Doji trading strategies are popular and the doji pattern is one of the most famous candlestick patterns. Candlestick patterns have several “derivatives” and can be used together with other bars. There are at least 64 different candlestick patterns that have been given a name, please read our article about how many candlestick patterns are there?…
The last trading day of the month offers trading opportunities. This is one of many seasonal trading strategies. Can we make a last trading day of the month trading strategy? The last trading day of the month is a weak day in the stock market – the last trading day of the month is a…
The first day of the month seasonality is strong in most markets. We have previously written about the turn of the month trading strategy, but today we look at the first trading day of the month. The turn of the month includes the end of the month and the first three trading days of the…
Does trend following work in the S&P 500? We recently came across an article called Breaking into the Blackbox: Trend Following, Stop Losses, and the Frequency of Trading: The Case of the S&P 500. It’s written by academics, but in plain language without complicated math, so everyone can understand. In this article, we look at…
Trend following the S&P 500 is probably not the sexiest thing to do. Back in 2012 Meb Faber published a paper called A Quantitative Approach To Tactical Asset Allocation in the Journal of Wealth Management. Meb Faber found the 200-day moving average useful and decided to look at the following simple trend following system in…
Ray Dalio’s All-Weather Portfolio was constructed to stand the test of time, no matter the investing climate – be it inflation, deflation, or stagflation. How did the portfolio perform during Covid-19, a period that witnessed enormous volatility? Ray Dalio’s All-Weather Portfolio performed very well during Covid-19. While the stock market dropped 30%, the All-Weather Portfolio…
This article presents an ETF rotation strategy. Sector rotation is popular and this is not without merit. The idea is to be in the sector that shows the best recent momentum. Today we present an ETF momentum rotation trading strategy based on monthly data in EEM, SPY, and TLT. ETF momentum strategies are one of…
Below is a simple and easy trading strategy to implement in SPY or the S&P 500: The classical mean reversion strategy in the S&P 500 In plain English the strategy reads like this: IBS (internal bar strength) must be lower than 0.25 (using daily bars). RSI (21) must be below 45. If 1 and 2…
Most traders and investors have heard that you need to sell in May and go away. Is this just a myth or is it correct? Let’s find out by looking at the historical numbers: My data is the S&P 500 index from 1960, downloaded from Yahoo/finance, until the end of April 2020. The index doesn’t…
Below is a potential short strategy in the S&P 500: Short= C>Ref(C,-1) AND Ref(C,-1)>Ref(C,-2) AND Ref(C,-2)>Ref(C,-3) AND ADX(5)>35 AND RSI(2)>90 Description: If the close is higher for the third time in a row, 5 day ADX is bigger than 35 and RSI(2) is bigger than 90, then go short on the close. Exit/cover on tomorrow’s…
By looking at some potential strategies for S&P 500 I found some very interesting facts that I wouldn’t guess beforehand. I used the ETF SPY as a proxy for the S&P 500. My dataset starts at 1. January 1994 and ends yesterday, 25th of October 2018. The data is adjusted for dividends and taken from…
Russell 2000 rebalancing at the end of June is an important event. It’s important because it leads to potential imbalances, but more importantly, the Russell 2000 has shown abnormal outperformance over these few days. The seasonality and effect are so strong it seems to be a tradeable Russell 2000 rebalancing trading strategy. In this article,…
Sell in May – myth or fact? Sell in May and go away must be one of the most famous phrases in the stock market. But is this adage a myth or a fact? There are plenty of myths in the stock market that never has been tested. There is a lot of academic empirical…
What happens after an extraordinary big fall in SPY? Volatility trading strategies can be very profitable – both long and short. Let’s find out and test by using some simple variables. To measure a big fall we use the average difference between the high and the low over the last 25 days. Calculate the average…
This article presents an overnight trading strategy in the S&P 500. Overnight means entering at the close and exit at tomorrow’s open. We exit at the next open no matter the price movement during the night session. We have previously written about other overnight trading strategies plus described the night trading session: Night trading strategies…
Some weeks ago I wrote about a potential daytrading strategy in XLP. This is a similar test done in SPY: Yesterday the formula (c-l)/(h-l) must have been lower than 0.1. Today SPY opens down. If these two simple criteria are fulfilled, then go long at the open and hold until close. This is the result…
The overnight edge in the stock market is well documented: By using the tailwind from the close until the next open, you can develop some good short-term trading strategies. In this article, I present 4 overnight trading strategies in the S&P 500. The strategies buy at the close and sell the next day’s open. Because…
During my early days as an investor/trader in the early 90’s, I was told (in many books) that an up day that finishes near the low of the range is a bad sign. Is this true? The only way to find out is by backtesting. Backtesting is the core of what we do and we…
Today SPY opened down about 0.8%. From then it has fallen even more, and in time of writing is down 1.5% since the open. A quite tough day for the longs. Looking at what has happened on similar days since January 2010 (open more than 0.7% down and falling more than 1% from the open)…
Do you know the average return in the S&P 500 separated into trading days and day of the week? In this article, we look at the average gain per trading day and day of the week. The best days are centered around the first and last days of the month. We also find out that…
In day trading, what are the returns in the first hour, middle of the day, and in the last hour? I have lately broken down the trading day into performance during the first hour, the middle of the day, and the last hour. Previously I have written two articles about when SPY establishes the high…
I have previously written two articles about when SPY sets high and low during the day: Which Trading Hour Is The Best? When Should You Buy And Sell During The Day? At what time of day sets SPY high and low? Intraday high and low in SPY by weekday I’m trying to find something tradeable…
In a previous article, I wrote about when SPY sets a high/low. But is there any difference separated by weekday? Here is the number from January 2010 until the 1st of August 2012: #Number High Low High Low of days First hour First hour Last hour Last hour Monday 119 44 43 29 29 Tuesday…
Mean reversion strategies work well in the stock market. One of the best indicators for such strategies is the Internal Bar Strength Indicator (IBS): (HIGH-CLOSE)/(HIGH-LOW) This simple formula increases the odds a lot, in my experience, for mean-revertive assets like stocks and stock indices. Here is an example: Enter at close if the above formula is…
Searching on the internet you can find a lot of articles on how to play the opening gap of the S&P 500. Gap trading strategies are popular. What is an opening gap? (Gap Fill) A gap is when the opening price (or print) is higher or lower than the previous close. A gap up indicates…
The VIX is a popular measure of the implied volatility of S&P 500 index options. Put shortly, the VIX is a mean reversion indicator: when the risk premium increases (VIX is rising in value) it might be wise to buy stocks and sell when VIX drops in value. In this article, we present several…
A well-known “fact” is the end-of-month rally in stocks at the end of the month and the first day(s) of the next month. It’s a lot about it on the web, but as far as I can see no actual hard numbers and strategies. Do stocks go up at the end of the month? Let’s…
Are there any daily seasonalities in the S&P 500? I did some research into SPY, an ETF based on the S&P 500 components and a very good proxy, based average return on which day of the month. To get a sufficient number of data I started back in 2005. Here are the results: Average gain…
