Nirvana s Exciting New Frontier

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Brice Hoover
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Introducing OmniFunds Nirvana s Exciting New Frontier There are many ways to trade the markets.

However, Strategies do not fire Signals all the time, which can make it difficult to stay fully invested.

comparative analysis. Fund switching is somewhat common in the financial world. WealthFront.

This classic approach works fine in up-trending markets. We believe we can do much better in all market conditions - by comparing the behaviors of related securities to predict trend.

Clearly, these ETFs are related, but SPY is only up 1% in 2015, while KBE is up 10%. Switching into KBE when its Relative Momentum was high would have been a good move!

1 Introducing OmniFunds Nirvana s Exciting New Frontier There are many ways to trade the markets. For quite some time, we have been using Strategies to time entries and exits with a high degree of success! Sometimes, it Pays to Switch. However, Strategies do not fire Signals all the time, which can make it difficult to stay fully invested. Today, I am excited to announce OmniFunds - a new fund management approach being developed by Nirvana that is based on switching between stocks or Exchange Traded Funds as a result of comparative analysis. Fund switching is somewhat common in the financial world. WealthFront.com, a fund management company, balances assets by periodically switching ETFs among various asset classes, maintaining fixed ratios between them. This classic approach works fine in up-trending markets. We believe we can do much better in all market conditions - by comparing the behaviors of related securities to predict trend. To the right is a good example. SPY is an ETF that represents stocks in the S&P 500. KBE is another ETF that is composed of bank stocks. Clearly, these ETFs are related, but SPY is only up 1% in 2015, while KBE is up 10%. Switching into KBE when its Relative Momentum was high would have been a good move! ETF switching is just one approach. We can switch between stocks within ETFs, stocks or ETFs within a favored industry group or between ETFs representing different global markets. The possibilities are endless. Over the next pages I d like to explain some great switching concepts that we are currently developing for OmniFunds. High Relative Momentum Switching into KBE in early February based on its high Relative Momentum was a good idea! In this issue... How Does Switching Work? Great Switching Concepts...3 Proof of Concept using DSS...6 Introducing OmniFunds...8 Our First Portfolio is Up!...10 Special Offers...11

2 How Does Switching Work? Switching Concepts In this article, I m going to explain why Switching can work better than traditional trading. Trading Regular and Inverse ETFs Long When using OmniTrader, we typically wait for a Signal to fire before entering a new position. This means our account could be in cash most of the time. Using a Switching Concept, we continuously adjust based on the rank of symbols in our target list. Using advanced switching concepts, we can switch between stocks in the broad market. Or, we can use information about holdings of an ETF to time the actual purchase and sale of the ETF itself. The Incredible, Versatile ETF There are over a thousand Exchange Traded Funds available on the U.S. Market. You can find ETFs that trade in just about every imaginable category: U.S. Industries Financial Markets Foreign Currency Foreign Stock Markets Metals Other Commodities When using ETFs, we can base our switching decisions on the internal components. We can also enforce diversification by investing in anti-correlated instruments. Another great advantage of using ETFs is the proliferation of Inverse ETFs allows us to take Long positions in Bear markets. Above are two Direxion ETFs, one for Bull Energy and one for Bear Energy. With a large collection of ETFs like this, we can always be on the LONG side, which is important for retirement accounts. Switching can be achieved by rolling from one ETF into the other. Some of the Concepts discussed on the next pages use these concepts. We are now manually testing them, in anticipation of the coming OmniFunds Platform

Switching Concept #1: The Value Line Model by Ed Downs Our primary objective is to switch into stocks or ETFs that have the greatest opportunity for appreciation and least risk; we can measure two

Safety For Timing we want to measure the technical likelihood of a stock or ETF moving up over the next week or month.

3 Switching Concept #1: The Value Line Model by Ed Downs Our primary objective is to switch into stocks or ETFs that have the greatest opportunity for appreciation and least risk; we can measure two key metrics: Timing and Safety. A long-standing service called Value Line uses a specific definition of Timing and Safety based on Fundamentals. Our method is based on Technical Factors. Timing vs. Safety For Timing we want to measure the technical likelihood of a stock or ETF moving up over the next week or month. This can be based on cyclicality, stability and maturity of trend, recent volume patterns, the relative formation of higher lows and chart patterns. Breaking key resistance is one such measure as shown to the right on DBA. Safety has to do with how stable a stock or ETF is, which relates to its Beta and likelihood of it participating in a market downturn, or even accelerating down in such a move. Examining strength relative to the market is another way to assess safety (see DIS example to the right). Developing Scoring Metrics Timing is good for DBA, an ETF that represents agriculture, due to its recent break through resistance. We are currently researching various formulas and factors that can yield a technical Timing and Safety score. Being able to test these combinations in OmniFunds will provide a dramatic boost to our research in this area. Trend and Volatility are key components of safety. Disney has been in a steady up-trend for months, which makes it a safer candidate for investment

