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Quantitative Technical Research
• formal systematic process in which numerical data are used to obtain information about securities and financial markets
• describe variables• examine relationships among variables• assess probabilities associated with cause and
effect interactions between variables
strategy development considerations
• know thyself• time frame- frequency of trades• absolute or relative returns• drawdowns• simplicity• practicality• sweetspot and limitations
Testing
• Hypothesis• Parameters• Test – in sample, out of sample • Indicators • Portfolio Level Strategy
What to test
• Market breadth: advance/decline, 4 Week High, 10 Week MA, 52 Week
• Sentiment: AAII, Investors Intelligence • Trend and Trend Momentum: Short,
Intermediate and Long Term• Relative Strength: ROC, Weighted ROC,
MA/MA,
WHY?
• Breadth: assess market risk – correlation• Sentiment: extreme levels – market inflection
points • Trend & Trend Momentum: probability of
market and individual security direction• Relative Strength: assess attractiveness of
security vs. group of securities • Relative Strength: broad asset allocation
Quantitative Strategy
• processes can improve ability to collect, assimilate and apply information
• scientific repeatable process with definable prospects
• methodical, systematic approaches to managing market risk, allocating portfolio capital and security selection
• reduce emotional and subjective components of investment decision making process
Market breadth
• Market breadth models• Advance Decline • 4 Week High• % above 10 Week MA• 52 Week High Low• Price Volume
Advance Decline
• represents the amount of liquidity in the markets
• one stock – one vote • Nasdaq preferred over NYSE • advance decline line – moves too slow • acceleration/deceleration in advancing vs.
declining issues tends to expand and contract representing “liquidity waves”
McClellan
• Sherman and Marion McClellan created the McClellan Oscillator and Summation Index (son Tom continues on tradition of innovative indicator development)
• Oscillator – difference of the 10% and 5% trend of advances minus declines divided by advances plus declines
• Summation Index – addition of the daily oscillator values
Nasdaq Summation Index at a 20 day high and Nasdaq 50 day MA positive slope
Test Period Nasdaq Average 21 Day Return Strategy Average 21 Day Return
1978-2000 1.55% 1.88%
2000-current 0.09% 0.49%
1978 - current 1.03% 1.43%
Nasdaq Summation Index
