Momentum detection is key to how we select bull and bear market funds.
The challenge is to see past market noise to select momentum leaders.
We seek momentum leaders in bull markets
We automatically rotate to defensive positions
We deploy AI and advanced signal processing to clarify market data
We identify momentum leaders in a bull market and employ our proprietary Dual Defense™ (
StormGuard™ + 
TrendGuard™) as we seek to protect against downside risk and underperformance.
How Our Process Works
Equity Market Data
StormGuardTM determines when a bull or bear market is indicated using multiple market metrics.
Bear Market Indicated
When bear market conditions are indicated, Merlyn.AI Indexes switch to a defensive strategy where it generally selects a portfolio of four or more momentum leading ETFs from our bear universe.
Categories:
- Inflation-protected treasury
- US Treasury
- Aggregate Bond
- Short- and Long-term Bond
- Corporate Bond
- High-Yield Bond
- Gold
- Broad-based U.S. equity market index (seeking better returns during a bear market rebound)
Bull Market Indicated
Momentum Analysis. Instead of relying on traditional Simple Moving Average-based momentum analysis, we use differential signal processing and matched filter theory to reduce market noise, assess its characteristics, and adaptively tune our momentum filters – all of which are intended to improve the selection of momentum leaders.
AI-based Genetic Algorithms learn from market behavior.
- The process evaluates up to 400 ETFs to select sets of candidate funds for an ever-evolving population of competing momentum strategies.
- Top momentum performers are selected for the portfolio.
This helps mitigate the risk of human-based hindsight selection bias in the ETF selection process and enables the index to adapt to changing market conditions.
TrendGuardTM employs a defensive backstop fund that competes against an index’s category momentum leaders during its bull market index construction. The backstop fund is selected whenever its momentum is the highest, seeking to achieve a performance floor.
Momentum Analysis. Instead of relying on traditional Simple Moving Average-based momentum analysis, we use differential signal processing and matched filter theory to reduce market noise, assess its characteristics, and adaptively tune our momentum filters – all of which are intended to improve the selection of momentum leaders.
AI-based Genetic Algorithms learn from market behavior.
- The process evaluates up to 400 ETFs to select sets of candidate funds for an ever-evolving population of competing momentum strategies.
- Top momentum performers are selected for the portfolio.
This helps mitigate the risk of human-based hindsight selection bias in the ETF selection process and enables the index to adapt to changing market conditions.
TrendGuardTM employs a defensive backstop fund that competes against an index’s category momentum leaders during its bull market index construction. The backstop fund is selected whenever its momentum is the highest, seeking to achieve a performance floor.
Bear Market Indicated
When bear market conditions are indicated, Merlyn.AI Indexes switches to a defensive strategy where it generally selects a portfolio of four or more momentum leading ETFs from our bear universe.
Categories:
- Inflation-protected treasury
- US Treasury
- Aggregate Bond
- Short- and Long-term Bond
- Corporate Bond
- High-Yield Bond
- Gold
- Broad-based U.S. equity market index (seeking better returns during a bear market rebound)
Bull Market Indicated
Momentum Analysis. Instead of relying on traditional Simple Moving Average-based momentum analysis, we use differential signal processing and matched filter theory to reduce market noise, assess its characteristics, and adaptively tune our momentum filters – all of which are intended to improve the selection of momentum leaders.
AI-based Genetic Algorithms learn from market behavior.
- The process evaluates up to 400 ETFs to select sets of candidate funds for an ever-evolving population of competing momentum strategies.
- Top momentum performers are selected for the portfolio.
This helps mitigate the risk of human-based hindsight selection bias in the ETF selection process and enables the index to adapt to changing market conditions.
TrendGuardTM employs a defensive backstop fund that competes against an index’s category momentum leaders during its bull market index construction. The backstop fund is selected whenever its momentum is the highest, seeking to achieve a performance floor.
Momentum Analysis. Instead of relying on traditional Simple Moving Average-based momentum analysis, we use differential signal processing and matched filter theory to reduce market noise, assess its characteristics, and adaptively tune our momentum filters – all of which are intended to improve the selection of momentum leaders.
AI-based Genetic Algorithms learn from market behavior.
- The process evaluates up to 400 ETFs to select sets of candidate funds for an ever-evolving population of competing momentum strategies.
- Top momentum performers are selected for the portfolio.
This helps mitigate the risk of human-based hindsight selection bias in the ETF selection process and enables the index to adapt to changing market conditions.
TrendGuardTM employs a defensive backstop fund that competes against an index’s category momentum leaders during its bull market index construction. The backstop fund is selected whenever its momentum is the highest, seeking to achieve a performance floor.
Let our AI-powered indexes help you improve investment decisionmaking.
“In an unusual equity market like we’ve experienced this year and last, momentum signals have been sometimes less reliable. TrendGuard adds an important element to our defensive strategy that kicks in when momentum behaves like this. Together with StormGuard, this approach presents what we call ‘Dual Defense.’”
~ Scott Juds, CEO, Merlyn.AI
StormGuard™
Our market risk assessment software seeks to determine when a bull or bear market is indicated using multiple market metrics.
Merlyn.AI’s indexes automatically switch between equity and defensive positions based on StormGuard’s bull/bear assessment.
TrendGuard™
Our second line of defense recognizes the limitation of momentum-based analysis in an irregular cycle like 2021-2023 and seeks to achieve a performance floor.
TrendGuard presents a new defensive backstop that competes against an index’s category momentum leaders for selection.
We believe that reducing noise and eliminating hindsight bias are key to making better investment decisions.
Momentum Detection
We approach noise reduction differently.
Instead of relying on traditional Simple Moving Average-based momentum analysis, we use differential signal processing and matched filter theory to reduce market noise, assess its characteristics, and adaptively tune our momentum filters – all of which are intended to improve the selection of momentum leaders. Simply put, cleaner signals lead to the possibility of better decisions.
Genetic Algorithms
It’s all about eliminating hindsight selection bias.
Merlyn.AI deploys genetic algorithms to evolve competing sets of candidate ETF models from which momentum-leading ETFs are identified. During the evolution process, member ETFs of the competing models are replaced by ones that seek to make the model stronger (e.g. improve the performance). Using this selection process Merlyn.AI seeks to eliminate hindsight selection bias and adapt the ETF selection process to changing market conditions.