Alpha Power Investing NewsletterApril 17, 2015
The Alpha Market Trend Filter
Alpha has a new strategy. Like our other offerings, it concentrates on risk management. Unlike our other strategies, it is not based on market seasonality - the recurring calendar-based cycles which flow from human behavior in response to certain repeating investment forces, such as the presidential election cycle.
Instead, this is a trend-following risk-management system using a unique combination of moving averages to identify unsafe/safe market trends. We call it the Alpha Market Trend Filter (AMTF).
We've created this new tool to tell us when the trend of the stock market is changing. Unlike similar systems, ours is specifically designed to detect when the long-term trend is reversing. In order to avoid confusing whipsaws which occur with short-term trend-following systems, ours requires that a down market trend be in place long enough to move below a long-term moving average for two consecutive months. This causes the system to stay invested during sharp and quick market corrections which are normally followed by quick upward reversals.
The rules of the Alpha Market Trend Filter are these:
Sell: If the S&P 500 index registers two consecutive monthly closes below its own 21-month moving average and is also below its own ten-month moving average, the Alpha Market Trend Filter deems the market trend to be "unfavorable". At that time, the strategy will be switched entirely into intermediate U.S. government bonds.
Buy: The S&P 500 trend remains unfavorable until it registers one monthly close above its own ten-month moving average. At this time, the market trend is deemed "favorable" and equity investments are reestablished.
Historically, this simple system has stayed fully invested during all of the major bull markets since 1970. Importantly, the system avoided market risk during the two bear markets of this century (2000-2002, 2008-2009). Graphs of the buy/sell points plotted against the moving averages of the S&P 500 can be viewed from the Home page of our website at www.alphaim.net by clicking the black box titled Alpha Market Trend Filter.
Our new program, the Alpha Multi-Income Strategy, which uses this risk management discipline exclusively, can be reviewed in a PDF document by clicking on the brochure at the Strategies and Performance section of our website.
I would be pleased to answer any questions you may have about this strategy.
P.S. I am pleased to announce that Alpha now manages over 12,000 accounts as a separate account manager and as a sub-advisor to several investment platforms, broker-dealers, and investment advisory firms.
Disclosure: Past performance is not a guarantee of future performance.
© 2015 Alpha Investment Management, Inc.