1/4/2
010
1/23/2
010
2/11/2
010
3/2/2
010
3/21/2
010
4/9/2
010
4/28/2
010
5/17/2
010
6/5/2
010
6/24/2
010
7/13/2
010
8/1/2
010
8/20/2
010
9/8/2
010
9/27/2
010
10/16/2
010
11/4/2
010
11/23/2
010
12/12/2
010
12/31/2
010
1/19/2
011
2/7/2
011
2/26/2
011
3/17/2
011
4/5/2
011
4/24/2
011
5/13/2
011
6/1/2
011
6/20/2
011
7/9/2
011
7/28/2
011
8/16/2
011
9/4/2
011
9/23/2
011
10/12/2
011
10/31/2
011
11/19/2
011
12/8/2
011
12/27/2
011
1/15/2
012
2/3/2
012-1200
-1000
-800
-600
-400
-200
0
200
400
600
800
Summation Index Observations
• indicator Peaks 4/26/2010, 1/18/2011 • indicator Bottoms 7/7/2010, 8/23/2011 • direction and level are important (short and
intermediate term signals)• daily data has become more volatile• consult weekly advance decline • include volume
S&P 500 Weekly price& Weekly A/D Oscillator
1/4/2
010
1/27/2
010
2/19/2
010
3/14/2
010
4/6/2
010
4/29/2
010
5/22/2
010
6/14/2
010
7/7/2
010
7/30/2
010
8/22/2
010
9/14/2
010
10/7/2
010
10/30/2
010
11/22/2
010
12/15/2
010
1/7/2
011
1/30/2
011
2/22/2
011
3/17/2
011
4/9/2
011
5/2/2
011
5/25/2
011
6/17/2
011
7/10/2
011
8/2/2
011
8/25/2
011
9/17/2
011
10/10/2
011
11/2/2
011
11/25/2
011
12/18/2
011
1/10/2
012
2/2/2
012
2/25/2
012
3/19/2
012
4/11/2
012
5/4/2
012
5/27/2
012800
900
1000
1100
1200
1300
1400
1500
-15
-10
-5
0
5
10
S&P 500 Weekly Price &4 Week High Oscillator
1/4/2
010
1/27/2
010
2/19/2
010
3/14/2
010
4/6/2
010
4/29/2
010
5/22/2
010
6/14/2
010
7/7/2
010
7/30/2
010
8/22/2
010
9/14/2
010
10/7/2
010
10/30/2
010
11/22/2
010
12/15/2
010
1/7/2
011
1/30/2
011
2/22/2
011
3/17/2
011
4/9/2
011
5/2/2
011
5/25/2
011
6/17/2
011
7/10/2
011
8/2/2
011
8/25/2
011
9/17/2
011
10/10/2
011
11/2/2
011
11/25/2
011
12/18/2
011
1/10/2
012
2/2/2
012
2/25/2
012
3/19/2
012
4/11/2
012
5/4/2
012
5/27/2
012800
900
1000
1100
1200
1300
1400
1500
-0.2
-0.15
-0.1
-0.05
0
0.05
0.1
0.15
S&P 500 & Intermediate Term Momentum
1/4/2
010
1/27/2
010
2/19/2
010
3/14/2
010
4/6/2
010
4/29/2
010
5/22/2
010
6/14/2
010
7/7/2
010
7/30/2
010
8/22/2
010
9/14/2
010
10/7/2
010
10/30/2
010
11/22/2
010
12/15/2
010
1/7/2
011
1/30/2
011
2/22/2
011
3/17/2
011
4/9/2
011
5/2/2
011
5/25/2
011
6/17/2
011
7/10/2
011
8/2/2
011
8/25/2
011
9/17/2
011
10/10/2
011
11/2/2
011
11/25/2
011
12/18/2
011
1/10/2
012
2/2/2
012
2/25/2
012
3/19/2
012
4/11/2
012
5/4/2
012
5/27/2
012800
900
1000
1100
1200
1300
1400
1500
-50.00
-40.00
-30.00
-20.00
-10.00
0.00
10.00
20.00
30.00
40.00
50.00
S&P 500 & Long Term Momentum
1/4/2
010
1/27/2
010
2/19/2
010
3/14/2
010
4/6/2
010
4/29/2
010
5/22/2
010
