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Systematic Tactical Asset Allocation

Our systematic tactical asset allocation strategy is based on an proprietary algorithm that adjusts the exposure to stocks, bonds, gold and commodities. Based on timing signals, the algorithm determines the proper mix of assets that maximize Sharpe ratio while volatility remains low. This is a beta strategy but has the potential of generating high risk-adjusted returns and leveraged alpha.

The strategy generates signals for popular ETFs and rebalance occurs monthly at the start of the month if the asset mix changes.

Below is the current allocation. Unlocking the protected content requires Market Signals or All in One premium subscriptions.

Rebalancing date: January 3, 2022, on market open

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2021 Performance (Unleveraged)

Return: +13.6%
Drawdown: -3.3%

Strategy Historical Performance Based on Backtests

Case 1. Using indexes closely tracked by the ETFs. No leverage. 01/03/1995 – 12/31/2021.

CAGR for the strategy is 8.3% vs. 11.1% for SPY passive buy and hold. Maximum drawdown and volatility for the strategy are -8.8% and 7.1% vs. -55.2% and 19.2%  for SPY passive buy and hold, respectively. Sharpe for the strategy is 1.17 vs. 0.58 for buy and hold. This is a beta strategy with superior risk-adjusted returns as compared to buy and hold.

Case 2. Using indexes closely tracked by the ETFs. 2X leverage. 01/03/1995 – 12/31/2021.

CAGR for the strategy is 14.4% vs. 10.6% for SPY passive buy and hold. Maximum drawdown and volatility for the strategy are -15.2% and 12.9% vs. -55.2% and 20.2%  for SPY passive buy and hold, respectively. Sharpe for the strategy is 1.12 vs. 0.57 for buy and hold. Note that Sharpe is not affected much by leverage at least in theory.

Case 3. Using ETFs closely tracking the indexes. No leverage. 01/03/2007 – 12/31/2021.

Performance with no leverage is as follows: CAGR for the strategy is 7.6% vs. 10.6% for SPY passive buy and hold. Maximum drawdown and volatility for the strategy are -8.5% and 7% vs. -55.2% and 20.2%  for SPY passive buy and hold, respectively. Sharpe for the strategy is 1.10 vs. 0.52 for buy and hold.


Specific disclaimer: The risks of investing in equities, or in equity derivatives, include total loss of capital. At times we may hold positions, long or short, calls or puts, in a number of ETFs listed in these reports.

Disclaimer: The systematic tactical asset allocation signals (Signals) are provided as an educational trading tool for informational purposes only and do not constitute investment advice. We do not warrant the accuracy, completeness, fitness or timeliness for any particular purposes of the Signals. Under no circumstances the Signals should be treated as financial advice. The author of this website is not a registered financial adviser. Before subscribing please read our Disclaimer and Terms and Conditions.

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