In compliance with the mantra of this blog, here I present a very
simple to follow but remarkably profitable strategy to trade SPY. The
strategy utilizes trend lines to decide the beginning or end of a trend
in SPY. In addition, it looks for trend line breaks of 21 day smoothed
moving average* of Equity Only "Put to Call Ratio" (CPCE). This is a low
maintenance system as it only traded 5 times since the low in March
2009, yet it gained 134% vs 125% gained by B&H portfolio
investing only in the long side. This strategy can also be used to play
the short side of the market. The long and short combined approach would
have earned 145%.
*34 EMA can be used instead
Targeted Audience:
B&H type investors willing to tolerate smaller gyrations.
Most suited to manage long term investments.
Trading Method:
Open LONG position (Close Short Position):
When all ETFs rise above an established down trend line.**
or when 3 out of 4 ETFs rise above an established down trend line and 21 SMMA of CPCE falls below an established trend line
**prices are dividend adjusted
Close LONG position (Open Short position):
When all ETFs fall below an established up trend line.
or when 3 out of 4 ETFs fall below an established up trend line and 21 SMMA of CPCE rise above an established trend line.
STATUS:
Long SPY11/29/2012
Exit Long SPY 10/14/201
Long SPY 11/13/2014
Trades since 2003 used Total Put to Call Ratio
until CPCE became available
*34 EMA can be used instead
Targeted Audience:
B&H type investors willing to tolerate smaller gyrations.
Most suited to manage long term investments.
Trading Method:
Open LONG position (Close Short Position):
When all ETFs rise above an established down trend line.**
or when 3 out of 4 ETFs rise above an established down trend line and 21 SMMA of CPCE falls below an established trend line
**prices are dividend adjusted
Close LONG position (Open Short position):
When all ETFs fall below an established up trend line.
or when 3 out of 4 ETFs fall below an established up trend line and 21 SMMA of CPCE rise above an established trend line.
STATUS:
Long SPY11/29/2012
Exit Long SPY 10/14/201
Long SPY 11/13/2014
(The Setup as of April 17, 2015)
STATs as of July 12, 2013
Trades since 2003 used Total Put to Call Ratio
until CPCE became available
Thanks a lot, Harapa! I really like longer term timing methodologies like this.
ReplyDeleteThanks for your interest in my work. One reason for sharing this type of work is that drawing trend lines is a bit tricky business. So May be next time when we get to that point you all can chime in to help me decided the legitimacy of the TL break(s). So let's keep watching this type of setup. As you may already know, I try to keep the main chart up to date long after the initial post.
DeletePS: I fixed the typo:)
I am new to your blog, so forgive this newbie question.
ReplyDeleteWhat are the 4 ETFs you track? One I suppose is the SPY.
I see that the 34EMA on the daily $CPCE chart has been above the trendline since last week for a down trendline drawn from 1st week of July-2013.
However your B&H bias is still long, I guess because all 4 ETFs are above their downtrend line?
Just wanted to make sure that I am using the proper period for the chart and trendline.
Thanks.
Ray
I just posted an updated chart. Yes, 21D LWMA of CPCE did break above a trend line, however, only 2 (DIA & IWM) broke the support but other two (SPY& QQQ) didn't. So no a valid exit signal was issued.
ReplyDeleteFor future reference please note the date of posted charts to make sure you are looking at something that relates to current situation. As a practice, I only update charts whenever a signal changes.
Thanks Harapa.
ReplyDeleteResponse appreciated.
Ray