6/14/2
010
7/7/2
010
7/30/2
010
8/22/2
010
9/14/2
010
10/7/2
010
10/30/2
010
11/22/2
010
12/15/2
010
1/7/2
011
1/30/2
011
2/22/2
011
3/17/2
011
4/9/2
011
5/2/2
011
5/25/2
011
6/17/2
011
7/10/2
011
8/2/2
011
8/25/2
011
9/17/2
011
10/10/2
011
11/2/2
011
11/25/2
011
12/18/2
011
1/10/2
012
2/2/2
012
2/25/2
012
3/19/2
012
4/11/2
012
5/4/2
012
5/27/2
012800
900
1000
1100
1200
1300
1400
1500
-30.00
-20.00
-10.00
0.00
10.00
20.00
30.00
40.00
50.00
60.00
Weekly Trend Momentum Observations
• Momentum tends to precede price• Unique metric characteristics: trend stability
yet responsive at market inflection points • Recent Intermediate Term peak: 3.30.2012 • Recent Intermediate Term bottom?:6.8.2012
AAII Sentiment
• Threshold of 2 to 1 bears vs. bulls• Recent signal on 5.17.2012• Back tested results (4 week hold) • 56 profitable trades – average gain of 4.79%• 17 unprofitable trades – average loss of 3.82%• Win Loss = 76.7%
AAII Sentiment
1-15-88
10-15-88
7-15-89
4-15-90
1-15-91
10-15-91
7-15-92
4-15-93
1-15-94
10-15-94
7-15-95
4-15-96
1-15-97
10-15-97
7-15-98
4-15-99
1-15-00
10-15-00
7-15-01
4-15-02
1-15-03
10-15-03
7-15-04
4-15-05
1-15-06
10-15-06
7-15-07
4-15-08
1-15-09
10-15-09
7-15-10
4-15-11
1-15-12500000
1000000
1500000
2000000
2500000
3000000
3500000
AAII SentimentProspero
1 WK2 WK3 WK4 WK
Intermarket Anaysis
• John Murphy• branch of technical analysis that examines
relationships between stocks, bonds, commodities and currencies
• relationships contain important information about the business cycle and hold important implications for asset allocation
Relationship of Stocks and Interest RatesWeekly returns - S&P 500 & 10 Year Yields
• Correlations • 1960s -.050• 1970s -.288 • 1980s -.278• 1990s -.268• 2000s .388• 2007-current .452
• In most of history, rising rates have been associated with declining stock prices
• Structural changes in economy (borrowing and demand for goods) have caused relationship to invert
Hypothetical results: Long SPY when intermediate term trend is positive AND 10 Year Yield trend is negative
(1962-2011)
5/14/1
962
8/14/1
963
11/14/1
964
2/14/1
966
5/14/1
967
8/14/1
968
11/14/1
969
2/14/1
971
5/14/1
972
8/14/1
973
11/14/1
974
2/14/1
976
5/14/1
977
8/14/1
978
11/14/1
979
2/14/1
981
5/14/1
982
8/14/1
983
11/14/1
984
2/14/1
986
5/14/1
987
8/14/1
988
11/14/1
989
2/14/1
991
5/14/1
992
8/14/1
993
11/14/1
994
2/14/1
996
5/14/1
997
8/14/1
998
11/14/1
999
2/14/2
001
5/14/2
002
8/14/2
003
11/14/2
004
2/14/2
006
5/14/2
007
8/14/2
008
11/14/2
009
2/14/2
