Rule-based ETF rotation as one testable procedure

A mechanical alternative to passive ownership

A published case study framed ETF portfolio construction as a mechanical, rules-based alternative to passive stock ownership after two large equity drawdowns in a single decade.

The case treated buy-and-hold as an untested hope rather than a complete procedure because it lacked predefined exits through historically large bear markets.

Regime first, then rank rotation

The procedure first used Market regime classification to decide whether the broad market was in an uptrend or a risk-off state.

It allowed Rank rotation only when multiple confirming indicators agreed.

Once the regime filter permitted exposure, relative-strength ranking of a limited ETF universe chose which holdings to own. Editorial reading: that ranking step is the Relative Strength Index method in this taxonomy, applied to the allowed ETF set.

A loss threshold set before trading

Risk tolerance was defined as a personal loss threshold set before trading, then enforced with planned exits rather than revised after prices fell.

The stated design goal was to keep most of an uptrend and stay out of most of a downtrend, accepting that the rules would lag a full bull-market average because of early exits and late entries.

Editorial reading: those three pieces are the point of the case. Market regime classification decides when exposure is allowed, Relative Strength Index ranking decides what to own, and the pre-set exit decides when to stand aside. Rank rotation is the procedure that holds those rules together so they can be tested as one plan.