spx S&P500 Limit Strategies Combined with Monthly Pres x Seasonality System

S&P500 Limit Strategies Combined with Monthly Pres x Seasonality System

The initial results of this simple system are quite promising. Rules: buy at open as dictated by system, but reduce position size by 1/2 at 3% above monthly close and another 1/2 when at 6% above the prior month close. E.g., index at 1000, p = 2; buy 2:1 leverage, if market hits 1030, sell to 100% invested; if market then hits 1060, sell to 50% invested, etc. Also tooled around with the opposite, buying if the market dips 3% below and 6% below but this is somewhat unrealistic since at times it would require 3:1 leverage which in real life I wouldn't take. Nevertheless, the results are very, very promising:

1998: model: +51.9% v. 26.6% buy and hold

1999: model +35.4% v. 1.4% (through 10/15/99).

Earlier periods were also tested and showed promising results. More later…

Monday, February 21, 2000

Updated the S&P500 monthly file, added some data columns, and converted to Excel (see S&P500 Monthly Data.xls). The results are interesting:

First, the historical norms:

	Max:			Min:		Avg:
Mo:	12			1
Yr:	2000			1945
SPX:	1469.25			13.49
Div:	16.83			0.66
Div Yld (m):	0.72%			0.10%		0.33%
Earnings:	39.72			0.93
E Yld:	16.5%			2.6%		7.7%
rr mo:	16.3%			-21.8%		0.79%
PR:	20.5			1.5		6.8
DR:	14.0			0.4		4.7
Tot rr/m:	16.7%			-21.5%		1.12%
CPI:	168.7			17.8
DCPI:	19.7%			-2.9%		4.3%
30 year Yld:	14.14			2.08		5.98
Yld-MA:	1.70			-1.67		0.01
Yld / MA:	17.3%			-15.6%		0.4%
d30y 12m:	40.5%			-33.5%		2.4%
90d yld:	16.30			0.38		4.82
d90d 12m:	269.3%			-73.5%		11.0%
30y / 90d:	6.42			0.76		1.60
PR-MA:	6.18			-4.25		0.03
DR-MA:	1.83			-2.17		0.02
Spx/ma:	14.2%			-21.3%		1.8%
Range 12m:		70.4%	5.7%		17.9%
Pres Yr:	4			1
3 mo:	24.9%			-30.2%		2.4%
6 mo:	38.8%			-32.4%		4.8%
12 mo:	53.4%			-41.4%		9.8%

Here are the results using a new and improved model:

	Model:	B&H:	Diff:
10,000 becomes:	449,054,905	5,460,869	443,594,036
End Date:	Jan-00	Jan-00
Years Invested:	50.03	50.03
Average rr:	23.9%	13.4%	10.5%
Worst Year:	-26.0%	-36.2%	10.2%
Worst Drawdown:	27.5%	42.5%	-15.0%
Average Drawdown:	3.5%	4.4%	-1.0%

The model follows (I simply added each of the three p_inv values and maxed with 0 and min'd with 2):

	Post	Mid	Pre	Elec
Lookup Table (2):
1	1.0	1.0	2.0	2.0
2	1.0	1.0	2.0	2.0
3	1.0	1.0	2.0	2.0
4	1.0	1.0	2.0	2.0
5	0.0	0.0	1.0	1.0
6	0.0	0.0	1.0	1.0
7	1.0	1.0	2.0	1.0
8	0.0	0.0	1.0	1.0
9	0.0	0.0	1.0	1.0
10	0.0	2.0	1.0	1.0
11	1.0	2.0	2.0	1.0
12	1.0	2.0	2.0	1.0
	p inv:			p inv:
Yld/ma:			E Yld:
-20%	2.0		0%	-2.0
-10%	1.0		3%	-1.0
-5%	0.5		6%	0.0
0%	0.0		9%	0.0
5%	0.0		12%	1.0
9%	0.0		15%	2.0
12%	-2.0		18%	2.0
15%	-2.0

There were combinations that performed better on a total return basis, but none with such low drawdowns. I am attempting to pay more attention to this, with a max drawdown of 30% and a maximum 1 year loss of 30%.

This is only a crude beginning. Note the injection of value (Earning yield) into the equation.