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Scott Juds

Sector Rotation Investment Strategies
A Service of SumGrowth Strategies^® LLC

Returns

Safety

Simplicity

Control

Examples

Please click the graphic slides or the text just above for more on each topic.

Why Taking Control Urgently Matters

Diversify and Rebalance? Why Be Average?
The financial industry has hypnotized us into believing diversification and rebalancing is the only worthy investment strategy. But diversification inherently means owning a little bit of everything — which is the formula for achieving precisely average performance! Rebalancing further ensures we won't stray far from average. No other industry proclaims average performance is the best you can achieve. Fortunately, it's not true here either.

Change the Game!
To achieve a different result requires a different approach. Price momentum has long been proven the best predictor of future returns. Simply by owning momentum leaders and avoiding momentum laggards one can simultaneously improve returns and reduce risk of loss. No diversification compromise! SectorSurfer further maximizes performance utilizing digital signal processing theory and automated strategy tuning.

An Extra 10% Really Matters
Before Retirement: The Nest Egg Value chart illustrates how an additional 10% annual return compounds over 15 years to produce a nest egg four times the value it would have otherwise had. The earlier you start, the greater the multiple. It really matters!

After Retirement: The Nest Egg Annual Income chart illustrates how portfolio return affects the inflation-adjusted annual income you can take, assuming a $100k nest egg, 2.5% inflation, and 30 years of retirement to fund. In the illustrated example, investing in the S&P 500 would likely allow an income of $14,000/yr. However, earning an extra 10% increases it to $36,000/year. Again, it really matters!

Additional Resources
• The Economist: Momentum in Financial Markets. A compilation of industry studies and expert opinions.

What is True Sector Rotation?
The Trend is Your Friend Trends and fads are an inherent part of human character. It takes time for information to spread, to be understood, and to be acted on. This creates momentum. Price momentum is found in all capital markets, including stocks, bonds, treasuries, and currencies. By its very definition, "trend" means that information from the recent past tells you something about the near future. SectorSurfer's trend analysis algorithms use modern digital signal processing theory to optimally extract trend signals from noisy market data.
True Sector Rotation The market cycle is tied to the economic cycle. Each market sector performs best during a portion of the economic cycle. If you think of each market sector as a piston in your investment engine, the smoothest, most powerful ride will be achieved when each of the major market sectors is represented in your portfolio ... but only while each is delivering its power stroke. By owning only the top trend leaders and avoiding trend laggards one can simultaneously improve returns and reduce risk of loss. That's True Sector Rotation! Diversify and Rebalance? Diversification inherently yields precisely average performance. Master investor Warren Buffet instructs us: "Wide diversification is only required when investors do not understand what they are doing.
Additional Resources • Short video demo on how True Sector Rotation produces higher returns. • Sector Rotation Theory Page provides theory summary and technical explanations. • The Economist: Momentum in Financial Markets. A must read for momentum doubters. • Jegadeesh & Titman Profitability of Momentum Strategies. Academic momentum paper.

How StormGuard Reduces Risk
Risk is About Losing Money! The definition of risk depends on who you ask. The financial industry uses the coefficient of variation (CV) to measure risk, which tells you how wiggly the line on the chart is, but not the probability of losing real money. Treating both up and down-moves equally as risk is an unfortunate consequence. Only down-moves contribute to real loss. SectorSurfer's risk measure is the probability of a 15% loss in a year. StormGuard Measures Market Health Not only do SectorSurfer's trend-following algorithms inherently steer around and avoid poorly performing funds, but its StormGuard Indicator monitors overall market health and advises a move to the safety of a money market fund when market storms approach. The StormGuard Indicator is calculated daily from a basket of broad market indicators. Optimized for Minimum Probability of Loss The StormGuard Indicator optimally tunes itself for the minimum probability of loss according to the character of the constituent funds/stocks of each SectorSurfer Strategy by balancing the probability of whipsaw loss from reacting too quickly to market dips against the probability of loss from reacting too slowly to major downturns. Diversify and Rebalance? Warren Buffet instructs: "Risk can be greatly reduced by concentrating on only a few holdings." SectorSurfer practices serial diversification by owning many very different things, just one at a time.
Additional Resources • Short video demo about how SectorSurfer makes lower risk possible. • StormGuard Technical Details in the SectorSurfer Online User Manual. • Sector Rotation Theory Page provides theory summary and technical explanations.

