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Could you elaborate on the strategy for the sake of discussion?

The benefit of a SMA filter is not to improve returns but to improve risk-adjusted returns. That is, you get slightly lower return but greatly reduced volatility and drawdown. Faber discusses this in his paper and on his blog.

If you haven't done so already, download the spreadsheet I posted (S&P500 vs. IUL) and look at the SMA section.

vast majority of the time, the buy in was at a higher price than the sell
Yes. And in the vast minority of the time the buy in was much much lower than the sell. 18% lower for 12/2000 to 4/2002. Then IN for one month (which had a 1% loss) and then another 11% lower from 4/02 to 5/03.

It's amazing how much better a portfolio will do if you side-step a couple of 25%-45% losses.
It's amazing how much better you sleep when the market is in freefall if your portfolio is sitting in cash.

You've committed the classic neophyte mistake of thinking that the # of wins vs. losses is important. It's not. What is important is the SIZE of wins vs. losses.

That's why, BTW, most amateur covered call investors end up getting wiped out. They collect dozens and dozens of small wins, winning month after month for as much as a year or two. They think that they've found the route to free money. But then one large loss comes along and they lose as much in one trade as they made in 50 trades.

So....95 times of 100 (or whatever the number is) you'd be slightly better off holding. 3 times of 100 you'd be about even. And 2 times out of 100 your face gets ripped off.

Don't forget, too, the question of what to do with the money when the signal says to get out. In that 2000-2003 period, 1-year T-bills were yielding 6% to 1% (average 2.6%)
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