This one is easy. Just never sell short. Stay long when the trend is up. Go to cash or Treasury Bills in downturns.
Observe that the most protracted downtrends, evinced by the blue line, occur within the context of extended bear markets.
The original system was built with a complete set of bull-market data and a limited set of bear-market data--the last six months of the previous bear market.
The long-term trend indicator was incorporated into the system in February of 2008 prior to the severe drop off in the market that started in May of the same year.
The table shows the results since inception.
TABLE OF RESULTS
Relation of Choices to Profits & Worst-Case Drawdowns
|
profit |
tot% |
% max |
|
|
Choices/Benchmarks
|
%/year |
gain |
drawdn |
CF |
|
Buy/sshrt SPY |
34.2 |
632 |
-21.3 |
30 |
|
Buy/sshrt btm 2 |
31.6 |
541 |
-39.0 |
14 |
|
Long only w timing |
30.3 |
501 |
-19.9 |
25 |
|
Long only no timing |
18.3 |
213 |
-33.6 |
6 |
|
avg Portfolio price |
4.0 |
30 |
-24.5 |
1 |
|
sshort only |
1.0 |
7 |
-23.9 |
0 |
|
|
|
|
|
|
Nasdaq 100 |
2.8 |
21 |
-51.9 |
0 |
|
SP500 |
-2.8 |
-18 |
-56.2 |
neg |
CF is a ratio of
total%gain
to worst %drawdn.)
The system drawdown for the second choice in the table, Buy/sshrt btm 2, in 2002 was -30.3%. Using the sshrt SPY choice as the worst-case drawdown parameter then would be inappropriate.
It would have been totally unimaginable as a realistic alternative to selling short the two weakest ETFs--in the same category as then even thinking of the solo-star super role the federal government now plays on the Nation's financial stage in the theater of economics with an air of omnipotence and knowledge unimaginable even now.
| 