We Kept it Simple!
After creating your new account: Only Four Steps to Get Started 1. View the My Strategies Tour video (top left). 2. Click , pick a Strategy, or create your own. 3. Check charted performance by clicking . 4. Click to edit name and notes. You're done!	After clicking your email alert: Only Four Steps for Trade Alerts 1. See which ticker symbols to sell and buy. 2. Click the icon for specific trade information. 3. Click your brokerage link and go make the trade. 4. Click the button. You're done!

Additional Resources
• Short video demo showing how to select or custom build Strategies.
• SectorSurfer Online User Manual details all the features and functions.
• Subscription Plans range from Free to just a monthly pittance for Premium Strategies.
• Our will help you quickly create an account to get you SectorSurfing.

SectorSurfer's Algorithm Validation

Overview
SectorSurfer's validation is confirmed by the validation of each principle detailed in the paragraphs below.

Trend Signals Exist in Market Data
In his 1996 book Chaos and Order in the Capital Markets, Edgar Peters applied the Hurst Range/Scale analysis method to data from all capital markets, including stocks, bonds, commodities, and treasuries. He found that they all have a significant short-term trend component that dissipates after numerous months.
• See Hurst Exponent Reveals Trends on the Sector Rotation Theory Page for further technical information.

Momentum Strategies Really Work
When you can get the media, industry, and academia to agree that something is real and works, then you know you really have something. These three momentum trading articles do just that:
• The Economist: Momentum in Financial Markets. A survey of strategy results and expert commentary.
• Columbine Capital Price Momentum - a Twenty Year Research Effort. Industry momentum white paper.
• Jegadeesh & Titman Profitability of Momentum Strategies. A fundamental academic momentum paper.

SectorSurfer's Performance is Trend Based
How can we tell that the trend signal we extract from the noisy market data really does drive SectorSurfer's performance? The Hurst exponent measures the quality of the trend signal and has a month-end bump in its character. This bump is a fingerprint likewise found in the character of SectorSurfer Strategy performance.
• See SectorSurfer's Trend Fingerprint on the Sector Rotation Theory Page for further technical information.

Trend Signals Exhibit Stationarity
Stationarity refers to the character of a random process remaining the same, such as the distribution in heights of men, shoe sizes for women, or trend lengths in market data. Stationarity enables one to confidently manufacture shoes of various sizes even though the shoe size of the next customer is unknown. Backtesting provides assessment of market character. Stationarity in market character enables strategy design to learn from the past in order to improve one's batting average for future investment choices.
• See Trend Signal Stationarity on the Sector Rotation Theory Page for further technical information.

SectorSurfer's Improved Technology

Background
"Diversify and Rebalance" was born with MPT (Modern Portfolio Theory) in 1950 when we had rotary dial telephones. Today the telecom industry has wireless digital cell phones with touch screens, video cameras, voice dialing, and GPS maps. But, the financial industry is still selling us 1950s diversify and rebalance?

Extracting the Trend Signal is Everything
If the EMH (efficient market hypothesis) were true, the future would be random and the Hurst exponent of market data would be exactly 0.5, but it's not, because market data contains significant trends. A trend means that information from the recent past tells you something about the near future. There is nothing more important than to apply the best signal processing technology available to extract the trend signal from noisy market data to improve one's investment batting average. (Here's why, MPT is blind to trends.)

Differential Signal Processing
One of the most fundamental methods for improving the signal-to-noise ratio in data communications is to eliminate common mode noise via differential signal processing. That's why it's built into Ethernet and USB. Most charting and analysis software evaluates ticker symbols independently, which taints the analysis with common mode market noise resulting in excess whipsaw losses reacting to noise unrelated to its own relative performance. SectorSurfer's simultaneous differential analysis eliminates common mode noise.

Matched Filter Theory
Matched filter theory provides the basis by which trend signals can be optimally extracted from noisy market data. The well-known academic paper Profitability of Momentum Strategies, by Jegadeesh & Titman used a simple equally weighted SMA (Simple Moving Average) of length 6 months as its trend measure. However, neither the SMA nor 6 months are near optimum compared to the Matched Filter Theory solution. Simply put: better trend analysis produce better results. See this summary comparison and the Strategy Hall of Fame.

Automated Strategy Optimization
Investors familiar with technical chart indicators know how tedious it is to determine which indicators and what parameters to use. SectorSurfer completely automates this process for you. Better results, less time!

