Subject: Re: Chart: timing with Nas100 RS screen
It would seem that with a high volatility screen like this that a shorter moving average timing would be better than a longer SMA period.
It's hard to compare the results of different timing periods by just looking at the overall long-term returns or even by looking at a few chosen time periods. A great overall return might be hiding a 5 or 10 year period with absolutely TERRIBLE losses. Losses that would cause anyone to throw in the towel.
A good bit of information would be to look at all the rolling N-year periods in the long-term run. This backtest, 1985 to 2025, is 40 years. The rolling periods start every month. I examined several rolling periods, so we can get an idea of what we might encounter.
There are 480 rolling 1-year periods, 432 rolling 5-year periods, 372 10-year periods, and 312 15-year periods.
Each month buy/hold the top 10 Nasdaq-100 stocks with the highest 52 week price momentum. Keep any existing holding that is still in the top 12.
First, CAGRs without timing.
# Yrs --> 1 2 3 5 10 15
# >0 387 406 406 416 361 312
# <0 93 62 50 16 11 0
Win % 81% 87% 89% 96% 97% 100%
Yrs --> 1 2 3 5 10 15
Avg 28.9% 25.2% 23.4% 22.9% 21.8% 20.2%
Med 25.7% 23.5% 22.6% 23.6% 20.8% 18.8%
Min -63.1% -48.5% -32.5% -15.8% -4.6% 4.2%
Max 230.9% 142.9% 114.5% 78.1% 53.2% 46.0%
2/3 range 10.6% 15.5% 16.5% 15.5% 18.1% 16.8% <<--- 1/3rd are worse & 2/3 are better.
95% range -30.9% -16.5% -5.1% 0.8% 3.7% 10.4% <<--- 5% are worse & 95% are better.
The thing that is quite important is the worst return (read: loss) of a multi-year period. A large loss over 2 or 3 years will cause people to abandon a winning screen.
Timing is applied at the trade day of each month (month = 21 trading days), using the most recent N week SMA of the S&P500 index. Sell when the current price is 1% below the SMA, buy when at or above the SMA.
CAGR of 43 week (215 day) SMA
# Yrs --> 1 2 3 5 10 15
# >0 379 415 433 424 372 312
# <0 86 53 23 8 0 0
Win % 82% 89% 95% 98% 100% 100%
Yrs --> 1 2 3 5 10 15
Avg 26.1% 23.7% 22.4% 22.2% 22.4% 21.8%
Med 18.8% 20.0% 20.8% 21.2% 21.2% 19.8%
Min -32.6% -16.8% -8.2% -4.6% 3.7% 9.7%
Max 230.9% 134.2% 109.4% 75.5% 46.8% 41.2%
2/3 range 9.4% 13.3% 14.1% 15.6% 16.7% 17.7% <<--- 1/3rd are worse & 2/3 are better.
95% range -14.4% -5.8% 0.1% 2.2% 8.2% 12.1% <<--- 5% are worse & 95% are better.
CAGR 65 week (215 day) SMA
# Yrs --> 1 2 3 5 10 15
# >0 389 431 447 430 372 312
# <0 60 28 9 2 0 0
Win % 87% 94% 98% 100% 100% 100%
Yrs --> 1 2 3 5 10 15
Avg 27.8% 25.6% 24.3% 24.3% 24.7% 24.6%
Med 20.7% 21.8% 23.2% 22.6% 23.2% 24.3%
Min -32.6% -17.4% -3.5% -1.1% 7.2% 13.6%
Max 230.9% 142.9% 114.5% 78.1% 47.9% 41.9%
2/3 range 10.0% 14.0% 15.0% 17.6% 20.2% 20.4% <<--- 1/3rd are worse & 2/3 are better.
95% range -14.3% -3.1% 2.7% 4.9% 12.8% 15.9% <<--- 5% are worse & 95% are better.
Compare the number of multi-year periods with losses for the different timing schemes.
For 3-year periods 50 had a loss without timing, 23 had a loss with 43 week timing, and 9 had a loss with 65 week timing.
For 5-year periods the respective numbers with a loss were 16, 8, and 2.