moving up in a timely fashion was demonstrated by these results. Finding high-flyers and avoiding crashing ETFs is the goal of momentum investing. In 2016, that was achieved rather spectacularly.

Transaction Date Selection

The transaction date for a new momentum ranking/selection is always the last Friday of the month. That was 12/30. If one were trading/backtesting TN1, RSX would be purchased at the open next week. Shown in the table below are the three highest momentum rankings by week for the last several weeks. Highest ranked ETFs on transaction days (trade days) are highlighted in blue. Non-transaction days are shown for informational purposes. Following changes in momentum for ETFs can provide a valuable perspective on shifting markets. Toward this end, a heat chart conveying this information graphically for all followed ETFs is being developed.

For backtesting purposes, only the highlighted blue ETFs are assumed to be “bought.”

TN1 — Recent Rankings

Momentum rankings need not be constrained by calendar dates. As an example, RSX rose to the top spot on 12/16, two weeks earlier than the next trade date. Had one bought it then (the open on 12/19) the entry price would have been 20.88. It closed on 12/30 at 21.22, up 1.63%. XLF would have been exited then (two weeks earlier than shown in the table) and at a higher price (23.38 on the open on 12/19).

In this instance, profit would have been increased by trading more than once per month. That does not argue for doing so. Such a trading style ensures more commitment and more trading costs. It does not ensure more profits.

It does provide another reason for following the rankings even on non-trade days. Judgment and feel are important elements to successful trading.

More Information

The above summary only included one trading style and one position traded. There are three different trading styles which allow up to three trades per month. Additionally, a simple switching system (SSS) can be used with any of these systems to reduce risk. To see more about the dynamic momentum trading, go here.

A full summary of 2016 ETF performance systems will be forthcoming. It will provide results for the additional trading options. The need for timeliness dictated that rankings appear now.

The fact that TN1 appears to be the system most followed and most suitable for this type of trading provided the motivation to include its summary results in this post.