An advisor client asked me how I use the CMG Ned Davis Research Large Cap Momentum Index within a total portfolio. My two cents is I like to have a systematic way, absent emotion, to raise some cash when the weight of technical evidence is negative and a way that gets me back fully invested when the weight of evidence is positive.
For example, I would favor a 30% allocation to equities at this time because, in my opinion, valuations are high (as you’ll see in Friday’s “On My Radar,” we are now at a level that is higher than it was at the market peak in 2007). In my personal account, within my 30% equity weighting, I would have one-third invested in an ultra-low fee large cap ETF. On sell signals, I would trade that large cap equity ETF to BIL (a short-term Treasury bill ETF).