Switching Concept #2: Relative Strength, Longer Term by Jeremy Williams In his breakthrough 1996 book, What works on Wall Street, James O Shaughnessy rigorously tested more than 60 popular stock

4 Switching Concept #2: Relative Strength, Longer Term by Jeremy Williams In his breakthrough 1996 book, What works on Wall Street, James O Shaughnessy rigorously tested more than 60 popular stock ranking criteria. His results showed which ranking systems worked and which ones did not. Selecting Stable Strength More striking though is that he found that when he used the Relative Strength of a stock with the other factors the results increased dramatically. Finding the Strongest Candidates We are currently researching longer term switching concepts based around Relative Strength and Relative Momentum. These approaches employ monthly (or even quarterly) switching to simplify the trading process and reduce trading costs. We first rank our list of stocks to identify the candidates with the highest strength, and then filter out the ones that are showing signs of being overheated. Relative Strength Concept Outperforms Market! Success in the Lab Preliminary results from prototype models look extremely promising. Our Concept Relative Strength Portfolios are significantly outperforming the market indexes (see pane to the right), and we expect this methodology to produce stable high performing production portfolios aimed at our longer term investors. We are further exploring different ways of measuring strength, and refinements to our filtering process that should result in even larger performance gains. An example of an OmniFunds Relative Strength Portfolio vs. the SPY using an early prototype application. The OmniFund Portfolio averages 23% annual return over the two year period, vs. 14% for the SPY

Switching Concept #3: Switching Stocks in Strong ETFs by Jeff Drake One switching concept that has already shown great promise is to switch into the stocks that are lagging in strong ETFs.

The ETFs we used for this experiment were IYF, which represents financial stocks, and OIH, which represent oil and gas stocks.

5 Switching Concept #3: Switching Stocks in Strong ETFs by Jeff Drake One switching concept that has already shown great promise is to switch into the stocks that are lagging in strong ETFs. Making Gains in a Flat Market Buying the Laggards To begin with, we took two inversely correlated ETFs. The ETFs we used for this experiment were IYF, which represents financial stocks, and OIH, which represent oil and gas stocks. We wanted to see which of these ETFs showed the highest Relative Momentum. Once we knew which ETF is performing better against the broad market, we bought the five stocks (constituents) in that ETF that were showing short term weakness. These stocks are typically oversold and prime for a strong upward move. In our simulated test, we would re-evaluate the two ETFs every Friday over a three month period. If a different ETF showed higher Relative Momentum, we would sell the stocks related to the weaker ETF and then buy the five laggard stocks in the stronger ETF. However, if the same ETF was stronger, we would then sell the stocks we were holding and re-purchase the weakest constituents. Consistent Gains The test was conducted from the beginning of April to June 19th. The performance of this approach showed consistent gains in a relatively flat market. This method is now being traded in OmniVest (see page 10). Here is a partial list of some of the positions that were taken in our Switching Stocks in Strong ETFs experiment. This approach was able to gain over 5% in profits while the broad market consolidated in a trading range. Our maximum Draw Down was just 1.5% compared to a 3% max drawdown on the S&P 500 index. Only the Beginning This approach used only one of the dozens of possible combinations of inversely correlated ETF pairs. The table below shows just a few of the other ETF pairs that are currently being tested with this method. And that s just a small sample. We can also look at comparing even more ETF combinations and then switch into the best ETF s constituents. We could look at three, four, and even more ETFs to engage the stocks with the highest profit potential. The possibilities are almost endless and very exciting! - 5 -