0111000000
3000000
5000000
7000000
9000000
11000000
13000000
S&P 500 Trend up, yield trend up (green)S&P 500 trend up, yield trend negative (blue)
9/17/2
007
11/5/2
007
12/24/2
007
2/11/2
008
3/31/2
008
5/19/2
008
7/7/2
008
8/25/2
008
10/13/2
008
12/1/2
008
1/19/2
009
3/9/2
009
4/27/2
009
6/15/2
009
8/3/2
009
9/21/2
009
11/9/2
009
12/28/2
009
2/15/2
010
4/5/2
010
5/24/2
010
7/12/2
010
8/30/2
010
10/18/2
010
12/6/2
010
1/24/2
011
3/14/2
011
5/2/2
011
6/20/2
011
8/8/2
011
9/26/2
011
11/14/2
011
1/2/2
012
2/20/2
012
4/9/2
012
5/28/2
0128000000
9000000
10000000
11000000
12000000
13000000
14000000
Relative Strength lineSPY/IEF
1/3/2
011
1/16/2
011
1/29/2
011
2/11/2
011
2/24/2
011
3/9/2
011
3/22/2
011
4/4/2
011
4/17/2
011
4/30/2
011
5/13/2
011
5/26/2
011
6/8/2
011
6/21/2
011
7/4/2
011
7/17/2
011
7/30/2
011
8/12/2
011
8/25/2
011
9/7/2
011
9/20/2
011
10/3/2
011
10/16/2
011
10/29/2
011
11/11/2
011
11/24/2
011
12/7/2
011
12/20/2
011
1/2/2
012
1/15/2
012
1/28/2
012
2/10/2
012
2/23/2
012
3/7/2
012
3/20/2
012
4/2/2
012
4/15/2
012
4/28/2
012
5/11/2
012
5/24/2
012
6/6/2
0121.00
1.05
1.10
1.15
1.20
1.25
1.30
1.35
1.40
1.45
Relative Strength &Asset Allocation (EEM/SPY)
1/3/2
007
2/21/2
007
4/11/2
007
5/30/2
007
7/18/2
007
9/5/2
007
10/24/2
007
12/12/2
007
1/30/2
008
3/19/2
008
5/7/2
008
6/25/2
008
8/13/2
008
10/1/2
008
11/19/2
008
1/7/2
009
2/25/2
009
4/15/2
009
6/3/2
009
7/22/2
009
9/9/2
009
10/28/2
009
12/16/2
009
2/3/2
010
3/24/2
010
5/12/2
010
6/30/2
010
8/18/2
010
10/6/2
010
11/24/2
010
1/12/2
011
3/2/2
011
4/20/2
011
6/8/2
011
7/27/2
011
9/14/2
011
11/2/2
011
12/21/2
011
2/8/2
012
3/28/2
0120.15
0.2
0.25
0.3
0.35
0.4
0.45
Trend Scoring System
• uniform way to objectively assess the merits of buying, selling or holding a security at any point in time
• score weights are based on weekly trend, trend momentum and relative strength
• metric weighting = 1 point if positive • maximum score =7, minimum score = 0• max score for SPY = 5, cannot achieve 2
additional from RS vs. itself
Scoring components
• Short term trend • Intermediate term trend• Long term trend• Intermediate term momentum• Long term momentum• Intermediate term relative strength• Long term relative strength
characteristics of scoring system
• Score = ideally 4 or higher (move from below 4 to above 4 is generally important
• Score direction – improving trend in score tends to correlate with improving price trend
• Turnaround – a score of 0 that improves to 1 or 2 is indicative of improving trend momentum (momentum precedes price)
