Volume & money flow · daily rule · Indexes & ETFs
Negative Volume Index on S&P 500 ETF
What the play says
Latest reading: NVI 1,197,061.50 · 255-day EMA 1,003,923.50
SPY with the play, last two years
Shading shows the play's call from the close that triggered it.
Negative Volume Index
Growth of $10,000 since 2005
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 2005 | Hold, since 2005 | Play, 5 yrs | Hold, 5 yrs | |
|---|---|---|---|---|
| Annual return | +9.9% | +11.1% | +13.9% | +13.9% |
| Total return | +674% | +876% | +91% | +91% |
| Worst drawdown | −53.5% | −55.2% | −24.5% | −24.5% |
| Volatility | 18.4% | 18.9% | 17.1% | 17.1% |
| Sharpe ratio | 0.51 | 0.56 | 0.62 | 0.62 |
| Time invested | 99% | 100% | ||
| Switches per year | 0.5 | 0 |
Every call, graded
Right on 2 of 10 closed calls (20%). In calls averaged −7.3%; out calls saw SPY move +5.1% on average.
| Called | Call | Price | Until | SPY moved | Result |
|---|---|---|---|---|---|
| May 29, 2009 | IN | $67.81 | now | +1,047.4% | open |
| May 22, 2009 | OUT | $65.24 | May 29, 2009 | +3.9% | ✕ wrong |
| May 18, 2009 | IN | $66.86 | May 22, 2009 | −2.4% | ✕ wrong |
| May 13, 2009 | OUT | $64.99 | May 18, 2009 | +2.9% | ✕ wrong |
| Apr 24, 2009 | IN | $63.51 | May 13, 2009 | +2.3% | ✓ right |
| Mar 2, 2009 | OUT | $51.37 | Apr 24, 2009 | +23.6% | ✕ wrong |
| Nov 21, 2008 | IN | $57.39 | Mar 2, 2009 | −10.5% | ✕ wrong |
| Nov 14, 2008 | OUT | $62.52 | Nov 21, 2008 | −8.2% | ✓ right |
| Oct 30, 2008 | IN | $69.50 | Nov 14, 2008 | −10.1% | ✕ wrong |
| Oct 29, 2008 | OUT | $67.18 | Oct 30, 2008 | +3.5% | ✕ wrong |
| Jan 6, 2005 | IN | $79.84 | Oct 29, 2008 | −15.9% | ✕ wrong |
An in call is right when the price rose before the next call; an out call is right when it fell. The latest 11 of 11 calls shown.
How the play works
- The index starts at 1,000. On a day when volume is lower than the day before, it moves by that day's percentage price change. On other days it stays put.
- In when the index closes above its 255-day exponential average (Fosback's one-year average).
- Out when it closes below that average.
Fosback studied the index for the whole market. Running it on one stock's own price and volume follows modern charting practice (StockCharts, Fidelity).
The one-year average is a 255-day exponential average, as on StockCharts. The type of average in Fosback's original test was not found.
Daily changes compound, as in Fosback's formula.
The rule needs about a year of history before its first call.
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.