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Chart: timing with Nas100 RS screen

Just looking at statistics for applying timing to a screen doesn't give you a feel for the effect. Nor does it help much to decide which of several timing schemes works best for you.

So I created a graph of the top 10 Nasdaq 100 stocks with the greatest momentum, monthly.
The chart shows:
Untimed.
timing with the 52 week SMA of NASDAQ Composite (^IXIC)
Timing with the 52 & 65 week (252 days and 325 days) SMA of the S&P 500.
The sell signal is 1% below the SMA.

Link to chart: https://docs.google.com/spreadsheets/d/1GUanGFQB7w...

The sell signal is 1% below the SMA.

RayVt

Thanks for posting the graphs. Is the sell next day close or something else?

Aussi

So I created a graph of the top 10 Nasdaq 100 stocks with the greatest momentum, monthly.
The chart shows:
1-Untimed.
2-timing with the 52 week SMA of NASDAQ Composite (^IXIC)
3-Timing with the 52 & 65 week (252 days and 325 days) SMA of the S&P 500.
The sell signal is 1% below the SMA.

I like it.

If I had to make a choice from that chart 2-timing would win for the long-term.

Worth noting that the three major time outs were during the periods as expected but held us out for longer periods(years) than expected.

GD_

Is the sell next day close or something else?

Something else.

Using the daily closing values that come out of GTR1 ...
Then stripping that down to the value on the first day of the month ...
Compute the return for that month. ((next_month_value / this_month_value) -1)
(It is an interesting contortion in Excel to isolate the SOM values from the daily values and put them in a table with no holes.)


For each month, look down the table of signals and find the signal (IN/OUT) that was computed just before this month.
If that signal was OUT, then the return for that month is forced to 1.0000.
The IN/OUT signal at the end of month N determines the return to be used for month N+1, actual or 1.0000.

The signals are computed in a separate operation.
There is some granularity involved, because the signals are computed on a daily basis but reported on a weekly basis. The signal computed for a week is to be applied to the next week. In this case, the last week reported in a month is applied to the next month.

(It is a PITA to ensure that you are applying the signals to the correct month instead of effectively applying the NEXT month's signal, which would be lookahead error.)

Worth noting that the three major time outs were during the periods as expected but held us out for longer periods(years) than expected.

Yes.

What you can't see in the chart is the many periods that you were OUT for only 1 or 2 months. Also the periods where you were IN for one month in the middle of a long period of being OUT.
Those whipsaws could be exhausting and get you to throw in the towel.

For this screen you need both nerves of steel and the patience of a saint. Tough combination.

In actuality you would not sit in cash during the out periods, but switch to a short-term income thing like SGOV or BIL or NEAR or ICSH.

Hard to explain to the spousal unit that you are investing in a great thing that doubles your money every 3-4 years but for the last 2 years you're sitting in a MMF earning 2%.

Even harder to explain that you have a 40% drawdown after having said we will take out some money later as we are really doing well.

Aussi

I have said this before.
I got started in serious investing in 1997 when I discovered the Motley Fool.
A year and a half later mortgage rates has dropped and we went to refinance our mortgage. From 14% (Thanks, Jimmy Carter) to 8%.

I ran the numbers and told my wife, "We can either do a straight refi and reduce the monthly payment, or we can take $20,000 cash back and the payment will be the same as we pay now. It looks like if I had invested serious money in Motley Fool Foolish Four method we would have made a large gain and I think that this will continue."

She said "We are not having any trouble making the current payment, so even if you lose the entire $20,000 we would still be okay. Anyway, we were flat broke when we got married so we would not be any worse off than when we started."

I said, "Okay, we'll take the $20,000 and I'll invest it. I will keep track of what the mortgage balance would be if we didn't take the money, and compare that to the investment value. In a few years we will know if we made a mistake or not.
And whenever the investment account gets as big as the remaining mortgage balance, I will tell you and we can decide if we want to sell the stocks and pay off the house."

A few years later the stocks _had_ grown to be more than what we owed on the house, so I presented it to her and said, "Do we want to pay off the house now?" Fully expecting as a typical woman she would want to pay off the house.

She said, "Are you nuts? Keep investing. Just tell me when we have enough that we can retire."

When a bear market hit, and when I got a call from the broker demanding me to wire money and meet the margin call, and the times we were down 50%, she just said "Just tell me when I should stop spending money."
Unusual woman.

My friend at work, also doing Motley Fool, his wife insisted on paying off their house ASAP. After I retired (early) he was still prioritizing the mortgage, still working on getting it paid off when he got caught in a layoff a few years later.

Am I reading the graph correctly? If your start was anytime other that ~2H00 to ~2H08, Untimed gives the better return?

So, basically, this would have helped one miss the dot com and financial crisis busts (which ain't nothing), but other than that, worse?

Am I reading the graph correctly? If your start was anytime other that ~2H00 to ~2H08, Untimed gives the better return?

So, basically, this would have helped one miss the dot com and financial crisis busts (which ain't nothing), but other than that, worse?

Yes.

People think the purpose of timing is to improve the return. When they find it does not, they say "timing the market does not work".

