Volatility Derived Model

 **This is for informational purposes only and not a recommendation to Buy or Sell E-mini or any other investment vehicle**

**LongSPY in effect**

This model monitors the rate of change of volatility indices (e.g. VIX)  representing major market segments, VIX term structure, and investor's expectation of a 2 sigma event in the next thirty days. The use of rate of change eliminates the guess work of establishing threshold levels for any volatility measure to guide buy or sell decisions.
[Archived: For example now a days VIX is at 5 year low. Does this mean the bull market is in trouble?  Not necessarily. Actually VIX has been at a level even lower than this few times in the history of its existence. Surprisingly, markets (instead of collapsing) made significant gains in the next 6-12 months. (I plan to make a post on this in the future, so stay tuned) March 08, 2013].

Trading Guideline:
Model issues a buy/sell using Early Warning Setup - Eagle Eye. 
A conservative buy is issued when histogram turns positive from being negative.
An aggressive buy is issued when histogram is > -0.012 from being below this value.
A sell is issued when histogram drops below -0.012.
A Buy/Sell watch is issued when only one condition is unmet for the final signal.
System doesn't use any stop loss.

Model Time Horizon:
Medium Term: Weeks

Target Audience:
Swing Traders and investors looking for a substitute for B&H investing with market timing to reduce volatility

STATUS (Since June, 2013):
Exit Long SPY at Open on Jun 5, 2013
June 27, 2013, Buy Watch for aggressive investors in effect
July 1st, 2013, Go LONG SPY for aggressive investors in effect
July 8th, 2013, Go LONG SPY for all investors in effect 
Aug 21, 2013, Sell Watch in effect
Exit Long SPY at Open on August 28th, 2013 
September 12th, 2013, Go LONG SPY for aggressive investors in effect
Exit Long SPY at Open on October 2, 2013
October 18th 2013, Go LONG SPY for aggressive investors in effect 
Exit Long SPY at open on December 6, 2013 
A close above previous highest high (on close basis) will negate the signal of this setup 
Long SPY on open of December 20, 2013
Exit Long SPY at open on January 28, 2013 
Long SPY on open of February 14, 2014
Exit Long SPY at open on April 11, 2014 
Long SPY at open on April 20, 2014  
Exit Long SPY at open on July 14, 2014
Long SPY at open on July18, 2014  
Exit Long SPY at open on July 30, 2014  
Long SPY at open on August 14, 2014  
Exit Long SPY at open on September 30, 2014  
Long SPY at open on October 28, 2014
Exit Long SPY at open on December 13, 2014  
Long SPY at open on December 29, 2014
Exit Long SPY at open on January 02, 2015
Long SPY at open on January 27 2014
Exit Long SPY at open on February 02, 2015
Long SPY at open on March 16, 2015
Exit Long SPY at open on June 01, 2015 
Long SPY at open on June 23, 2015
Long SPY at open on March 16, 2015
Exit Long SPY at open on June 29, 2015 
Long SPY at open on July 14, 2015
Exit Long SPY at open on August 21, 2015
Long SPY at open on Oct 06, 2015
Exit Long SPY at open on Dec 14, 2015
Long SPY at open on Dec 23, 2015
Exit Long SPY at open on January 06, 2016
Long SPY at open on Feb 02, 2016
Exit Long SPY at open on June 13, 2016
Long SPY at open on July 07, 2016
Exit Long SPY at open on Sep 13, 2016
Long SPY at open on Sep 26, 2016
Exit Long SPY at open on October 13, 2016
Long SPY at open on November 18, 2016 
Exit Long SPY at open on March 24, 2017
Long SPY at open on April 27, 2017
Exit Long SPY at open on August 11, 2017
Long SPY at open on August 30, 2017
Exit Long SPY at open on October 19, 2017
Long SPY at open on November 03, 2017
Exit Long SPY at open on November 14, 2017
Long SPY at open on November 22, 2017
....
Exit Long SPY at open on January 27, 2020
Long SPY at open on February 05, 2020
Exit Long SPY at open on February 25, 2020
Long SPY at open on April 07, 2020
Exit Long SPY at open on September  04, 2020
Long SPY at open on September 25, 2020

Exit Long SPY at open on October 06, 2020
Long SPY at open on November 04, 2020

 

The setup 

(Chart updated on after the close on November 11, 2022)

Equity Curve Since March 2009 

(as of July 31, 2017)

*ETFs or mutual funds (leveraged or non leveraged) tracking the performance of SP500 index are the most suitable products to trade with this setup.

A simple trading strategy

In my conversations with ordinary folks like myself, I am often asked if there exits a simple but a profitable strategy to build a retirement portfolio.  My answer to them is always, yes, but...
Why but?
Because, in implementing a number of strategies to invest in stock markets in the last 25+ years, I have come to conclude that most of the time it is not the strategy but it's execution that fails.
Why?
May be because while evaluating a strategy, we are mostly oblivious to the environment in which it was being executed, but as we start to implement the strategy, those elements hinder the execution. News, opinions, personal situations, and the uncertainty (this time is different) are few that fall in this category.
So, after but I say "if you believe in it and can execute it as directed".

So if you are the person  looking for a strategy to built your retirement portfolio, I present you with this time tested simple to implement strategy for a consideration.

Trade Entry:
Buy SP500 on the next day open when EMA18 crosses above EMA43 on a weekly chart of SP500 and sell when EMA18 crosses under EMA43.

Here are the STATS of this strategy since 1970.

While STATs are good, these don't tell the whole story of trading. So to feel more about the strategy let's look at this entire trade series (as shown on these two charts).  Entries on these charts are marked in green (arrow and vertical line) and exits in red.

Notice this strategy effectively avoided most corrections in the '70 and since 2000. However, the strategy could not avoid the crash of  '87, correction of fall of '98. waterfall decline of 2011, and few other minor corrections since 2009. But despite these hiccups strategy returned ~575% more than B&H.

Now, what you do think of this strategy? I would like to know.

Momentum Block

Background information about this table is described here

Status as of May-12-2014 08:00 EST