Cycle Trading

[Duma]

I have the first phase of my project finished. It has some interesting results that I thought I would share now.

I am working on the next phase with is to calculate the trading yield if I was only trading the sectors that are long 100%. Even with my Excel skills, this is taxing me a bit to organize.

So here are my observations to date:

1. Just buying and holding S&P500 long all year has yielded 9.4%.

2. Using my daily phase chart to trade S&P500 has yielded 12.0%. That is a modest 2.6% extra gain. But the key is it protected me from a major market drawdown. Remember trading a daily chart is not meant to make spectacular yields, but to do exactly what it did, beat the market a bit and protect.

3. If I had traded B&H equal portions of the 8 sectors rather than S&P500, I would have had a gain of 12.1%. I find the extra yield remarkable and at the moment unable to explain why. Clearly the makeup of these 8 sectors did better that all the stocks in the S&P500 combined.

4. And this is the most interesting, if I had traded equal allocations of all 8 sectors with the Daily Phase chart, the yield would be 16.7%. Now I see a 5.3% improvement over the basic B&H S&P of 9.4%. This is huge and I am almost tempted to just stop here and say trade the 8 sectors and forget S&P. It would also have the big advantage of providing a way to easily scale in and out of the market as it cycles up and down. As of 12/1, I would only be 5/8 long.