Momentum · month-end rule · Sectors
12-1 Momentum on Technology Select Sector ETF
What the play says
Latest reading: 12-1 return 32.9%
XLK 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 XLK over exactly the same dates, after costs.
| Play, since 2005 | Hold, since 2005 | Play, 5 yrs | Hold, 5 yrs | |
|---|---|---|---|---|
| Annual return | +13.8% | +16.2% | +18.5% | +22.0% |
| Total return | +1,548% | +2,462% | +132% | +169% |
| Worst drawdown | −31.2% | −53.0% | −30.0% | −33.6% |
| Volatility | 19.3% | 22.6% | 23.3% | 25.9% |
| Sharpe ratio | 0.68 | 0.70 | 0.68 | 0.75 |
| Time invested | 84% | 100% | ||
| Switches per year | 1.2 | 0 |
Every call, graded
Right on 15 of 26 closed calls (58%). In calls averaged +17.2%; out calls saw XLK move +4.1% on average.
| Called | Call | Price | Until | XLK moved | Result |
|---|---|---|---|---|---|
| Apr 28, 2023 | IN | $73.69 | now | +166.3% | open |
| Jun 30, 2022 | OUT | $61.64 | Apr 28, 2023 | +19.5% | ✕ wrong |
| Mar 29, 2019 | IN | $34.67 | Jun 30, 2022 | +77.8% | ✓ right |
| Jan 31, 2019 | OUT | $30.95 | Mar 29, 2019 | +12.0% | ✕ wrong |
| Jun 30, 2016 | IN | $19.50 | Jan 31, 2019 | +58.8% | ✓ right |
| May 31, 2016 | OUT | $19.77 | Jun 30, 2016 | −1.4% | ✓ right |
| Mar 31, 2016 | IN | $19.85 | May 31, 2016 | −0.4% | ✕ wrong |
| Feb 29, 2016 | OUT | $18.24 | Mar 31, 2016 | +8.8% | ✕ wrong |
| Nov 30, 2015 | IN | $19.47 | Feb 29, 2016 | −6.3% | ✕ wrong |
| Oct 30, 2015 | OUT | $19.33 | Nov 30, 2015 | +0.7% | ✕ wrong |
| Apr 30, 2013 | IN | $13.03 | Oct 30, 2015 | +48.4% | ✓ right |
| Mar 28, 2013 | OUT | $12.80 | Apr 30, 2013 | +1.8% | ✕ 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 27 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.