New SP500 Trading Models

NEW MARKET-TIMING MODEL ANNOUNCEMENT

1.OPTIMUM-2

We have launched the much-anticipated OPTIMUM2 SP500 Trading model. It is available in the PRO CHARTS page in the OPT2 tab.

OPTIMUM2 dynamically calculates optimal support & resistance levels that act as entry/exit signals for the SP500 in the 15 years since Feb 2009. As at 05 Jun 2024, the SP500 has returned 579.1% whilst the OPT2 long + short strategy returned 1,351.7% in 20 long and 20 short trades, or 1,030% in 20 long-only trades (in cash on short legs, interest on cash excluded from returns calculation).

It is a bull market optimised strategy and its use is therefore predicated on the assumption we are in an ongoing bull market. Therefore should we enter a bear market, losses will amplify as the model begins to prematurely allow long trades leadings to strings of losses. It is therefore not advisable to treat this as an ALL-MARKETS model!

The OPT2 trade status panel that is updated daily (including the trade stats tables) looks as follows when selecting the OPT2 tab:

The support/resistance levels keeping the long/short trade alive apply to closing prices and it therefore best to monitor status of the SP500 just before going into the closing auction each day to perform trade actions in order to closest follow the model. Levels are provided for yesterday, now and what they will be tomorrow to facilitate this. We will be issuing PRO Alerts when levels are being approached intraday.

The OPT2 resistance & support levels are also provided on an intraday updated basis in the PRO>SP500 Charts in the SP500 Technical Analysis T/A tab. They are labelled DTS: Higher price and DTS: Lower price accordingly. This allows you to observe the relationship between the SP500 and these levels during the course of a trading day to gauge and anticipate potential trade action.

It is important to understand that the trade actions are based on closing prices. Thus when the SP500 closes above yesterdays resistance level (the resistance level is thus pushed upwards) then we initiate a long trade if we are short. Conversely if the SP500 closes below the support level (pushes it downwards) then we initiate a long trade if we are in cash or short.

A detailed research note will be following in a few weeks, as our research team is working on several enhancements to the model to improve performance including potential dynamic algorithmic rules for transitioning from bull-market to an all-markets model at the appropriate times and other adaptations to allow for higher or lower frequency of trades to cater to different risk appetites.

2. OPTIMUM-3

A “OPT3” SP500 trading strategy, a higher-frequency companion to “OPT2” is now live in the PRO>CHARTS in the “OPT3” tab.

This represents support & resistance levels that acted as more rapid entry/exit signals for the SP500 in the 15 years since Feb 2009. It delivers 36 long & 36 short trades as opposed to the OPT2 strategy which delivered 20 long and 20 short trades.

OPT2 is optimized for best longs gain/loss ratios (best long risk/reward factors) of 17.5-to-1 (vs OPT3’s 12.4-to-1). This means for each 1% loss made in the strategy, it will claw back 17.5% in a winning trade. OPT2 also incidentally happens to be the best available win rate % shorting strategy in the 15 years.

The newer OPT3 on the other hand, is optimized for best longs win rate % (83.3% vs. OPT2’s 70%). Whilst the shorting strategy is not ideal in OPT3, the fact that it can deliver almost double the volume of trades for a higher win rate than OPT2 is remarkable.

The OPT3 trade status panel that is updated daily (including the trade stats tables) looks as follows when selecting the OPT3 tab:

The recommended trading strategy is to apportion 50% allocation to the OPT2 strategy, executing longs and shorts, while allocating the remaining 50% to the OPT3 strategy, executing longs-only and staying in cash when OPT3 is short.

OPT1, OPT2 and OPT3 strategies will be accompanied with email alerts on trade status changes for PRO subscribers, as well as alert entries in the ALERTS log.

 

About RecessionALERT

Dwaine has a Bachelor of Science (BSc Hons) university degree majoring in computer science, math & statistics and is a full-time trader and investor. His passion for numbers and keen research & analytic ability has helped grow RecessionALERT into a company used by hundreds of hedge funds, brokerage firms and financial advisers around the world.
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  WE HAVE GONE LIVE WITH THE MORE RAPID OPT3 COMPANION TO THE RECENTLY LAUNCHED OPT2 SP500 TRADING STRATEGY. SEE THE ANNOUNCEMENT IN THE LINK ON THE RIGHT FOR MORE DETAILS AND APPLICATION NOTES.