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This article will dive into trend following. We will start by going over some key assumptions and expectations to consider when implementing a trend-following strategy. What are realistic Win Rates and Profit/Loss ratios? Attention then turns to selecting a timeframe suitable to trend-following. I will then explain 10 trend-following indicators
Seasonality takes a back seat to price action when it comes to analysis and signals, but seasonal patterns can provide a tailwind to existing trends or fresh signals. This report will look at the best and worst six months, break down the monthly numbers and analyze trends in the equity curves. May is here and June-July are around the corner so we will focus on these three months.
The turn of the month shows a strong bullish bias with an extremely stable equity curve that really took off the last few years. This strategy, which is only invested 38% of the time, outperformed buy and hold with a higher Compound Annual Return. Overall, the eight day percentage change at the turn of the month is positive 68% of the time for SPY. Despite strong numbers overall, February is weakest month when testing over the last twenty years, and we just happen to be in February.
There is a new ETF in town that promises big potential. The Invesco Next Generation Nasdaq 100 ETF (QQQJ) is based on an index with the same name. As the Invesco web site explains, 90% of its total assets will come from the underlying index and this index is based on the 101st to 200th largest stocks in the Nasdaq. This makes it a small and mid cap version of the Nasdaq 100. The ETF is
2021 is just around the corner and chartists without a strategy should think long and hard about getting one. Trading in the direction of the trend is pretty much my bread and butter strategy. I do not fish for bottoms or attempt to pick tops. Tempting as it often is, I try to refrain from such endeavors as much as possible. More often than not, we are better off using trend-following indicators to identify bullish and bearish trend reversals
This article covers the Trend and Thrust Breadth Models in detail. We start with an overview of breadth and explain why the S&P 500 is my preferred index for measuring broad market breadth. Attention then turns to the individual indicators and the key levels for generating signals. These models use a “weight of the evidence” approach
The StochClose strategy offers a systematic approach to trading a defined ETF universe. This is the sixth installment of a five-part series that started with an introduction to the StochClose indicator on April 21st. This first installment covered the rationale for the indicator and its settings, the signal thresholds and a ranking table. The second installment tested a momentum-rotation strategy, the third outlined a
This is the fifth and final part in a series on using StochClose in trading strategies. Today we will add a profit target to the trend-following signals. How does a Profit Target and the Profit Target amount affect performance? First, there will be an all-signals tests using the Master 200 ETF list and the All Weather 50 ETF list. Then, there will be portfolio tests using signals
This is part 4 of a series on using StochClose in trading strategies. Today we will take StochClose trend signals to the portfolio level. After setting the hard to beat benchmarks, I will test the two groups in the All Weather List separately: the 40 stock-related ETFs and 10 alternative ETFs. These two groups will be tested for the entire periods and then in their preferred market environment. The alternative ETFs performed as expected, better in bear markets, but the stock-related ETFs produced a big surprise.
This article will test crossover signals in the StochClose indicator and the compare these signals with other trend indicators. These are “all signal” tests to quantify performance as a trend-following indicator. Even though good past performance does not guarantee future performance, an all signals test gives us an idea of what to expect going forward. How often does a bullish signal result in a profit, how big are the profits on average and how big are the losses.
Seasonality is behind price action when it comes to analysis and signals, but monthly seasonal patterns can provide a tailwind to existing trends. This study will look at monthly seasonal patterns for the S&P 500 over the last 30 years with a new twist. In addition to win rate, we will also look at returns and the equity curves.
StochClose (125,5) is a trend indicator that can be used in rotation strategies. A rotation strategy ranks a set of securities by an indicator value, buys the top ranked securities and sells when they drop below a certain threshold. This article will explain the details of the rotation system and backtest several different systems. We will start with a basic SPY/TLT rotation and then move to rotation strategies with 50 ETFs.
StochClose is an indicator that quantifies trend direction and trend strength. It also removes volatility from the equation and levels the playing field for stocks and ETFs. As such, it offers a balanced approach to trend identification and relative chart strength. TrendInvestorPro uses this indicator on charts and in the ETF ranking tables. This article will explain the methodology, show chart examples and provide an example of the ranking table.
For the third time in 20 years the stock market fell by more than 30%. As noted in the study of bear markets, the S&P 500 fell around 50% in 2002-2003 and 2008-2009. Folks are calling this a generational opportunity, but this is the third such opportunity in the last 30 years, which covers a generation.
Breadth indicators are also referred to as market internals. As the “vital signs” for an index or sector, breadth indicators reflect aggregate performance for the individual components. As such, breadth indicators can provide leading signals by strengthening before a bottom or weakening ahead of a top. After all, the whole is only as good as the sum of the parts