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Author: klouche Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 251806  
Subject: STB Validation Attempt Date: 2/25/2013 5:08 PM
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This is an attempt to validate the STB system mentioned in 241859 and earlier by Alicia.

In summary, for the Nasdaq since 1985; when the trend system indicated to be in the market, returns were 42.5%.

The system uses a pair of trends called near and far. The ratio of near over far indicates an acceleration of price appreciation.
When this ratio is in the upper echelon, or one standard deviation high (with a cutoff); market performance is expected to be positive.

Dataset ^IXIC (Nasdaq) from Yahoo.

Column A Date
Column B is a list of NASDAQ prices from Yahoo
Column C is the near trend =TREND(B31:B60,,{31})/TREND(B31:B60,,{30})-1 (cntrl-shift-enter)
Column D is the far trend =TREND(B2:B31,,{31})/TREND(B2:B31,,{30})-1 (cntrl-shift-enter)
Column E is the ratio of C/D
Column M a flag set to 1 if Column E is between 1.7 and 18.6
Column N is set to market return for day if sum of the past 19 market days represented in Column M is 5 or greater

Trading Summary
81 trades
in market days 1,772 or 26%
CAGR when in market 42.5%


Trade data
Min -9.5%
Max 34.7%
Geomean 3.1%
Median 2.1%


losers 25
winners 56
Geo if loss -3.9%
Geo if win 6.2%

When Returns Occured

Year Return
1986 11.6%
1987 7.9%
1988 8.0%
1989 1.8%
1990 -2.5%
1991 17.3%
1992 15.2%
1993 3.2%
1994 -4.4%
1995 13.1%
1996 15.8%
1997 -0.7%
1998 56.7%
1999 29.5%
2000 4.1%
2001 19.5%
2002 17.7%
2003 3.1%
2004 2.6%
2005 4.6%
2006 -2.1%
2007 -6.3%
2008 -3.7%
2009 39.3%
2010 14.0%
2011 3.8%
2012 8.9%
2013 1.5%


These are the returns for being in the market 26% of the time. When the Nasdaq declined over 80% 2000-2002, this approach had positive returns. The 2008 loss was kept to 3.7%.

On the downside, 2003 to 2007 are flat. During this period other markets such as home builders, Brazil, China, gold soared and the investment would be better served there.

There's much more exploration to be done such as macro timing indicators, lags, trend length and low correlation market baskets. For now we can say it worked well for this bubble reflecting price series which is still well below its all time high.

KL
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