Here is a SPY Filter that beats the SP500 handily since 1998 if someone wants to code it
OK, what follows is a list of a fairly lengthy set of calculations. If you are not a “numbers geek” you might consider skipping down to the actual results.
A = Daily High
B = Daily Low
C = Daily Close
D = 200-day moving average of daily closing prices
E = Daily True High (Today’s high or yesterday’s low, whichever is greater)
F = Daily True Low (Today’s low or yesterday’s high, whichever is lower)
G = Daily True Range (E-F)
H = Average Daily Price (A + B) / 2
I = 15-day Average of H
J = 15-day Average of G
K = MVCI = (C-I) / (J * Square Root of 2))
L = Buy Signal Cutoff Value
M = # days to hold a long position
Figure 1 displays an Excel spreadsheet with these calculations.
1 Figure 1 – Excel spreadsheet for MVCI (whatever that means) Indicator
Hmmm, maybe I do have too much time on my hands. But I digress. In (slightly long-winded) English, the indicator is calculated by:
1) Subtracting the 15-day average of the average daily price (defined as( [high]+[low]/2)) from today’s closing price, and dividing that result by;
2) The 15-day average of the Average True Range times the square root of 2
Don’t ask me how someone came up with multiplying something by the square root of 2 because, well, heck I don’t even know what MVCI stands for, so how would I know?
The default value for variable L is -0.51. The default value for M is 22 days.
A “Buy Signal” occurs when:
1) The closing price for SPY is above its 200-day simple moving average AND;
2) The MVCI value for that day is -0.51 or less. So when a buy signal occurs the trader buys SPY and holds it for 22 trading days.
If MVCI drops below -0.51 during these 22 days then the 22 day holding period starts again at 22, i.e., positions can be held for longer than 22 days.
Figure 2 displays the fluctuations of the MVCI since 12/31/2012 with the -0.51 level highlighted in red. 2Figure 2 – The MVCI (whatever that means) indicator in action
So in a nutshell, anytime SPY is above its 200-day moving average each day the MVCI is below -0.51 starts a 22 day holding period.
Crazy , right?
Well, maybe we should consider the results first.
The Results
For the record:
-$1,000 invested in SPY using MVCI in the manner described here grew to $4,417 (+342%)
-$1,000 invested in SPY on a buy-and-hold basis grew to $1,848 (+84.8%)
Not to discourage your efforts, but that's a 9% annualized yield. You can hit 12% with just a simple moving average crossover technique. (Of course, in all situations when you compare to buy and hold you need to account for taxes and fees.)
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