A member of The Crew recently asked me about the January Effect and if had I done any research on it. I had not. I have tested the December effect, which is buying the worst stocks of the year on December 1st, Should You Buy the Best or Worst YTD Stocks. From Investopedia, ‘The January Effect is a perceived seasonal increase in stock prices during the month of January. Analysts generally attribute this rally to an increase in buying, which follows the drop in price that typically happens in December when investors, engaging in tax-loss harvesting to offset realized capital […]
[…]ago. Time to revisit an old idea. Just because the limit price gets touch or exceeded does not guarantee we will exit or fully exit in real trading. We must live with that issue for these tests. The Initial Strategy Test range from 1/1/2007 to 9/30/2019. Set up Rules Stock was a member of the Russell 3000 index, is not currently a member of the index Stock is traded a major exchange. The as traded price is greater than $1 The 21-day moving average of close*volume greater than $500K Close is greater than the 100-day moving average Two period RSI […]
[…]never backed up with numbers. Are we really seeing fewer trades? Smaller returns? Time to do the research and see what the numbers tell us. The Test Testing Universe: Top 1,000 stocks by dollar-volume with closing price greater than $1. No ETFs included. Date Range: 1/1/2001 to 8/30/2013 Entry: RSI(2) < 5 Entry on Close Exit: RSI2 > 70 Exit on Close I performed an “All Days” test. This means we can have multiple entries in the same stock at the same time. In a situation where an oversold stock continues on a journey downward day after day-the […]
A common way to describe a mean reversion trade is a rubber band that stretches away and then snaps back. Something that Steve, my trading buddy, and I discuss when a trade keeps going against us is that the rubber band has broken. I have never tested that concept. Meaning after N day sell-off, are we now more likely to continue to sell off than bounce? Doing research is not always about trying to develop a new strategy but sometimes it is testing a concept. The concept may lead to a new trading idea. The Test Date range is from […]
I was going through some old issues of Technical Analysis of Stocks & Commodities looking for some ideas to test. In the November 2019 issue, I came across “Stock Market Seasonality: A Global Phenomenon” by Jay Kaeppel. The basic idea was that global markets share the same “buy in November and sell in May” phenomenon as the US market. This got me thinking about how markets have changed since 2012 or so. My theory is that before 2012, this pattern was better than either buy and hold or other start and end months. But after this time, buy and hold […]
[…]my comments may not apply in different situations. Any mention of ConnorsRSI is using the default parameters of (3, 2, 100). The parameters tested below will give 1000 variations. Set up Rules Stock is member of the S&P 500 index It has been less than (10,15,20,25,30) days since a 39 week high ConnorsRSI is less than (10 to 40 in steps of 2.5) Entry Rules If we have a set up, then enter a limit order for the next day at (.5, 1.0, 1.5, 2.0)% below the close. Order good for one day only. Only place enough orders so if […]
[…]specific to this variation? Optimization Comparison Next I ran an optimization using these parameters. Setup The 252 day PercentRank of the (2,3,4,5) day returns is below (5,10,15) Buy Enter at a limit price today at (.50,.75) of ATR(10) below previous close Sell 2 period RSI greater than (40,50,60,70,80) Exit if in position after (NA,1,2,3,4,5,6,7,8,9,10) bars I took these results and created this pivot table. Each row represents 120 variations. We can see that the 4, 7 and 9 day exits beat the baseline of not using this exit. But the improvement is minor and not consistent. Spreadsheet Fill the […]
David Weilmuenster is today’s guest author. David and I worked together at Connors Research for eight years and is one great researcher and AmiBroker programmer. Brochures for professionally managed investments and academic white papers on long term investing almost always praise the benefits of regularly re-balancing a portfolio. The benefits can arise from the interaction, or correlation, of periodic returns among the constituent assets in a portfolio. As the correlations among constituent assets decrease, the long term returns of the overall portfolio generally will increase with regular re-balancing. This has become known as “the only free lunch in investing”, although […]
A research friend recently sent me a link to The #1 Stock In The World. Besides being a blatant title to get one’s attention (and it worked on me), I found the idea interesting along with my research friends. I have been trying to add either XIV or VXX to my trading in some small way. The article is only doing a buy and hold on XIV but it peaked my interest to try some other ideas. Major Data Problem Here is where I ran into problem right away. XIV did not trade until 11/30/2010. So it has had the […]
[…]and trade entry/exit is on first day of the month open. I only tested monthly evaluation. The reason for not testing longer periods is that all my other strategies evaluate monthly and waiting until the quarter or longer increases volatility of the strategy and the bias introduced by when you reevaluate. Buy and Hold We need a baseline to compare against. Here are the buy and hold numbers for TLT and SPY I did not realize how strong the bull market in TLT has been until I saw these numbers. Very close to same results of the SPY with half […]
