Dual Momentum Top 6 (DUAL-T6)
Developed by Keller & Keuning · Dual Momentum · Med-High Risk
Dual Momentum Top 6 was developed by Wouter Keller and Jan Willem Keuning as part of their broader research on momentum-based tactical allocation (SSRN #2759734). DUAL-T6 applies an absolute momentum filter to a broad twelve-asset universe and selects the top six qualifying assets by trend strength, combining the simplicity of trend-following with the diversification benefits of multi-asset allocation. The strategy represents Keller's approach to the classic momentum portfolio — broader and more diversified than his concentrated VAA and DAA designs, but more selective than fully passive multi-asset allocations.
The twelve-asset universe spans the major investable categories: US large-cap equities (SPY), US tech (QQQ), US small caps (IWM), European stocks (VGK), Japanese stocks (EWJ), emerging markets (EEM), real estate (IYR), commodities (GSG), gold (GLD), high-yield bonds (HYG), investment-grade bonds (LQD), and long-term Treasuries (TLT). This breadth ensures the strategy has access to assets that perform well across diverse macroeconomic environments — equities for prosperity, bonds for deflation, gold for inflation, and commodities for real asset demand.
Each asset is evaluated against its own thirteen-month simple moving average, producing a trend strength ratio (current price divided by the moving average) that serves as both an eligibility filter and a ranking signal. Assets trading below their moving average are excluded entirely — this absolute momentum gate prevents the portfolio from holding positions in established downtrends. From the qualifying pool, the top six by trend strength ratio receive equal allocation.
The thirteen-month SMA ratio provides a slow, stable signal that changes gradually, reducing unnecessary turnover while remaining responsive to genuine trend changes over periods of several months. The six-position selection provides meaningful diversification across asset classes — during typical markets, the top six include a mix of equity, fixed income, and alternative positions. When broad market weakness pushes multiple assets below their moving averages, the unfilled slots move to intermediate bonds (IEF), automatically increasing the portfolio's defensive allocation proportionally to the breadth of the decline.
How It Works
SMA Ratio Ranking and Filtering
Each month, all twelve assets are evaluated by their thirteen-month SMA ratio — the current price divided by the thirteen-month simple moving average. This ratio measures how far each asset has risen above (or fallen below) its own trend line, providing a normalized metric that can be meaningfully compared across asset classes with different volatility characteristics.
Assets with SMA ratios below 1.0 — meaning they are trading below their moving average — are excluded from the ranking regardless of their relative position. This binary filter prevents the portfolio from holding any asset in a confirmed downtrend. From the remaining qualifying assets, the top six by SMA ratio receive equal allocation. An asset with an SMA ratio of 1.08 (eight percent above its moving average) ranks above one at 1.03 (three percent above), reflecting the stronger trend strength of the first asset.
Six-Position Diversification
The six-position selection provides broad diversification across asset classes during normal market conditions. A typical risk-on portfolio might hold three or four equity segments alongside one or two bond and alternative positions, spreading risk across genuinely different return drivers. The equal weighting at approximately sixteen percent per position ensures no single holding dominates the portfolio's risk contribution.
During periods of asset class rotation — such as the shift from equity leadership to bond leadership during rate-cutting cycles — the SMA ratio ranking gradually transitions the portfolio composition. Equity positions whose trends are weakening drop in the ranking, eventually falling below the top six or below their moving averages entirely. Bond and alternative positions whose trends are strengthening rise in the ranking, entering the top six as they displace the weakening equity holdings. This rotation occurs naturally and gradually through the ranking mechanism.
Automatic Defensive Scaling
When broad market weakness pushes multiple assets below their thirteen-month moving averages, the pool of qualifying assets shrinks. If only four assets qualify, the remaining two slots receive allocation to intermediate bonds (IEF). If only two qualify, four slots shift to IEF. During the most severe bear markets, when virtually all risk assets break below their moving averages, the portfolio may hold mostly or entirely IEF — automatically achieving near-complete defensive positioning.
This graduated defense mechanism operates without any explicit defensive trigger, canary signal, or breadth measurement. The defense emerges naturally from the combination of the absolute trend filter and the fixed six-slot portfolio structure. The severity of the defensive positioning scales automatically with the breadth of market weakness — exactly the proportional response that more complex strategies like PAA achieve through explicit breadth calculations. The result is similar protection through a simpler mechanism.
Explore Dual Momentum Top 6 (DUAL-T6)
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