Volatile markets are showing investors the value of safe strategies. The Pacer Trendpilot 100 ETF (CBOE: PTNQ). PTNQ can move between being 100% allocated to the Nasdaq-100 Index to allocations to safe T-bills.
PTNQ’s cousins include the Pacer Trendpilot US Large Cap ETF (CBOE: PTLC) and the Pacer Trendpilot US Mid Cap ETF (CBOE: PTMC).
The Pacer ETFs implement a type of trend following strategy that automatically adjusts exposures according to current market conditions. PTLC takes a 100% position in the S&P 500 Index when the benchmark is trading above its 200-day simple moving average for five consecutive days, moves to a 50% position to the large-cap index and 50% 3-month U.S. T-bills when the benchmark falls below its 200-day for five consecutive days, and takes on 100% 3-month US T-Bills if the benchmark closes lower than its value from five business days earlier. PTMC follows the same move between S&P MidCap 400 Index and US T-Bills, and PTNQ follows the similar trend following strategy with the Nasdaq-100 Index.
For PTNQ, “When the NASDAQ-100 Total Return Index closes above its 200 day simple moving average (200 Day SMA) for five consecutive business days, the exposure of the Index will be 100% to the NASDAQ-100 Index. From the equity position, the Index will change to the 50/50 position or the T-Bill position depending on the the 50/50 Indicator and the T-Bill Indicator,” according to Pacer.
It’s Working
Price action suggests PTNQ’s stragtegy is working. While the FAANG stocks have wreaked havoc on the Nasdaq-100, PTNQ is up more than 8% this year and has climbed modestly higher this month.
“Trendpilot’s strategy calls for participating in the market when the trend is up. It will pare back market exposure during short-term downtrends. And to prevent extended declines it will move to T-bills during long-term market downtrends,” reports Investor’s Business Daily.
The ETF’s recent sturdiness suggests its portfolio is currently heavily allocated to T-bills.
“Looking at it’s price chart, it looks like it’s been out of the stock market since Nov. 16. The ETF’s relative strength line dipped the first couple of weeks after the move. But it has since climbed to new high ground, a bullish sign,” according to IBD.
Chart Courtesy: Investor’s Business Daily
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