New to this forum and testing a papertrading ETF sector rotation system based on the 11 SPDR US SECTOR ETFs. Why paper trading? Well... I live in Europe and these ETFs are not available for trading. There are options through CFDs, but there are too high financing costs involved. For some of these ETFs there are more or less European alternatives but the volume is significantly lower and the costs higher. This strategy invests in the 3 best performing US Sector-ETFs, each month the top 3 are recalculated. This is done by looking at performance at multiple time intervals (1 week, 2 weeks, 1 month, 3 months, 6 months and 1 year). Furthermore, I apply a weekly trend filter on the S&P500 ETF (SPY). - As long as the long-term trend is bullish new positions can be purchased as they enter the top 3. - With a neutral trend, existing positions remain open until as long as they are part of the top 3. However, no new positions are purchased if the ranking changes and a new ETF enters the top 3. - In the event of a long-term negative trend, all positions are sold and the virtual portfolio goes 100% cash. This simulation (forward testing) was started at the beginning of 2023: DEMO-results to date: - 2023 (virtual starting equity $30,000.00): +20.43% (7 trades in total) - 2024 (virtual starting equity $36,129.79): +15.22% (16 trades, of which 3 bought in 2023) - 2025 (virtual starting equity $41,626.97): +3.20% (1 closed, 3 open trades) Recent results on a monthly base (since beginning 2025): JANUARY 2025 - LONG TERM TREND SPY BULLISH (12/31/2024) NO CHANGES IN TOP 3 POSITION | ETF | OPEN* | CLOSE | RESULT 1 | XLY | $224.35 | $232.17 | 3.49% 2 | XLF | $48.33 | $51.47 | 6.50% 3 | XLC |$96.81 | $102.38 | 5.75% * price at open or last close if position was not closed from the previous month FEBRUARY 2025 - LONG TERM TREND SPY BULLISH (1/31/2025) NO CHANGES IN TOP 3 POSITION | ETF | OPEN* | CLOSE | RESULT 1 | XLY | $232.17 | $215.96 | -6.98% 2 | XLF | $51.47 | $52.18 | 1.38% 3 | XLC | $102.38 | $102.00 | -0.37% MARCH 2025 - LONG TERM TREND SPY BULLISH (2/28/2025) TOP 3 CHANGES: XLY OUT - XLU IN POSITION | ETF |OPEN* |CLOSE | RESULT 1 | XLF | $52.18 | ? | ? 2 | XLC | $102.00 | ? | ? 3 | XLU | $79.14 | ? | ? SOLD XLY AT $217.22 (opening price on march 3), result on virtual equity 2025 = -0.91% I also created a substack page (completely free) to keep track of this but don't know if I'm allowed to post a link here? Anyway, the intention is to post updates here on a regular basis. What I am particularly curious about is whether this type of strategy can achieve similar (or even better?) results than the S&P500 index and how the inevitable draw downs will compare. Anyone who knows of decent European ETFs that are comparable.... shoot! Kristoff
There are already several Sector rotation ETFs, such as XLSR and SECT, that do what you are trying to accomplish. There returns over 1-year and 5-year pretty much only meet or trail the SPY returns.
Thanks. I just read the fact sheet for both ETFs. It does seem that the strategy is a lot more complicated than merely rotating in the 3 best performing ETFs. Also, I suspect there is no trend filter applied to close all positions in the event of a long-term downtrend in the S&P500? So I am going to keep monitoring this for now. Especially with these market conditions, I am curious to see what the effect will be of a trend filter that allows all positions to be closed should we end up in a downtrend for an extended period of time.
After what seemed like a great start to 2025, we are back where it all started, slightly negative since today's close ;-)
SPY Trend Change Alert after the close on friday March 21, 2025 (from neutral to bearish). The current 3 open positions (XLU, XLC and XLF) will therefore be sold (100% cash) next Monday, March 24.
Although I like the idea, the going to cash part can be implemented easier than you would with a rotating basket. Just close the position if some conditions are met. Most times these complicated strategies in the etf's, managed by teams of portfolio managers and analysts, are more efficient than we like to think.
Meanwhile, it is April 2, high time for an update after the nervous month of March. As reported in the previous post, we faced a trend change in the S&P500 ETF (SPY) based on the Trend Indicator that turned negative after the weekly close on date of March 21, 2025. Thereupon, all three open ETFs were sold on Monday, March 24, 2025 at market opening. Current S&P500 long-term trend Meanwhile, nothing has changed, the SPY ETF is still in a long-term downtrend. New positions are not allowed at this time. Sector ETF rankings The new ranking for the month of April has changed slightly. XLC loses its place in the top 3. A new ETF takes its place, XLP, which comes in at #3. XLF (Financials) XLU(Utilities) XLP (Consumer Staples) However, all positions have already been sold and no new positions are being purchased as the long-term trend is currently negative. Current Results at the end of march SRMS Portfolio: +0.30% (-2.66% compared to february 28) - 100% CASH since 03/24 Max DD - SRMS: (-8.03%) S&P500: -4.96% Max DD - S&P500: (-10.04%)