Welcome!

SectorSurfer levels the playing field with Wall Street by putting the power of award winning high performance investment algorithms in your hands. Its True Sector Rotation algorithm holds only the momentum leader during bull markets, and its StormGuard algorithm seeks to protect and grow your assets during bear markets. Only by owning the trend leader and avoiding the laggards can one simultaneously improve returns and reduce risk.

Higher Returns:
Returns cannot be improved by diversification
alone. Diversification inherently produces average
results by owning a bit of everything. To improve
returns, one must own only the trend leader and
avoid the trend laggards. By optimally extracting
trend signals from noisy market data and owning
only the trend leader SectorSurfer can produce
higher returns as shown by example below.

--- Click link for more information. ---

Probability of loss
White dot: S&P500. Yellow dot: SectorSurfer.

Probability of Loss:
We believe that risk is about losing money,
not about how wiggly the line on the chart
is. We believe that treating both up and
down-moves equally as risk is an error
because only down-moves contribute to
real loss. SectorSurfer's risk measure is
the probability of a 15% loss in a year,
as shown in the example chart below.

--- Click link for more information. ---

Probability of loss
White dot: S&P500. Yellow dot: SectorSurfer.

True Sector Rotation:
True Sector Rotation is the method of owning the one, and only one, best trending fund at any time. Since half of the market sectors will, by definition, be beating the S&P 500 at any time, owning only the trend leader is an excellent way to beat the market.

Market data contains trends, and a trend means that something from the past can tell you something about the future. Thus, extracting trend signals from noisy market data is the whole game.

SectorSurfer extracts trends from noisy market date to improve your investment batting average. It works for ETFs, mutual funds and stocks.

StormGuard:
Market storms are much larger than market corrections and require special detection methods. SectorSurfer's StormGuard algorithm is designed to find the optimum balance between reacting too quickly and producing whipsaw losses, versus reacting too slowly and getting hurt by the market storm.

StormGuard-Armor is our highest performance market sentiment indicator. It examines three separate sources of market data to derive whether the market is safe for investing. By focusing on Safety First, not only are losses reduced, but you keep more of your hard earned returns. StormGuard-Armor is in fact the highest performance market direction indicator on the market!

Probability of loss

SectorSurfer's Value Proposition

We believe high performance investment software should be for everyone — not just Wall Street.

1. Best Safety Performance

Best Bear Market Performance? Here's Why:
Better performance requires more information, not just tweaking the moving average type or time constant. All well-known market direction indicators use just a single source of data (usually the S&P500) as the basis for determining market direction. Metaphorically, watching one knee of an elephant to know if it's going to take a step has definite value. But, watching three knees provides superior information, allowing earlier detection and eliminating false positives. Likewise, StormGuard-Armor achieves superior performance by incorporating three sources of data to provide three distinct views of the market.

Three Market Views: Price, Volume and Highs/Lows
StormGuard Armor was specifically designed to consider Safety First. By using a combination of price, volume, and new highs/lows information StormGuard-Armor is able to much more accurately sense when the market is in danger. The combination of price and volume signals whether institutional investors are on the move or waiting nervously at the door ready to run at the first sign of trouble. Likewise, the new highs/lows information signals whether value investors are on the hunt or cautiously sitting back. When either of the institutional or value investors pull back, the market is dangerous and StormGuard-Armor signals a move to safety. The significant improvements to both primary measures of risk for a simple largecap-midcap-bond Strategy are illustrated in the charts above. (click for details)

The Animated Charts Speak for Themselves:
The stark contrast between the multi-colored equity curves of the sequential charts (above-left) demonstrates the significance of actively and accurately exiting dangerous markets, as opposed to being satisfied with the buy-and-hold diversification methodology of 1950’s MPT (Modern Portfolio Theory) employed by Wealthfront, Betterment, and other Robo Advisors. Hover over the animated charts to enlarge, or click to see all of them static in one view.

StormGuard Armor ^TM

• Never ride to the bottom of a market crash again!
• Outperforms all simple market direction indicators.
• Uses measures of price, momentum and sentiment.
• Incorporates PID Signal Processing and Fuzzy Logic.

Bear Market Strategies

• Exiting bear markets to cash is a thing of the past.
• Our Bear Market Symbol enables specifying a ticker
symbol or a Bear Market Strategy instead of cash.

