American Muscle, our U.S. based ETF Rotation Trading Strategy
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American Muscle 
U.S. Index and Sector Trading Strategy

The New York Stock Exchange, largest in the world by market capitalization. The Nasdaq, second-largest exchange in the world by market cap. And U.S. Treasury securities (Treasuries), backed by the "full faith and credit" of the U.S. government, are widely considered the safest investments anywhere in the world.

This is America strong, and select ETFs from these powerhouse asset classes form the backbone of the American Muscle strategy.
But these assets don't necessarily move in tandem. There are long  stretches when one broad market index (or a sector within that market) will outperform others. And vice versa. And Treasuries? They often demonstrate an inverse relationship with the major equity indices, moving up when the NYSE and Nasdaq move down. That's fine. We can use that.

The key to maximizing returns? Knowing when to be in one ETF... and out of the others.

A Quick Take
The Strategy splits its portfolio into 40/60.
The 40% is invested in QQQ and TLT, with the portions changing each month according to a risk-parity calculation. The 60% rotates primarily among broad-market and sector ETFs. There's even a [limited] stock component. And if market sentiment turns negative, it's bond funds (or proxies) up to bat.

American Muscle taps the best.
With a GDP of over $19 trillion dollars, the U.S. economy is the arguably the envy of the world. The American Muscle taps the best of that economic engine each month.

Lean Muscle?
Subscribers have access to a variation of the strategy, one without a stock component. It's all ETFs all the time. Either way, the Muscles are top-producing models with reasonable risk/reward ratios.

There's more information below, but if you're ready, why wait? You can be placing your trades today.

  • Immediate access to the private Members Page.
  • Download the current Newsletter.
  • $7.95 per month.
  • Try for 60 days FREE.
  • Cancel any time; no questions, no hassle.
Need more information? OK, let's go in-depth...

Strategy Assets
The following broad-market index funds, sector funds, and safe-haven assets have been identified for inclusion in the American Muscle strategy:
Our Broad-Market Index Candidates
I started with three popular ETFs that track major indices within the U.S. stock market. That would be MDY tracking the S&P Midcap 400 index (an index of U.S. companies with market caps in the range of $1 billion to $4.5 billion), QQQ tracking the largest stocks of the Nasdaq, and MTUM which tracks large and mid-cap U.S. equities, selecting for price appreciation (momentum) and low volatility.

Broad Market
  • MDY - SPDR S&P MidCap 400 ETF
  • MTUM - iShares Momentum Factor ETF
  • QQQ - PowerShares Nasdaq-100 Investment Trust (ETF)
Our Sector (and Stock) Candidates
I further broke down the market by separating out four of the top performing sectors of the past ten years: consumer discretionary, financials, technology, and health care. Why? Because one or two sectors will often outperform their larger index family for an extended period of time. And I want to take advantage of that.

Finally, I added three individual stocks. Not just any stocks, but the top 3 holdings in the S&P 500 Index (updated annually, and subject to change as the index changes).

So here are the sector and individual names:

Sector
  • VCR - Vanguard U.S. Consumer Discretionary ETF
  • VFH - Vanguard U.S. Financials ETF
  • VGT - Vanguard U.S. Information Technology ETF
  • VHT - Vanguard U.S. Health Care ETF

Stocks (subject to change)
  • Apple Inc.
  • Amazon.com, Inc.
  • Microsoft Corporation

Note: The alternative strategy Lean Muscle skips the stocks component. It's all ETFs all the time, and geared toward investors who don't wish to add single-security risk to their portfolios.

Lean Muscle is included with American Muscle at no extra charge.
Safe Haven
And if the broader market is in a downturn? If bearish sentiment prevails, the strategy reduces exposure to the above equities and falls back to one of four safe-haven assets:

  • TLH - iShares 10 Year U.S. Treasury Bond ETF
  • TLT - iShares 20+ Year U.S. Treasury Bond ETF
  • SDY - SPDR S&P High Yield Dividend Aristocrats
  • VPU - Vanguard U.S. Utilities

Now, the selection and timing.

