Mean reversion · daily rule · Indexes & ETFs
Stochastic 20/80 on S&P 500 ETF
What the play says
Latest reading: %K 85.14 · %D 80.81
SPY with the play, last two years
Shading shows the play's call from the close that triggered it.
Stochastic (14, 3, 3)
Dashed lines at 20, 80.
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 | +6.2% | +11.0% | +9.4% | +13.9% |
| Total return | +268% | +861% | +57% | +91% |
| Worst drawdown | −30.6% | −55.2% | −16.2% | −24.5% |
| Volatility | 14.0% | 18.9% | 12.6% | 17.1% |
| Sharpe ratio | 0.37 | 0.55 | 0.48 | 0.62 |
| Time invested | 26% | 100% | ||
| Switches per year | 6.8 | 0 |
Every call, graded
Right on 91 of 148 closed calls (61%). In calls averaged +1.5%; out calls saw SPY move +1.9% on average.
| Called | Call | Price | Until | SPY moved | Result |
|---|---|---|---|---|---|
| Apr 17, 2026 | OUT | $706.56 | now | +10.1% | open |
| Mar 17, 2026 | IN | $665.59 | Apr 17, 2026 | +6.2% | ✓ right |
| Dec 8, 2025 | OUT | $676.33 | Mar 17, 2026 | −1.6% | ✓ right |
| Nov 21, 2025 | IN | $652.00 | Dec 8, 2025 | +3.7% | ✓ right |
| Apr 30, 2025 | OUT | $545.49 | Nov 21, 2025 | +19.5% | ✕ wrong |
| Feb 28, 2025 | IN | $582.73 | Apr 30, 2025 | −6.4% | ✕ wrong |
| Nov 12, 2024 | OUT | $583.44 | Feb 28, 2025 | −0.1% | ✓ right |
| Nov 5, 2024 | IN | $563.69 | Nov 12, 2024 | +3.5% | ✓ right |
| Sep 18, 2024 | OUT | $547.06 | Nov 5, 2024 | +3.0% | ✕ wrong |
| Sep 10, 2024 | IN | $534.77 | Sep 18, 2024 | +2.3% | ✓ right |
| Aug 21, 2024 | OUT | $546.30 | Sep 10, 2024 | −2.1% | ✓ right |
| Jul 29, 2024 | IN | $530.84 | Aug 21, 2024 | +2.9% | ✓ right |
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 149 calls shown.
How the play works
- In when %K crosses above %D while %D is below 20.
- Out when %K crosses below %D while %D is above 80.
Lane said divergence was the only signal that matters. The zone cross is the textbook simplification.
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.