6 Using the Tools We Have Switching with DSS in OmniTrader A few years ago, we released DSS, which stands for Dynamic Signal Selection. DSS allows the user to define (1) a Sort Order for Signals, (2) How many Signals can be taken at a time, and (3) the mix between Longs and Shorts. Naturally, we wanted to employ DSS to test it for a Switching application. But DSS cannot make a Switching decision. All it can do is enter new trades based on Signals, and exit those trades when the Trade Plan indicates. However, we wanted to get a rough idea of how switching based on an indicator value might work. We set DSS to examine the Trend Intensity Index on the Russell and allow positions to be taken based on ranges of values (Rule #2 to the right). DSS a tool in OmniTrader can roughly approximate the switching process on a weekly basis, using Signals and Exits in OmniTrader. DSS Switching Rules We wanted to compare performance of Buy and Hold on the broad market (SPY) over the last ten full years ( ) versus switching to the stocks with the greatest upside potential, as determined by the lowest CCI value. 1. CCI(6) indicator used to Sort the candidates (low to high). In order to implement this, we had to fool OmniTrader by generating a Signal on every stock in the given index on Friday, with an exit on the following Friday, as shown on the next page. b) If the value of TRII was between 80 and 20, trade the top 5 stocks at 10% allocation each The Trend Intensity Index (TRII) used to gauge market sentiment and determine how many stocks to buy. a) If the value of TRII was greater than 80, trade the top 10 stocks at 10% allocation each. c) If the value of TRII was below 20, no positions were taken. 3. Buy Monday, Sell Friday using these rules.

for Proof of Concept Fooling OmniTrader to perform Weekly Switching: We wrote a special Strategy that enters new positions on Monday and exits on Friday.

3x the Return with 1/3 the Draw Down Definitely on the Right Track This switching algorithm is based on 1-week trades (a limitation of DSS). We will have more flexibility with OmniFunds.

7 for Proof of Concept Fooling OmniTrader to perform Weekly Switching: We wrote a special Strategy that enters new positions on Monday and exits on Friday. Symbols were then ranked by CCI(6) and prioritized to the lowest values. Results of this test for switching inside the S&P 100 and Russell 1000 vs the Broad Market (SPY) are shown below. 3x the Return with 1/3 the Draw Down Definitely on the Right Track This switching algorithm is based on 1-week trades (a limitation of DSS). We will have more flexibility with OmniFunds. But the results of this test are very exciting to us. By switching within stocks in the S&P 100 or Russell 1000 we are seeing up to 3 TIMES the Return and less than a THIRD the Draw Down of Buy and Hold. Can t Wait for OmniFunds When we have OmniFunds, we will be able to refine the logic, incorporating better allocation methods and true switching ANY day of the week. The new tool is defined on the next page

The NEW OmniFunds Platform The switching methods discussed on the prior pages are promising; we just need the right tools to

We ve been doing runs using DSS in OmniTrader and by hand in VisualTrader, but we really need a new program to do this.

0 a platform that will be designed to Test AND TRADE Fund Switching concepts.

Market Data OmniVest Switched Portfolios Users will be able to quickly configure and test switching ideas to create

OmniFUNDS Software Trading (switching) Supported Brokers MB, IB, GXTrader +API Reports Testing Specialty Modules for each

8 The NEW OmniFunds Platform The switching methods discussed on the prior pages are promising; we just need the right tools to test them. We ve been doing runs using DSS in OmniTrader and by hand in VisualTrader, but we really need a new program to do this. My scientists and I put our heads together and we now have a specification for OmniFunds 1.0 a platform that will be designed to Test AND TRADE Fund Switching concepts. Some of the components of the system are shown below. Market Data OmniVest Switched Portfolios Users will be able to quickly configure and test switching ideas to create specialized Portfolios and then trade them in OmniVest on their account. OmniFUNDS Software Trading (switching) Supported Brokers MB, IB, GXTrader +API Reports Testing Specialty Modules for each kind of Fund Switching Algorithm NO PROGRAMMING will be required to use the platform. However, because of the unique open architecture of the platform, our staff will be able to quickly create new switching algorithms easily, with new modules released periodically to users. Advanced users will also have access to the SDK to create their own switching methods

9 Our Goal: A User-Friendly Program The first version of OmniFunds will be a desktop program running under Windows that performs four key roles: 1. The Platform will enable us to quickly create new Switching Methods. In so-doing, we will provide a SIMPLE dialog box for each one that drives the application. For example, the Timing/Safety ( Value Line ) approach will have simple options like this: 2. We and our OmniFunds owners will be able to use these simple dialog boxes to test specific Switching Concepts, on specific symbol lists. Users will offer ideas for additional controls that they want us to implement (possibly on an advanced tab). Our goal will be to make them as easy to use as possible. 3. After running a Simulation, users will be able to flip the switch to manage trades with any broker we support. After the first version is launched, an API will be exposed so users can support other brokers. 4. In Phase II, we will provide a feature that will enable us (and OmniFunds users) to trade any swtiching automation into OmniVest to deply on our accounts. We appreciate Nirvana Customers coming on board now to help us achieve this monumental software, and will collaborate with those who purchase to the greatest extent possible to create the most powerful product we can. FAQ on OmniFunds What s the difference between OmniFunds and OmniVest? OmniVest is based on the concept of Portfolios of Strategies, i.e., individual Signals firing opportunity points and aggregating those Signals to trade an account. OmniFunds is based on the concept of Switching between physical securities, and especially ETFs. OmniFunds are typically 100% allocated, creating the notion of a fund that can be invested in with a specific percent of an account. What is the Plan to Deploy OmniFunds? To develop Fund Switching concepts, we need to develop a new platform that is not Signal Based. The outcome of this project will be a program that can be used for testing switching concepts and also to trade switched funds automatically. In order to accelerate development, some OmniTrader components will be used. As soon as possible, we will provide OmniFunds owners the ability to trade their funds in OmniVest as a Portfolio. How will I benefit from owning OmniFunds? Customers who pre-purchase the software are helping us accomplish the job. In return, we will provide early copies and research reports to those who purchase now, fully explaining the switching concepts that are under development. Director s Club Members will be able to trade the concept right away in OmniVest, as described on the next page

