More Relative Strength Back Tests and Time Frame

This year so far I have been on a mission. That mission is to find, if possible, a distinct edge for you and I to utilize in the future. No guarantee one will be found, if one is it will probably end up being a combination of factors. Previous articles (latest first):

The primary thrust has been to utilize sector/industry rotation rather than a major market index. Last week I updated our Fidelity Select Rotational which consists basically of 41 sectors and industries.  I also have a list of 79 sector/industry ETFs from which today’s back tests will occur. The test rules:

  • Buy the top two ETFs by relative strength rank and hold those two ETFs until such time as they are replaced in the top 2 rankings.
  • Calculations are at the end of the month and fills are at the opening price the next trading day.
  • I believe it was in James O’Shaughnessy writings, where he stated that it seems the 6 month time frame  worked best. We will test that time frame as well as 3 month and 12 month time frames.
  • Since many of these ETFs are relatively new I will just test our “bull market” period from 11/2009 to present.

Reading the Back test report, i.e. what each line means: Here!

I am not going to interpret the above for you. I do not know what is most and least important to any individual, only you can determine that.  The usual caveat; simply past performance may not be indicative of future results.

Now for time frames let’s compare the tree time frames: 6 month, 3 month, and 12 month. Results are posted together for ease of comparison.

Pretty Interesting results! No? Something for everyone in the above data.

Members: More on this in last evenings attached notes!