Trading the Ivy Ten System

ivy portfolio

Memorial Hall at Harvard University in Cambridge, MassachusettsAbout a month ago, I wrote a post for One Step Removed about the Ivy Portfolio Allocation System. My post was based on the work done last year by Jeff Swanson from System Trader Success. Swanson wrote a very interesting article that provided the details on how to trade The Ivy Portfolio.

Let’s Live Test This Thing!

I found the concept behind the system to be so interesting that I thought it would be a worthwhile experiment to try paper trading it. In my post for One Step Removed, I performed the calculations that Swanson specified and returned a table that ranked the ten ETFs that the system could potentially trade.

Those calculations revealed that the top three ETFs on August 15 were GSG, DBC, and VB. Since I was just getting started with my Simple Systems Experiment, I thought this might provide another interesting live trading experiment. I started a mock portfolio with $10,000 and put one third of that capital into each of these top three ETFs.

Since my initial rankings were calculated on August 15, I used the closing price on August 16 to place the trades. From there, I will recalculate the rankings using the close on or before the 15th of each month and then place the trades using the closing price of the next trading day.

First Month Results


As you can see here, the first few days were rough. Then, the portfolio went on a nice run before peaking on August 28. After that it bounced up and down throughout most of September struggling to get past its high of about a 1% gain.

gsg091713GSG, which is the iShared Commodity Index, followed a similar path. It ran up through the end of August, but has since given back a good portion of those returns. Ironically, after calculating on Friday that the ETF would fall out of the ETF, it put in a big down day on Monday before the transaction went live at the close.


DBC091713DBC, which is the PowerShares Commodity Index, also took the same path. While the fact that Swanson included two commodities ETFs in the IvyTen System works great when they are both making money, we saw the reverse happen in September. DBC actually started falling a few days before GSG, and it had already lost its 100-day moving average on Friday when I calculated the new rankings.

vb091713VB, which is the Vanguard Small Cap ETF, did the exact opposite of the commodities with greater magnitude. It was struggling until late August, but has been tremendously profitable since then. It was so strong that it was actually the number one ranked stock in Friday’s new calculations.


It was very interesting to watch how the two commodities ETFs were inversely correlated to the way that the small cap equities ETF moved. It reminded me of Murphy’s book Intermarket Analysis. I was pretty excited to actually see that play out in real trading.

Moving On To Next Month


Obviously, the general market has shifted over the past few weeks. Equities are moving up quickly, and commodities are not. Not surprisingly, this has been reflected in the new Ivy Ten Rankings Calculations. As you can see, the current top three ETFs are VB, VEU, and VTI. Each of these are equities ETFs, so our Ivy Ten Portfolio will mirror the general market over the course of the next month. The way things have been going for the past few weeks, that is likely to be a great position to be in.