2. Best Bull Market Performance

It Provides the Best Bull Market Performance — Here's Why:
If the market was truly a random walk per the Efficient Market Hypothesis, there would be nothing better to do than buy-and-hold ordinary stock index funds and bond index funds in a 60/40 proportion as instructed by MPT (Modern Portfolio Theory ... circa 1950). However, academic researchers, Nobel Laureates and industry studies have all since confirmed that trends exist in market data. Since trend information inherently improves the odds of making a better decisions, all necessary steps must be taken to optimally extract them from noisy market data.

Optimally Extracting the Trend Signal is Everything:
We employ the cross-disciplinary sciences of Matched Filter Theory, Differential Signal Processing, and Adaptive Filter Design from the field of electronic signal processing — the same technologies that enable cell phones, Ethernet, and USB to perform so well. By owning only the trend leader and avoiding the trend laggards True Sector Rotation simultaneously improves returns and reduces risk.

The Charts Speak for Themselves:
The yellow equity curve in each sequential chart (left) demonstrates the proficiency of True Sector Rotation for numerous asset classes, including broad index funds, sectors, world regions, stocks and even retirement plans. Hover over the charts to enlarge, or click to see all of them static in one view. SectorSurfer literally leaves Robo-Advisors in the dust on all measures of risk and return precisely because they’ve employed out-dated, average-performing MPT. These performance comparisons to Betterment and Wealthfront illustrate this point.

True Sector Rotation ®

• Own only the trend leader - avoid laggard losses.
• Uses Differential Signal Processing and Matched
Filter Theory to optimize trend signal quality and
produces better returns with lower risk.

Polymorphic Momentum ^TM

• Adaptive trend filter tuning for any set of funds.
• Automatically adjusts filter shape and duration.
• Simplifies Strategy design — no PhD required.

Ultimate Performance Reliability - Strategy-of-Strategies

3. SectorSurfer is Easy to Use

We'll do the
Hard Work ...

... While You
Have a Life.

• Typically just 3 to 5 Trade Alerts per year.
• SectorSurfer signals - you make the trade.
• Select a ready-made Strategy from a list, or
try your ideas with your own custom design.
• Its as easy or complex as you'd like it to be.

4. Our Algorithmic Pedigree

Conquering
The Seven Faces of Risk

By Scott Juds

''This book is one of the very few 'must read' books. For those who have been burned by the 'diversify and rebalance' mantra, ''Conquering the Seven Faces of Risk'' is sorely needed, and Scott Juds truly delivers. As a fiduciary, I find SectorSurfer's risk mitigation algorithms to be so far superior to the conventional buy-hold-and-rebalance models that I cannot justify risking my clients' assets with the latter. I am impressed with Scott Juds' mission to educate the retail investing community.''

- David Yeh, MD, (Retired Nuclear Physician), Investment Advisor,
Author of ''The Busy Doctor's Investment Guide''

How to Become a SectorSurfer

How We Work

• Analyze each of your
   strategies every day.
• Send a trade alert if
   action is required.
• Keep you invested in
   only the best funds.
• Reduce your risk of
   loss in the market.

• Our complex signal
   processing algorithms
   identify real trends in
   noisy market data.
• Steering around the
   potholes and sitting
   out market storms
   improves both risk
   and return measures.
• Dedicated computers
   automate everything.

• We don't touch your
   investment accounts.
   You make the trades.
• We don't touch your
   credit card. Amazon
   Payments processes all
   subscriptions.
• We don't provide
   financial advice that
   is specific for your
   personal situation.

We'll do the Hard Work ...
... While You go Have a Life!

Resources

• Validation

• Technology

• AAII Seminar

•

Got questions? Ask a question by email.

Getting Started

• Study: Returns, Safety, Simplicity, Urgency, Examples

• Review: Subscriptions,
Free vs Premium Strategies

• Ready? It Costs Nothing to Start - Let's Get Surfing!

What SectorSurfers Say:(scroll the text)

"This product stands like an oak tree amid a forest of saplings. Over the years I have examined dozens of investment advisory services, but this one is the best by far. As a retired USAF officer, of particular importance is their popular TSP Thrift Savings Plan strategy designed for military/federal employees. I've been an enthusiastic SectorSurfer since January 2011."

