Tonight I need to discuss the strategy I’m employing in the ten ETF portfolio named “The Way Ahead” that I first introduced on Sept. 30, 2007. It began on the start of the 4th quarter of the year. Well six of the ten ETFs were stopped out when they hit their 8% stop loss price points during this recent market correction. This hypothetical portfolio started with $100,000 and I simulated purchasing $10,000 for each of the ten selected ETFs buying at the open price on October 1st. I also indicated that upon obtaining the transaction price I entered a stop loss of 8% (ala William J. O’Neal of IBD) and I deducted a $10.00 transaction commission for each buy and sell.
Now is the time to consider reinvesting the $55,454.86 into six new ETF selections chosen by RSI. I looked at this past week and decided to enter three trades for this next week and then the other three at a subsequent time, dictated by market action. The three for this week are:
- IXN – iShares S&P Global Information Technology Sector
- QQQQ – PowerShares QQQ Trust
- DOO – Wisdom Tree International Dividend Top 100 Fund
Okay why these three? Since I need to replace US market, technology, and single country foreign ETFs I thought these were good replacements. But above all these three have strong price momentum and should power through the remainder of the year into 2008. I will need to replace the energy, real estate, and large cap ETF to round out the portfolio. So on Monday morning I will enter simulated trades on the opening of the shares equal to $9,232.47 in the above ETFs. Going into these trades, the portfolio is down 3.9% (S&P500 lost 3.0%) … we have a bit to make up, but not bad considering this recent correction. Stay tuned.
