Momentum · month-end rule · Sectors
12-1 Momentum on Financial Select Sector ETF
What the play says
Latest reading: 12-1 return 8.4%
XLF with the play, last two years
Shading shows the play's call from the close that triggered it.
Return from 12 months to 1 month ago
Dashed line at 0.
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 XLF over exactly the same dates, after costs.
| Play, since 2005 | Hold, since 2005 | Play, 5 yrs | Hold, 5 yrs | |
|---|---|---|---|---|
| Annual return | +5.7% | +5.9% | +6.3% | +9.3% |
| Total return | +234% | +245% | +36% | +56% |
| Worst drawdown | −42.9% | −82.7% | −20.2% | −25.8% |
| Volatility | 16.9% | 28.8% | 14.9% | 18.3% |
| Sharpe ratio | 0.31 | 0.28 | 0.23 | 0.37 |
| Time invested | 70% | 100% | ||
| Switches per year | 1.1 | 0 |
Every call, graded
Right on 9 of 24 closed calls (38%). In calls averaged +13.4%; out calls saw XLF move +3.7% on average.
| Called | Call | Price | Until | XLF moved | Result |
|---|---|---|---|---|---|
| Jul 31, 2026 | IN | $56.74 | now | −3.4% | open |
| Jun 30, 2026 | OUT | $53.42 | Jul 31, 2026 | +6.2% | ✕ wrong |
| Dec 29, 2023 | IN | $36.07 | Jun 30, 2026 | +48.1% | ✓ right |
| Oct 31, 2023 | OUT | $30.89 | Dec 29, 2023 | +16.8% | ✕ wrong |
| Jun 30, 2023 | IN | $32.04 | Oct 31, 2023 | −3.6% | ✕ wrong |
| May 31, 2022 | OUT | $32.83 | Jun 30, 2023 | −2.4% | ✓ right |
| Jan 29, 2021 | IN | $26.23 | May 31, 2022 | +25.2% | ✓ right |
| Apr 30, 2020 | OUT | $20.30 | Jan 29, 2021 | +29.2% | ✕ wrong |
| Oct 31, 2019 | IN | $25.22 | Apr 30, 2020 | −19.5% | ✕ wrong |
| Sep 30, 2019 | OUT | $24.60 | Oct 31, 2019 | +2.5% | ✕ wrong |
| Jul 31, 2019 | IN | $24.70 | Sep 30, 2019 | −0.4% | ✕ wrong |
| Jun 28, 2019 | OUT | $24.13 | Jul 31, 2019 | +2.4% | ✕ 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 25 calls shown.
How the play works
- In at month-end when the return from 12 months ago to 1 month ago is above zero.
- Out when it is zero or below.
Jegadeesh and Titman ranked thousands of stocks and bought the winners. Testing one stock against zero is time-series momentum, a related idea.
The skip-a-month form came later; their 1993 paper skipped at most a week.
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.