Trade Sector Funds With Pure Momentum by Jay Kaeppel
In the July 1999 Technical Analysis of
STOCKS & COMMODITIES, I wrote about
one of the systems I use to trade Fidelity
Select sector funds. That system was
referred to as the relative strength system
(or RS System for short). In this article,
I will discuss another system that I use
for trading sector funds. This one is referred to as the
pure momentum system (or PM System). Like the RS
System, the PM System holds a portfolio of up to five
sector funds at any time. Because the PM System is
similar to the RS System, the results tend to be highly
correlated. In fact, there is usually some overlap
between the funds held by both systems. Both systems
make the bulk of their money by latching onto the
strongest sectors and riding them, and so this high
degree of correlation is not necessarily a bad thing.
But it does mean that you must be willing to live with
a certain amount of volatility.
If not for the favorable trading results, the pure
Can you trade mutual funds once a month, never cut
losses, and still make a lot of money?