Our First OmniFunds Portfolio Powered by The Trading Lab and Elite Trader Our Trading Lab is already trading a switched Portfolio manually in OmniVest using our Elite Trader facility.

At each switching interval, our Lab team adjusts positions to stay aligned with the rules.

10 Our First OmniFunds Portfolio Powered by The Trading Lab and Elite Trader Our Trading Lab is already trading a switched Portfolio manually in OmniVest using our Elite Trader facility. This Portfolio is based on the Switching Stocks in Strong ETFs method on page 5 the first of several that will be deployed. At each switching interval, our Lab team adjusts positions to stay aligned with the rules. Director s Club Members have access to these new Portfolios, and can decide a percentage allocation for each Switched Fund in their OmniVest accounts. The first OmniFunds Portfolio - off to a great start! This early manual process will give us the opportunity to build a record for this new concept. We think it s the perfect start one our Director s Club Members can benefit from now. Director s Club Extended We have already deployed the first Switching Portfolio in OmniVest for Director s Club Members (see above). More are nearing deployment now. These Portfolios are being traded manually by our staff; Director s Club Members can activate them to trade their accounts. We have opened some additional Director s Club seats, so those who want to can come on board now. Here are some of the benefits of being a Director s Club member: 1. Director s Cut Portfolios including OmniFunds (as shown above), available in OmniVest. 2. Personal Account Service any help you need setting up automation on your account. 3. Director s Committee periodic meetings on Nirvana plans; part of the inside crowd. 4. Limited Enrollment we restrict the number of seats available to maintain the value of our Director s Club resource Director s Club Seats are regularly $10,000 - available for a very limited time for just $3,500 for those who pre-purchase the OmniFunds Development and Trading Platform.

11 Special Limited Time Offer Join by July 31st and SAVE! Right now, we are opening up OmniFunds for pre-purchase. This funding drive will run until July 31, or until we have sold 250 units, whichever comes first. We appreciate our loyal Nirvana customers and will work hard to deliver the best possible product from this effort. Thanks for your support! - Ed Downs LET S DO IT! Join our OmniFunds Team... Help us reach our goal! We are starting development of the OmniFunds Platform now. Those who pre-purchase it will receive the following benefits: OmniFunds Platform for easy non-technical activation of Switching Concepts. Set the Platform to auto-trade your I.B., GX, or MB accounts. Later Release: Automatically trade a custom OmniFund in OmniVest as an OmniVest Portfolio; run on your account with other OmniVest assets. Pricing OmniFunds Development and Trading Platform Reg $2,500 Special $1,500 Also Available for a Limited Time the Director s Club RIGHT NOW, our Trading Lab is manually executing our Switched Fund for the Director s Club. As part of our platform development funding, we are opening seats up. Join the Director s Club now, and start tracking progress activate our Switched Portfolios at any time. Director s Club Limited Seats Available Reg $10,000 Special $5,000 $3,500 Call Nirvana Sales at NIRVANA or or visit Money Back Guarantee: Once released, the OmniFunds product will be backed by our 30-day Nirvana Money Back Guarantee

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12 7000 N. MoPac, Suite 425 Austin, Texas USA Toll Free PRESORTED FIRST CLASS MAIL U.S. POSTAGE PAID AUSTIN, TX PERMIT #1546 Nirvana s Exciting New Frontier Introducing OmniFunds

SuperFund Up 40% Since Release!

March 2018 1 SuperFund Up 40% Since Release! Up 40% Since Release (5/17) Weekly Aggressive OmniFund chart from www.myomnifunds.com OmniFunds, our Asset-Switching Platform, was developed and released in