Les Mosier, Chaplain, LtCol, USAF (Retired)

“I can tell you with certainty that SectorSurfer stands in a class of its own as the premier investment tool for individual investors. Its high performance algorithms literally level the playing field for individual investors against the big traders on Wall Street and will provide you with the confidence and to wisely manage your own investments.”

Richard Erkes, Former Chair of the State of Illinois Retirement Board
Founding member of the Chicago Board of Options Exchange
Former Program Director of the LA AAII Chapter.

"It is very satisfying to see my returns beating the market averages month after month. It even made my wife's restrictive and excessively diversified government retirement account perform well. This investment tool tops my list!"

Warren Hyland, CEO, AmbienEco Group

"I finally pulled the trigger on the SectorSurfer Fidelity KickAss Strategy. Since then the market has not been as hot AND yet I notice that the fund recommended by Sector Surfer is doing very well. My GAUD this is really going to work! What was once only an academic understanding of your methods has sunk in. Thank you for doing the hard work.
Dan Wahl, Design Engineer, "IceCube" South Pole Neutrino Observatory
Physical Sciences Laboratory, University of Wisconsin - Madison

"The effort/time you have put into your web site has produced outstanding results. I spend a lot of time on finances, and your web site is the finest I have ever seen. I am an ex-fighter pilot, land developer, and a full-time trader for the last 10 years."
Joe Schuchter, Full-time trader.

"With SectorSurfer's algorithms doing all the work, I get much better results and have more time in the day for real life. I used to spend hours each day sorting through funds looking for winners. "

Chris Feise, Retired Professor Washington State University

Former Director of Center for Sustaining Agriculture and Natural Resource

"I had no idea which funds to own until I found SectorSurfer. Now I know what to do and when to do it. Most importantly, I know SectorSurfer will look out for me when I'm busy taking care of business."

Kim Cahuas, President, Western Reserve Technology

"I used to be literally afraid to look at my retirement account, but Sector Surfer thankfully keeps track of it for me now and always keeps me in the best funds. It really is amazing and gives great peace of mind!"

Brandon Hulet, Teacher
Snohomish County, Washington

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*Please Note: Limitations: Not all user comments are positive. SectorSurfer does not endorse any specific investment strategy, nor expresses any opinion as to whether any strategy is apprpiate or suitable for a subscriber. Different types of investments and/or investment strategies involve varying degrees of risk and volatility, and at any specific point in time, or over any specific time-period, any investment or investment strategy can and will suffer losses, at times substantial losses. Therefore, it should not be assumed that the future performance of any specific investment or investment strategy, including the investments and/or investment strategies that may be employed in conjunction with SectorSurfer algorithms, will be profitable, equal any historical performance level(s), or prove successful. Keeping in mind that no subscribers, situations, or experiences are exactly alike, the above should not be construed as any assurance that SectorSurfer may be able to help any subscriber achieve the same satisfactory results. To the contrary, there can be no assurance that a SectorSurfer subscriber will experience a certain level of results or satisfaction.

Product Review
by: Joe Gruender

Contest Paper
by: Scott Juds

AAII New Product Review Product Review
by: Jaclyn McClellan

Media Interview
by: John Cook

Professional Article
Dale Van Metre, Ph.D.

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And
There's More to Come...

Notice: Your registered use of this site is considered equivalent to your signature as evidence of your acceptance of our Terms of Use, and Privacy Policy. Merlyn.AI, SectorSurfer, True Sector Rotation, StormGuard, StormGuard-Armor, Own-the-Bubble, Polymorphic Momentum, Tactical Diversification, Temporal Portfolio Theory, SwanGuard, and SumGrowth Strategies, are all trademarks of SumGrowth Strategies, LLC. Seattle WA 98125. Copyright 2010-2016 SumGrowth Strategies, LLC. All Rights Reserved.

SumGrowth Strategies, LLC is not a registered investment advisor and does not provide professional financial investment advice specific to your life situation. SectorSurfer is solely an algorithmic strategy analysis tool that produces trade signals according to the set of funds you provide to it for analysis. Strategy performance is hypothetical, based on trading at the market close of trade dates, and does not include associated trading fees or subscription fees. Past performance is no guarantee of future performance. Losses can and will occur over time as the market's character reacts to world events. SectorSurfer may only be used for your personal analysis and education purposes. Please Read More Here.

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Sector Rotation Investment Strategies A Service of SumGrowth Strategies® LLC