The Mechanics
As mentioned above, the strategy splits its portfolio into two components, 40% and 60%. Each component operates within its own parameters and with its own set of assets. Here's how that works...
40% of the Portfolio
Once a month, the strategy conducts a risk-parity calculation on QQQ and TLT. This calculation determines the percentage each fund will occupy in the portfolio for the upcoming month.

Each month, month after month, these two assets are represented in the portfolio -- only by differing amounts.
60% of the Portfolio
Once a month, the strategy first determines whether the broader stock market is in a "risk-on" or "risk-off" regime.

If it's "risk-on," the strategy conducts a relative strength test on all the broad-market, sector, and stock candidates listed above. It selects the "Top Two" outperforming assets, and buys them. A cash filter offers a backstop in the rare event markets plunge while still technically in a "risk-on" regime.

If it's "risk-off," the strategy conducts a relative strength test on the four "safe-haven" funds listed above. The outperformer gets the nod.

Rinse and repeat the next month.
Summary
So, at any given time our American Muscle portfolio holds two non-correlated funds (QQQ and TLT) in varying proportions. And depending on the regime of the overall market, the portfolio could hold two additional equity assets (funds or stocks), or a "safe-haven" fund.

Regarding benchmarks: SPY (the ETF that tracks the S&P 500 Index) is used as the benchmark to  judge the performance of American Muscle.

The Numbers
Over the past 14+ years, from 2008 to 2022 YTD, American Muscle has delivered a 4-fold improvement in Total Return over our benchmark SPY.
Chart #1
American Muscle vs. SPY, our proxy for the S&P 500
Total Return | 2008 - 2022 (updated monthly)
Chart courtesy ETFreplay.com

And American Muscle delivered these returns with less volatility and a much lighter max drawdown than our benchmark (see the Compare Strategies page for recent drawdown numbers).
Chart #2
Now, individual years can vary - sometimes dramatically. And full disclosure: of the last 14 full years (2008 to 2021), the strategy underperformed the benchmark in 4 of those years. So just a heads up: not every month, not every year is a slam dunk. This is the stock market, after all.
American Muscle vs. SPY
Annual Returns | 2008 - 2022 (updated monthly)
In sum, American Muscle has demonstrated the ability to capitalize on the growth of U.S. equities while maintaining a reasonable risk profile.

_____
Note: while the strategy rotates out of higher-risk equity funds and into the relative safety of bonds or bond proxies in the event of broad market downturns, nothing short of perpetually holding cash will protect in the event of a flash crash or a sudden jolt to equity or bond markets.

That said, the pain from most market downturns (i.e. recessions, bursting bubbles, market corrections) can be mitigated by a strategy that can switch to relative safety within weeks.

What You Get
Monthly Newsletter
Before the market opens on the first trading day of the month, you'll receive an email newsletter detailing the same actionable buy/sell signals that I will use to trade the strategy in my own account.

Members Page
Subscribers also gain access to the strategy's Members Page, offering up more details including:

  • FAQs
  • Month-to-date returns
  • Weekly performance summaries
  • Total Return charts from 2008 to present
  • A downloadable version of the newsletter
Here's a sample email newsletter...

Ready?
The American Muscle Strategy is $7.95 per month. Cancel at any time; no questions, no hassle. Follow along and see how the strategy catches market moves to the upside, while protecting hard-earned portfolios against major downdrafts.

First 2 months are FREE.
"I used to think I could get huge returns by making big bets on a few indexes/ stocks. I have tried trading. Its too time consuming and my returns are below average. I now believe slow and steady wins. Your strategies are easy to implement, keep you in the market way more often than not, and add some luster." --Kevin M.
"I have personally told five of my friends of your methodology [referring to American Muscle] and gave it my endorsement. I told them this is what I'm doing and they can keep doing what they want, but I have yet to find a better solution that balances return, risk, and ease of use." --Darryl J.
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