AVOIDING BEAR MARKETS WITH MARKET TIMING MODEL ( DAILY CHART)

So how does it work?

Very Simple

Buy SPY if above it's 200 MA at the end of the month

SELL SPY if below it's 200 MA at the end of the month

You could also use a monthly charts and use the 10 Month MA with the same rules.

That is it ! It's so simple and boring , that very few people use it. The Draw-down is at 18 % for the model vs 55 % ! for the SP 500.

One could use this to decide when to get in and out of the market. I know, it's not perfect , no system is .The system won't get you in at the very bottom or get you out at the top, but you will capture some nice gains if patient and disciplined.

How did it do in the 1980's? When you look at monthly data, you have to look back a long time to see if it is really just a drawdown of 18%. My recollection is that it was a massive losing methodology in the late 1980's and all through until the mid 1990's. Again, it is just my recollection from my years as a technical analyst at a major firm publishing interesting research over the years.

Hi Tim

Will do a backtesting tonight from 1982 - 1992 ,and post the results here

1992 isn't the mid-1990's :-) Do you have all the data? Can you go all the way up to your first signal on the chart? See what the 1970's looked like too.

I also like to KISS - Keep It Super Simple. I'm also curious to see what your back-testing reveals.

Hi all,

Should the system not even during the 1980's period if a reasonable stop loss is added for trades that went pear shaped in the 1980's?

Speculation for stop loss:
a) Perhaps using ATR
b) Exit based on entry candle, meaning if the trade does not head in the right direction then nip it in the bud early. And just try again later.

I have looked at charts going back to 1950 for SP500 based just on the 200 SMA and EMA and they resoundingly worked, in fact when compounded the results were quite something.

I have also conducted the same exercise on CAC, DAX, FTSE, NIKKEI, TIMES, DIA, HANG SENG, and QQQ, going back 25 or 30 years.

All worked, Nikkei less so than others for obvious reasons.

Hi Herman
Hi Hernan

Definitely, this system can be improve by adding a few rules such as ATR for stop losses. I haven't tested this on other indices, but glad to know that the results are about the same.

Hello

I only have Data from 1980 , Here's the bactesting result from May 1980 to March 1994 . For that period the model underperformed the market with return of 114.6 % vs. 161.85 % for the S&P. MAX DD was a brutal 56 % in 1987 ( black Monday) .


5/30/80 6/31/81 17.9
8/31/82 1/31/84 36.8
8/31/84 9/30/85 9.6
10/31/85 9/30/86 21.8
10/31/86 10/31/87 4.1
6/30/88 1/31/90 20.3
5/30/90 8/31/90 -12.0
1/31/91 11/29/91 9.1
12/31/91 3/31/94 6.9