With the goal of better performance in a changing marketplace, much of the change this year being attributable to unprecedented government intervention/stimulus, we have spent the past month revising and improving our trend model for the US stock market.
Here is a brief outline of what we did, and some of the significant changes:
- The model utilizes market breadth, momentum, rate of change, and a price-based metric for risk aversion.
- This is a long-only model: it is either long or neutral, no short positions.
- It was built with the objectives of: 1) buying weakness, 2) being in the market as much as possible, 3) exiting on meaningful declines based on the monthly trend, and 4) quickly re-entering the market as soon as there is evidence that a bullish trend has re-emerged.
We back-tested this new model from 2007 forward, which encompasses almost 7 years of data and includes both uptrends and downtrends. The tables and graphs below detail how the model has fared since 2007, both outright and versus the S&P 500. Based on these data, we are implementing this new model into our research immediately.
This information is provided for information purposes only. Past performance or back-tested results may not necessarily indicate future results. The results indicated from back-testing or historical track record may not be typical of future performance. No inferences may be made and no guarantees of profitability are being stated by Asbury Research LLC. The risk of loss trading in stocks, futures, commodities and Forex can be substantial. You should therefore carefully consider whether such trading is suitable for you in light of your financial condition.
All investment/trend models have inherent limitations in that they look back over previous data but can’t see into the future, and this one is no different. Past performance does not guarantee future results. However, our goals/objectives for this new model seem to have born themselves out on a consistent basis over the time period tested.
Finally, our trend model is not intended to be a stand-alone trading system, but rather a tool that objectively defines the direction of the minor trend with the goal of participating in market advances and avoiding declines. The trend model is just one of dozens of different metrics and data series that we combine to produce a comprehensive market analysis, one which we believe the sum of its parts is collectively more insightful and forward-looking than any of its individual components.
Feel free to contact us with questions.