Momentum · month-end rule · Indexes & ETFs
Market-State Momentum on S&P 500 ETF
What the play says
Latest reading: Stock 12-1 return 16.1% · SPY 36-month return 85.0%
SPY with the play, last two years
Shading shows the play's call from the close that triggered it.
Stock's 12-1 return and SPY's 3-year return
Dashed line at 0.
Growth of $10,000 since 2007
Log scale. After trading costs, with T-bill interest while out.
The record
The play against buying and holding SPY over exactly the same dates, after costs.
| Play, since 2007 | Hold, since 2007 | Play, 5 yrs | Hold, 5 yrs | |
|---|---|---|---|---|
| Annual return | +9.8% | +10.9% | +14.1% | +13.9% |
| Total return | +528% | +671% | +93% | +91% |
| Worst drawdown | −33.7% | −55.2% | −18.8% | −24.5% |
| Volatility | 14.7% | 19.6% | 14.5% | 17.1% |
| Sharpe ratio | 0.61 | 0.55 | 0.72 | 0.62 |
| Time invested | 77% | 100% | ||
| Switches per year | 0.9 | 0 |
Every call, graded
Right on 7 of 18 closed calls (39%). In calls averaged +15.6%; out calls saw SPY move +2.8% on average.
| Called | Call | Price | Until | SPY moved | Result |
|---|---|---|---|---|---|
| Apr 28, 2023 | IN | $398.24 | now | +95.4% | open |
| May 31, 2022 | OUT | $388.77 | Apr 28, 2023 | +2.4% | ✕ wrong |
| May 29, 2020 | IN | $278.33 | May 31, 2022 | +39.7% | ✓ right |
| Apr 30, 2020 | OUT | $265.68 | May 29, 2020 | +4.8% | ✕ wrong |
| Feb 28, 2019 | IN | $248.68 | Apr 30, 2020 | +6.8% | ✓ right |
| Jan 31, 2019 | OUT | $240.88 | Feb 28, 2019 | +3.2% | ✕ wrong |
| Jun 30, 2016 | IN | $178.00 | Jan 31, 2019 | +35.3% | ✓ right |
| May 31, 2016 | OUT | $177.38 | Jun 30, 2016 | +0.3% | ✕ wrong |
| Apr 29, 2016 | IN | $174.41 | May 31, 2016 | +1.7% | ✓ right |
| Feb 29, 2016 | OUT | $162.78 | Apr 29, 2016 | +7.1% | ✕ wrong |
| Nov 30, 2015 | IN | $174.46 | Feb 29, 2016 | −6.7% | ✕ wrong |
| Oct 30, 2015 | OUT | $173.83 | Nov 30, 2015 | +0.4% | ✕ wrong |
An in call is right when the price rose before the next call; an out call is right when it fell. The latest 12 of 19 calls shown.
How the play works
- In at month-end when the stock's return from 12 months ago to 1 month ago is above zero and SPY's return over the last 36 months is above zero.
- Out at month-end when either is zero or below.
The paper reported when momentum paid, not a trading rule. Turning it into a hold-or-cash switch is Be The Puck's.
The paper sorts NYSE and AMEX stocks into winner and loser portfolios. A positive 12-1 return stands in for being a winner, as in Be The Puck's 12-1 play.
The paper calls the market up when the value-weighted market's past 36-month return is positive. SPY's 36-month return stands in. On SPY itself, both tests use SPY.
Signals are acted on the first trading day of the next month.
Where the rules come from
The case against
Valeriy Zakamulin tested moving-average timing on up to 155 years of U.S. stock data and found no statistically significant edge in the second half of that record. The rules earned their keep in a few severe bear markets and lagged buy and hold for long stretches in between.