• High score represents positive relative strength
iShares ETFs scores 1.17.2011-1.9.2012
Date SPY DJP EEM EFA GLD ICF IJH IJJ IJK IJR IJS IJT IVE IVW JJGQQ
Q SH UUP
10/17/2011 1 0 0 0 4 1 1 1 1 1 1 1 1 4 0 6 5 6
10/24/2011 2 0 0 1 4 0 1 2 1 2 2 2 2 4 0 7 6
10/31/2011 3 0 2 2 4 3 3 3 3 3 3 3 3 6 0 7 1 5
11/7/2011 3 0 2 3 5 3 3 3 3 3 3 3 3 7 0 7 0 3
11/14/2011 4 1 2 3 5 5 3 3 3 3 3 3 3 7 0 7 0 2
11/21/2011 4 1 2 2 5 5 3 3 3 3 3 3 3 7 0 7 0 4
11/28/2011 2 1 2 2 4 3 2 2 2 2 2 2 2 5 0 6 1 6
12/5/2011 3 1 2 2 6 3 3 3 2 3 3 4 3 7 0 6 0 7
12/12/2011 4 1 2 2 5 3 3 3 3 5 5 7 3 7 0 6 0 7
12/19/2011 4 0 2 1 4 5 3 3 2 6 5 7 3 7 0 5 0 7
12/26/2011 5 0 2 0 2 7 3 4 3 7 6 7 4 6 0 3 0 7
1/2/2012 5 0 2 1 2 7 3 4 3 7 7 7 4 7 1 4 0 7
1/9/2012 5 1 1 1 2 7 4 4 3 7 7 7 6 6 2 5 0 7
iShares scores 1.16-4.2.2012
Date SPY DJP EEM EFA GLD ICF IJH IJJ IJK IJR IJS IJT IVE IVW JJG QQQ SH UUP
1/16/2012 5 1 3 2 1 7 5 5 4 7 7 7 6 6 1 5 0 5
1/23/2012 5 1 3 3 1 7 5 6 5 7 7 7 6 6 2 6 0 5
1/30/2012 5 3 4 3 2 7 5 6 5 7 7 7 6 6 3 6 0 3
2/6/2012 5 3 4 4 4 7 6 6 5 7 7 7 6 5 3 7 0 3
2/13/2012 5 3 4 4 4 7 6 7 5 7 7 7 7 5 3 7 0 3
2/20/2012 5 3 5 4 4 7 6 7 5 7 7 7 7 5 3 7 0 2
2/27/2012 5 3 5 5 5 7 7 7 6 7 7 7 7 5 3 7 0 2
3/5/2012 5 3 5 5 5 6 7 7 6 7 7 7 6 5 3 7 0 2
3/12/2012 5 3 5 5 5 6 7 7 6 7 7 7 6 5 4 7 0 2
3/19/2012 5 3 5 5 4 4 7 7 6 7 6 5 7 5 4 7 0 2
3/26/2012 5 2 5 5 2 4 6 7 5 6 6 5 7 5 4 7 0 2
4/2/2012 5 2 5 5 2 4 5 6 5 6 6 4 7 5 4 7 0 1
SPY DJP EEM EFA GLD ICF IJH IJJ IJK IJR IJS IJT IVE IVW JJG QQQ SH UUP
iShares scores 4.2-6.18.2012
Date SPY DJP EEM EFA GLD ICF IJH IJJ IJK IJR IJS IJT IVE IVW JJG QQQ SH UUP
4/2/2012 5 2 5 5 2 4 5 6 5 6 6 4 7 5 4 7 0 1
4/9/2012 5 1 4 4 1 4 4 4 5 5 6 4 6 6 5 7 0 2
4/16/2012 4 1 3 3 1 4 4 4 4 3 4 4 4 7 5 7 1 3
4/23/2012 4 0 3 3 1 5 4 3 4 3 3 3 4 6 5 7 1 1
4/30/2012 4 0 2 3 1 7 4 3 4 3 3 3 4 6 5 6 1 0
5/7/2012 4 0 2 2 1 7 3 3 3 2 2 3 3 6 5 6 2 0
5/14/2012 2 0 1 2 0 7 2 2 2 2 2 2 2 5 2 4 2 2
5/21/2012 2 0 0 0 0 6 2 2 2 2 2 2 2 4 4 4 3 5
5/28/2012 2 0 0 0 0 4 2 2 2 2 1 2 2 4 2 4 3 5
6/4/2012 2 0 0 0 0 4 1 1 1 1 1 1 1 4 0 4 3 6
6/11/2012 1 0 0 0 0 4 1 1 1 1 1 1 1 4 0 4 3 6
6/18/2012 2 0 0 0 0 5 1 1 1 1 1 1 1 4 0 4 3 6
Perf. Signal 8.74%NA -0.47% -2.93% -3.64%14.01% 8.72% 8.77% 7.68% 8.35%10.63% 9.28%10.88% 9.96% -4.38%13.27%NA 0.18%
EEM & Trend Score
1/3/2
011
1/16/2
011
1/29/2
011
2/11/2
011
2/24/2
011
3/9/2
011
3/22/2
011
4/4/2
011
4/17/2
011
4/30/2
011
5/13/2
011
5/26/2
011
6/8/2
011
6/21/2
011
7/4/2
011
7/17/2
011
7/30/2
011
8/12/2
011
8/25/2
011
9/7/2
011
9/20/2
