When SPY Falls 2 Times More Than Average Change

Last Updated on November 21, 2020 by Oddmund Groette

Here is a simple strategy in SPY:

  1. Calculate the absolute value of the % change from today’s close from yesterday’s close (c2c).
  2. Calculate a 25 day average of number 1.
  3. When SPY falls more than two times the number in number 2 from Close to Close (c2c), then go long at the close.
  4. Exit on next day close.

A very simple strategy. The idea is simply to buy when the risk premium rises. The test period is from 2005 until the present (if today is Monday, the result is showing the gain from Monday’s close until Tuesday’s close):

P/L #fills #wins Avg
44.73 159 94 0.28

Let’s see this strategy broken down into weekdays:

Mondays:

P/L #fills #wins Avg
14.99 19 13 0.79

Tuesdays:

P/L #fills #wins Avg
13.46 36 23 0.37

Wednesdays:

P/L #fills #wins Avg
13.11 35 19 0.37

Thursdays:

P/L #fills #wins Avg
-7.88 37 15 -0.21

Fridays:

P/L #fills #wins Avg
11.05 32 24 0.35

As you can see it works pretty well except Thursdays. I can’t think of any specific reasons why except that SPY tend to revert mid-week.