Larry,

If I recall correctly the "Safe Strategies" book had a blurb on investing in ETF's for the S&P 500 similar to what we do with COT. Right now with strategy 5 we have good entry parameters (short COT and below 40 DMA). However if I remember right the safe strategies system also had you reduce posisiton if the S&P decided to go against you, and you would move to cash 25% each successive week until the S&P decided to go below the 40 day DMA again.

Just a quick look at the charts shows that the S&P was below the 40 DMA roughly only about 3 months in 2005, while we were short the entire time. Would it make sense to incorporate into the strategy a neutral position (neither long nor short) if the trend goes against the COT to eliminate downside when the market decides to do it's own thing?

Thanks
Kevin

Kevin,

I backtested it a long time ago. And all I can tell you is that it doesn't test as well as the way we're doing it over a 19 year period of time. Having said that, I think it's fine. It's just another way to manage money. I don't see anything wrong with it at all.

Larry

Kevin,

You said, "Right now with strategy 5 we have good entry parameters (short COT and below 40 DMA)."

Did you mean the SPX is below its 40DMA? It's not.

Please explain.

Thanks,
Steve (Glad I'm no longer short from 892. I feel your pain, people.)

larry,

i may have asked this before (can't remember) - but have you compared the results of the COT vs SAR using strategy 5's risk mgmt?

thanks.

-ja

Joe,

I have tested a PSAR/COT strategy by being out of the market when the weekly PSAR does not agree with the COT signal. It doesn't work as well. No strategy that keeps you out of the market for long periods of time is going to test as well as Strategy 5 over a 19 year period of time.

I have not tested it using the same levereged and non-leveraged variables that we're using with Strategy 5. I would think it would work just as well (maybe a little better) as using the 40 week moving average, especially if you used the slower weekly PSAR setting.

I can tell you what's going to happen. People are going to look at the last two years and come up with a strategy that worked well during that period of time and try to project it out into the future. That's going to be a big mistake.

Larry

<<I can tell you what's going to happen. People are going to look at the last two years and come up with a strategy that worked well during that period of time and try to project it out into the future. That's going to be a big mistake.>>

Larry,

I did look into that. Then I applied the preliminary results to the previous 17 years and it resulted in more transactions and worse return.

Steve

Steven,

Those parameters were for entry points - but once we are in we are in as long as the COT is short, but regardless if S&P goes back above the 40 DMA. Right now it is. I was bringing up the "Safe Strategies" method of reducing your position if the market diverges.