011
10/3/2
011
10/16/2
011
10/29/2
011
11/11/2
011
11/24/2
011
12/7/2
011
12/20/2
011
1/2/2
012
1/15/2
012
1/28/2
012
2/10/2
012
2/23/2
012
3/7/2
012
3/20/2
012
4/2/2
012
4/15/2
012
4/28/2
012
5/11/2
012
5/24/2
012
6/6/2
01230.00
35.00
40.00
45.00
50.00
55.00
0
1
2
3
4
5
6
7
QQQ and Trend Score
1/3/2
011
1/16/2
011
1/29/2
011
2/11/2
011
2/24/2
011
3/9/2
011
3/22/2
011
4/4/2
011
4/17/2
011
4/30/2
011
5/13/2
011
5/26/2
011
6/8/2
011
6/21/2
011
7/4/2
011
7/17/2
011
7/30/2
011
8/12/2
011
8/25/2
011
9/7/2
011
9/20/2
011
10/3/2
011
10/16/2
011
10/29/2
011
11/11/2
011
11/24/2
011
12/7/2
011
12/20/2
011
1/2/2
012
1/15/2
012
1/28/2
012
2/10/2
012
2/23/2
012
3/7/2
012
3/20/2
012
4/2/2
012
4/15/2
012
4/28/2
012
5/11/2
012
5/24/2
012
6/6/2
01240.00
45.00
50.00
55.00
60.00
65.00
70.00
0
1
2
3
4
5
6
7
8
IJH (iShares S&P Mid Cap)Red =Trend Score 0-3, Green = Trend Score 4-7
7/24/2
000
11/24/2
000
3/24/2
001
7/24/2
001
11/24/2
001
3/24/2
002
7/24/2
002
11/24/2
002
3/24/2
003
7/24/2
003
11/24/2
003
3/24/2
004
7/24/2
004
11/24/2
004
3/24/2
005
7/24/2
005
11/24/2
005
3/24/2
006
7/24/2
006
11/24/2
006
3/24/2
007
7/24/2
007
11/24/2
007
3/24/2
008
7/24/2
008
11/24/2
008
3/24/2
009
7/24/2
009
11/24/2
009
3/24/2
010
7/24/2
010
11/24/2
010
3/24/2
011
7/24/2
011
11/24/2
011
3/24/2
01220
30
40
50
60
70
80
90
100
110
Dividend and Yield ETF Universe
Date SPY DEM DES DLN DON DOO DVY DWX EDIV FDL FVD HYG IYR JNK PFF PHB SCHD SDY VIG
4/23/2012 4 3 2 5 3 0 3 1 2 3 3 3 6 3 4 3 5 3 4
4/30/2012 4 2 3 5 3 1 4 0 2 3 3 3 7 3 4 3 4 3 4
5/7/2012 4 2 2 4 3 0 3 0 0 3 3 3 7 3 3 3 4 3 3
5/14/2012 2 2 2 4 2 0 3 0 0 3 3 3 7 3 3 3 4 2 2
5/21/2012 2 1 2 4 2 0 4 0 0 5 2 2 6 2 2 3 2 2 2
5/28/2012 2 0 2 4 2 0 4 0 0 5 2 2 4 2 3 3 2 2 2
6/4/2012 2 0 1 4 1 0 4 0 0 5 4 3 4 3 4 3 3 2 1
6/11/2012 1 0 1 4 1 0 4 0 0 5 4 3 4 3 4 3 3 3 2
6/18/2012 2 0 1 4 1 0 5 0 0 7 4 3 5 3 5 3 4 4 2
Symbol SPY DEM DES DLN DON DOO DVY DWX EDIV FDL FVD HYG IYR JNK PFF PHB SCHD SDY VIG
YTD Perf. 7.9% 0.7% 5.9% 6.8% 4.2% -3.8% 4.9% -4.1% -4.8% 6.4% 4.6% 2.2% 10.9% 3.7% 10.5% 2.8% 5.9% 4.4% 4.2%
Perf. Signal 8.7% 1.2% 7.5% 13.1% 8.8% -3.3% 3.5% -5.3% 0.6% 4.8% 4.3% 5.9% 10.3% 4.0% 1.6% 5.5%NEW NEW 11.2%
Nasdaq 100 Top 10 RS RANK vs. S&P 500
3/5/2012
3/12/2012
3/19/2012
3/26/2012
4/2/2012
4/9/2012
4/16/2012
4/23/2012
4/30/2012
5/7/2012
5/14/2012
5/21/2012
5/28/2012
6/4/2012
6/11/2012
6/18/2012Date
4 5 5 5 5 5 5 5 4 4 2 2 2 1 1 1MNST
92 90 89 84 83 83 85 88 88 87 35 11 3 2 2 2VRTX
7 7 8 9 9 8 9 8 8 6 5 3 4 4 3 3ROST
12 14 16 15 15 13 13 12 11 11 10 10 9 8 7 4DLTR
