No. of Recommendations: 30
We've been discussing the book "Seven-Rules-Wall-Street-Crash-Tested" in the "Sector Momentum 84 years" thread.

"Rule 3" the author proposes a twist on the "Sell in May and Go Away" timing method. He suggests that rather than buy the S&P500 index SPY, buy the sectors that do the best for the season. The author presents the Winter (Nov-Apr) and Summer (May-Oct) performance for each sector for 1991 through 2007.

I decided to do an out of sample forward test for 2008-2013 by choosing the three sectors best suited for Winter and for Summer. These choices were based on 1991-2007 and retained throughout the test. The Rydex equal weight ETF prices were used though heavier volume cap weighted ETFs are also available.

These are the sectors, ETFs and seasons used in the 2008-2013 test:

Sector	                Equal	Cap	Season
Consumer Discretionary RCD XLY Winter
Consumer Staples RHS XLP Summer
Energy RYE XLE
Financials RYF XLF Winter
Health Care RYH XLV Summer
Industrials RGI XLI Winter
Information Technology RYT XLK Summer
Materials RTM XLB
Utilities RYU XLU

Here are the results:

SPY Both Winter
CAGR 2.9% 8.9% 11.6%
GSDm 0.206 0.260 0.199
Sharpe(2.5) 0.02 0.25 0.46

MaxDD -49% -51% -35%
Mos to Brk Even 40 27 25
Overall Gain 15% 55% 77%

Both Winter and Summer investing tripled SPY returns. Pretty good for a largely passive method, out of sample. Winter ONLY return was even more impressive since most of the Summer 2008 loss was avoided.

This sector and timing combination may bear more research rather than SPY / RSP alone timing.

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