What I’m Reading This Weekend

State of Trend Following in April

Momentum Investing: Instrument Selection is Critical

$SPX the Day after Mothers Day Since 1990

Successful Backtesting of Algorithmic Trading Strategies – Part II

Combining Value, Trend, and Sentiment

All of these articles, and more, can be found over at The Whole Street.

Today, despite closing slightly lower, the S&P 500 closed for the 5th day above its upper Bollinger Band (50,2). I have written previously how closes above the the upper band are typically bullish and may signal an abnormal market. This evening we’ll examine what happens after 5 consecutive closes above upper Bollinger Band.

The Rules:

• Buy $SPX at the close after it has made X consecutive closes above its upper Bollinger Band
• Sell Y days later
• $SPX history starts in 1928
• No commissions or slippage included

The Results:

The results are more bullish than I expected, and they improve as the number of closes above the upper band increases.

• This setup was not nearly as rare as I had imagined.
• There were 126 occurrences of 5 closes above the upper band with 110 trades held the full 50 days.
• After 5 closes above the upper band, $SPX has closed higher 50 days later 67.27% of the time.
• Buy-n-Hold results are calculated by cutting $SPX history into 50 day segments and then averaging the segments.

The number of samples should be sufficient to lend reliability to the results, but I am honestly a little disappointed because I suspected the results would be either extremely bullish or extremely bearish. I was looking for some drama and didn’t find it. Instead, this study just presents another reason to lean bullish.

$SPY has completed 3 higher closes above its upper Bollinger Band.

I have authored a fair amount of studies about what happens when the S&P 500 closes above its upper Bollinger Band (50, 2). One can read most of those articles under this category: Abnormal Markets.

I have not, however, completed a study where I examined what happens after 3 higher closes above the upper Bollinger Band. And, sorry for the tease, but I will not publish such a study tonight. I’m guessing that there are not very many instances of this happening and that the study will not be generalizable.

But the real reason is that I turn 40 very soon and the celebrations began (somewhat unexpectedly) tonight.

Likely tomorrow I will examine what happens after this probably rare occurrence of 3 higher closes above the upper Bollinger Bands. Until then, one thing I can say for sure is that an abnormal market is abnormal, even when it is making you money.

The bull charges on…These are linked for your viewing ease.

ACAD

GST

LLEN

RVLT

Little late getting this out. Blame it on a weekend baseball tournament.

Market Timing Through Market Dominance – TransDow

Tax Is More Important Than Alpha

Strategies on The Cloud: TAA on Google Docs

Mean-Reversion Volatility Filters Part Two: Since 2011

Breakaway Gap Analysis on QQQ

Some of these articles, and more can be found over at The Whole Street.

The symbols are linked for your viewing ease…There are some good looking HTFs on this list.

ACAD

CLVS

ECTY

GST

RVLT

SBGI

In April the system returned 0.5% vs. a $SPY return of 1.9%. The system was 33% in cash for one day and missed part of the bounce from the 50 day average. Also, the defensive funds have been increasingly moving up in the ranks. These do not tend to move as much as the non-defensive funds.

Year-to-date the system is up 13% vs. a $SPY return of 12.1%.

The system is currently long FSUTX (Utilities), FBMPX (Multimedia), and FBIOX (Biotechnology).