3 3 2 3 3 3 3 3 5 5 7 7 6 6 6 5ALXN
5 4 4 2 2 2 2 2 2 2 3 4 5 5 5 6AAPL
1 1 1 1 1 1 1 1 1 1 1 1 1 3 4 7STX
97 97 96 96 96 95 95 95 91 82 67 47 28 20 16 8EXPE
11 11 14 16 16 14 12 11 10 9 6 6 7 7 8 9ORLY
9 10 10 12 14 16 14 14 16 13 11 13 12 11 9 10WFM
Nasdaq 100 Top Scores
Date 4/2/2012 4/9/2012 4/16/2012 4/23/2012 4/30/2012 5/7/2012 5/14/2012 5/21/2012 5/28/2012 6/4/2012 6/11/2012 6/18/2012Date
AMZN 3 3 3 3 5 6 7 7 7 7 7 7AMZN
BMC 4 4 4 4 6 6 6 6 7 7 7 7BMC
DLTR 7 7 7 7 7 7 7 6 7 5 5 7DLTR
EXPE 3 3 2 1 3 4 6 6 7 7 7 7EXPE
MNST 7 7 7 7 7 7 7 7 7 7 7 7MNST
VRTX 5 5 3 2 1 1 7 7 7 7 7 7VRTX
WCRX 3 2 1 1 4 6 6 7 7 7 7 7WCRX
BBBY 6 7 7 7 7 7 7 7 7 7 6 6BBBY
CERN 7 7 7 6 6 6 6 6 6 6 5 6CERN
COST 6 6 5 4 3 2 2 2 2 4 5 6COST
EBAY 7 7 7 7 7 7 7 7 7 6 6 6EBAY
QGEN 3 3 2 3 5 6 6 6 7 7 7 6QGEN
Nasdaq 100 Lowest Scores
Date 4/2/2012 4/9/2012 4/16/2012 4/23/2012 4/30/2012 5/7/2012 5/14/2012 5/21/2012 5/28/2012 6/4/2012 6/11/2012 6/18/2012Date
ORCL 3 4 2 1 2 0 0 0 0 0 0 0ORCL
PCAR 6 6 4 3 2 2 0 0 0 0 0 0PCAR
SHLD 7 6 5 2 1 0 0 0 0 0 0 0SHLD
SIRI 7 7 6 6 5 4 4 3 2 1 0 0SIRI
SNDK 4 2 1 0 0 0 0 0 0 0 0 0SNDK
SPLS 5 5 5 5 4 3 1 0 0 0 0 0SPLS
SYMC 5 5 5 5 3 1 0 0 0 0 0 0SYMC
TEVA 4 4 4 4 4 4 3 0 0 0 0 0TEVA
TXN 4 4 3 2 2 2 2 1 0 0 0 0TXN
VMED 4 5 3 2 2 0 0 0 0 0 0 0VMED
WYNN 4 5 5 5 5 6 3 0 0 0 0 0WYNN
XLNX 6 6 3 3 3 2 2 1 1 0 0 0XLNX
Nasdaq 100Score increase from 3 to 4
• Short Term trend is positive• Intermediate Term trend is positive• Intermediate Term momentum at a 4 week
high• Score = >4, Score < 4 for previous consecutive
7 weeks
Nasdaq 100 Score Buy Signal Back Test
Holding Period Avg. Gain Avg. Loss # of wins # of losses WinLoss %
4 WK 12.01% -10.44% 309 238 56.49%
8 WK 18.32% -14.37% 298 248 54.58%
12 WK 24.33% -18.72% 301 247 54.93%
Nasdaq 100 Score Buy Signal
(position size = 20, 4 week hold)
10/30/2
000
3/2/2
001
7/2/2
001
11/2/2
001
3/2/2
002
7/2/2
002
11/2/2
002
3/2/2
003
7/2/2
003
11/2/2
003
3/2/2
004
7/2/2
004
11/2/2
004
3/2/2
005
7/2/2
005
11/2/2
005
3/2/2
006
7/2/2
006
11/2/2
006
3/2/2
007
7/2/2
007
11/2/2
007
3/2/2
008
7/2/2
008
11/2/2
008
3/2/2
009
7/2/2
009
11/2/2
009
3/2/2
010
7/2/2
010
11/2/2
010
3/2/2
011
7/2/2
011
11/2/2
011
3/2/2
012500000
700000
900000
1100000
1300000
1500000
1700000
1900000
2100000
2300000
2500000
Nasdaq 100 Score Sell Signal
• Short Term trend is negative• Intermediate Term trend is negative• Intermediate Term momentum at a 4 week
low• Score = <4, Score > 4 for previous consecutive
7 weeks
Nasdaq 100 Score Sell Signal Backtest
