The TrendFlex System
The Baseline Analytics TrendFlex WealthBuilder is a trend-following system filtered by high-probability trend-change signals. Our objective is to stick with the main stock market trend while keeping watch on conditions that may point to a change in the major trend.
The main market trend is defined by the TrendFlex system. The TrendFlex System is comprised of two signals that represent a short-term (typically 2 to 8 weeks) and long term (measured in months) investment horizons. These signals, TrendFlex Classic and TrendFlex Allegiance, provide confirmation of the trend, and their divergence points to a potential change in the trend.
In the chart below, the TrendFlex Allegiance signal line (black line), representing the long-term horizon, indicates BUY (green arrow) and SELL (red arrow) signals in the S&P500, as the TrendFlex Allegiance signal line crosses above and below the dotted blue line.
The TrendFlex Score
Each week, while the main market trend is in force, Baseline Analytics reviews its key financial indicators to assess the risk to the main market trend. A weighted score is derived from these indicators to define an investment strategy. These indicators are organized into several categories:
- Index Reviews (S&P500, Dow, Nasdaq)
- Internal Market Strength (i.e. Price and Earnings Momentum)
- Market Psychology
- Economic Sector Relative Earnings Strength
- Intermarket Relationships (bonds, commodities, stocks) and relative risk premiums
- Style (small cap, large cap, value and growth)
The TrendFlex chart above identifies trend changes based on the TrendFlex score (green bars) moving above or below its 3-week moving average (black line). The S&P500 is the blue line. The major trend is defined by the TrendFlex score: low scores are bullish, high scores are bearish. Sharp changes in the Trendflex score relative to its moving average signify caution.
The Portfolio Mix Table provides investment guidance based on the trend (bullish or bearish) and the degree of risk for that trend to continue. For example, the current trend noted above is Bullish but at an increased risk of a pullback. In this scenario, investors are encouraged to continue to seek quality equities consistent with the uptrend in place (i.e. growth at a reasonable price), but to protect profits and partially-hedge their portfolio:
As a subscriber to Baseline Analytics TrendFlex, you will receive a weekly update of the TrendFlex Signals, the TrendFlex Score, and a recommended portfolio strategy based on the collective suggestions of these market trend and risk indicators. That's all there is to it! TrendFlex was designed to be a simple, market trend-following system to guide investment decisions.
See our Video about Baseline TrendFlex here: