Short Video Examining Mean-Reversion Signals when SPY is Extremely Oversold

Weekend Video, Chart Notes and ChartBook Update

After falling some 12% in six days and RSI moving below 20, the trading world is looking for a mean-reversion bounce in the S&P 500. The short video below examines two mean-reversion systems trading SPY at oversold extremes. The first buys when RSI(14) is below 20 and the 5-20 day Rate-of-Change exceeds 10%. This is an extreme oversold condition with only 5 trades since 1990. The second buys when RSI(14) is below 30 and the 5-20 day Rate-of-Change is below 10%. There were 17 trades with this system. Both systems sell when RSI(14) moves above 50. Signals are generated on the close, buy/sell prices are based on the next open, and there is no commission or slippage factor.

Enjoy your weekend!

-Arthur Hill, CMT
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