Holding Period Avg. Gain Avg. Loss # of wins # of losses WinLoss %
4 WK 11.29% -14.54% 80 112 41.67%
8 WK 19.49% -22.48% 82 110 42.71%
12 WK 24.58% -28.40% 93 99 48.44%
Nasdaq 100 MA Cross Parameters
• Short term trend is positive, previous 4 weeks negative
• Intermediate term trend is positive• Intermediate term momentum is at a 1 week
high• Weekly Closing price is < 5% above short term
moving average
Nasdaq 100 MA Cross Back test
Holding Period Avg. Gain Avg. Loss # of wins # of losses WinLoss %
4 WK 11.46% -7.01% 285 208 57.81%
8 WK 18.26% -9.63% 296 197 60.04%
12 WK 23.70% -12.72% 283 209 57.52%
Nasdaq 100 MA CrossRecent Buys
• 12.27.2011 AAPL, LINTA, MSFT, WFM• 1.17.2012 GOLD, SPLS, TXN• 1.23.2012 BBBY, EBAY, PCLN• 2.6.2012 COST• 2.21.2011 ATVI• 3.5.2012 GOOG, SNDK • 4.2.2012 VOD• 6.11.2011 COST, FISV, SRCL• 6.18.2011 ADP, INTU, PAYX, SIAL
Multiple Models & Metrics
• ETF Relative Strength Rotation• ETF Trend Scores• Individual Equity Strategies • Trend, Momentum, & RS rotation• Buy/Sell Signals• Trend Score up/down• MA Crossover• High RS Continuation Up• Trend Reversal
Variety of Universes
• ETFs• Funds• Nasdaq 100• IBD 100• MN Growth 100• Dividend Aristocrats• Dividend & Buybacks• Consumer Staples
Biography• Kevin Hockert, CMT, is the Director of Strategies for Prospero Institute, Inc. an
investment advisory firm founded in 2005. Prospero delivers quantitative investment solutions to RIAs and portfolio managers ranging from Barron’ Top 100 advisors to HNW wealth management firms. Several proprietary rules based strategies have been developed that are designed to help financial advisors and portfolio managers systematically allocate portfolios into and out of various asset classes. By providing a broad spectrum of solutions ranging from market breadth models, broad asset allocation, sector rotation, dedicated high yield, fixed income, alternative asset classes and individual security selection, Prospero’s strategies are designed to help financial advisors bridge the gap between hiring third party money managers and tackling the monumental task of managing client assets on their own.
• Kevin is a 21 year veteran of the financial markets. He was awarded the CMT designation in 2008 and the culmination of his research at that time included his CMT 3 paper titled “Intermarket Analysis and Dynamic Asset Allocation”. Kevin also serves as a Co-Chair of the Minnesota Chapter of the Market Technicians Association.
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