Initially, the Kepler began as a Buy-Hold-Rebalance portfolio where a Strategic Asset Allocation was followed. The second model for the Kepler involved using the Tranche Momentum model. Here were the basic rules use for managing the Kepler in the early momentum stages.
- Select 10 to 15 ETFs that have low correlations with each other.
- Set the Menu assumptions to 12 Offset Portfolios with 1 trading day in offsets.
- Set the maximum number of ETFs for any one offset to two (2) or three (3). For example, if either Commodities (DBC) and/or Gold GLD are recommended, move the maximum number from two up to three ETF options.
- Sell ETFs that are performing or rank below SHY using our ranking software (Kipling Tranche 2.5.1) and do not show up as a tranche recommendation.
- Round the Tranche Recommendations to the nearest 100 shares. Deal in blocks of shares when possible.
- An emphasis is given to the higher ranking ETFs that are most recently recommended, have positive absolute acceleration percentages, positive “Golden Cross” value, and are priced above their 195-Day EMA.
- Hold down portfolio risk by using the Position Sizing worksheets included in the Kipling Tranche 2.5.1 spreadsheet.
Since the advent of the Kipling LRPC spreadsheet, the Kepler management model has evolved again. I am now following the LRPC recommendations. When looking to add a security to the Kepler, the ETF must be a Buy as recommended by the Kipling spreadsheet and it must also pass the Point and Figure Ratio (PnF Ratio) screen. RSP is generally the benchmark for this screen. If LRPC calls for a Hold, the ETF will remain in the portfolio. It is best to follow the latest Kepler reviews to see how the portfolio is managed.