But that is NOT the purpose of timing.
Going back at least to the 2013 Mel Faber paper, the purpose of timing is to reduce the standard deviation (volatility) at the cost of reducing the overall return. The win is if timing reduces the stdev percentage-wise more than it reduces the return percentage-wise.

The other win is "avoiding the full brunt of a large decline."

2/1985-12/2025
Untimed:
CAGR      22.9%
Stdev     30.2%
MaxDD(12) -66%
Sortino   1.35

Timed (65 week SMA of SPX):
CAGR      22.6%
Stdev     26.1%
MaxDD(12) -33%
Sortino   1.63

Timing, based on backtests, reduces the sequence of returns risk, so the safe withdrawal can be increased even though overall return may be smaller.

Aussi

RayVt

How do you post your tables so they stay as tables?

Thanks

Aussi

My experience is as rayvt has said: it is dodging the big bears that makes all the difference over an investing lifetime. It's partly the math (big losses take forever to recover), but mainly the psychology: it's a lot easier to be aggressive if you're reasonably confident you won't fall off a cliff. You will fall into a few ditches, of course ...

Baltassar

How do you post your tables so they stay as tables?

1. Detabify
2. Enclosed with < pre > tag. (Without the spaces of course.)

Aussi,

I don't know what ratvt means by "detabify". When I post the screen picks, the table has tabs between all the screen names and picks while each line is followed my a return. At the very beginning of the table I use < pre > (no space) and at the end of the table I use < /pre > ( again no space).

Larry

If the field widths are regular and small, then tabs are probably ok after being passed through shrewdm processing.

But that's not the case when the fields are varying widths. Or when there are blank columns (fields).

Copy/pasted from Excel:
Not untabified:

Rows	2/1/1985	12/1/2025		Rows	9/1/2006	12/1/2025	
2	CAGR	23.5%		261	CAGR	20.9%	
492	Stdev	25.4%		492	Stdev	21.1%	
	MaxDD(12)	-36%			MaxDD(12)	-24%	
	Sortino	1.78			Sortino	1.77	
							
							

Untabified:

Rows      2/1/1985  12/1/2025           Rows      9/1/2006  12/1/2025 
2         CAGR      23.5%               261       CAGR      20.9%     
492       Stdev     25.4%               492       Stdev     21.1%     
          MaxDD(12) -36%                          MaxDD(12) -24%      
          Sortino   1.78                          Sortino   1.77      

When pasted into notepad, these look identical. And they look like the untabified version.

I still use the Export Text Macro that was part of the Radiscreen set of spreadsheets.

Another important caveat: at the top of a market (you tell me ... ) timing **always** looks its worst relative to simple b&h.

I tested on ChatGPT today to see if getting out of a stock when its voume falls compared to its norm, and you can add 1.4% CAGR by doing so when

ADV10 / ADV90 < 0.50

Effects versus baseline:

CAGR: 19.06 → 20.48% (+1.42%)
Sharpe: 0.702 → 0.734
MDD: −54.7 → −54.0%
Beta: 0.700 → 0.688
Recovery: 1892d → 1716d

The interesting thing is that essentially everything improved simultaneously:

CAGR ↑
Sharpe ↑
beta ↓
recovery time ↓
drawdown slightly ↓

That is unusual. But it only improved results if you checked daily and got out when daily dollar volume showed the drop-off, not if you waited to check on your normal new trading date.

By your normal next trade date: 82% were no longer top 5
65% were no longer even top 10.
So the dollar volume deterioration predicted you were going to be getting out of those stocks anyway, and would get you out early if you check daily.
For stocks triggering the volume rule:

Return period Avg return if you ignored signal and held
Next month -1.8%
Next 3 months -3.6%
Next 6 months -2.9%

For normal held stocks:

Return period Avg return
Next month +2.1%
Next 3 months +5.2%
Next 6 months +8.4%

The interpretation matters.

This looks much more like:

early warning of rank deterioration

than:

a separate volume factor with independent predictive power

The sequence appears to be:

stock becomes a momentum winner
investor attention cools (dollar volume fades)
returns flatten
momentum rank falls
monthly system eventually removes stock

The daily rule mainly gained by doing:

sell several weeks earlier.

I tested on ChatGPT today to see if getting out of a stock when its [dollar] volume falls compared to its norm, and you can add 1.4% CAGR by doing so when

ADV10 / ADV90 < 0.50

A few questions & comments:
1) I would not take ChatGPT as an authoritative source. Just maybe a pointer to something to check.

2) Have you backtested this? How?

3) Does ADV# mean "average dollar volume over the last # trading days"?

4) Where can you get ADV10 & ADV90? Daily.

5) I guess that you could do it yourself by keeping the daily data on every potential stock, so that you'd have this information by the time it (might) become one of the topN picks. Doable with Nas100 stocks, difficult on S&P500 stocks.

6) What do you do when you have sold a stock early but it is still in the topN picks on the next portfolio trading date? You cannot get in and get out simultaneously, so what do you do?

7) Hmmmm. Do you or should you bypass buying a new topN stock that has this declining ADV10/ADV90?

8) At least for this monthly screen, the nominal holding period is one month, so there is no reason to look at the 3 or 6 month difference in returns. In my backtests on GTR1, 2 month period is 10% less than 1 month. 3 month is quite a bit less.

9) "By your normal next trade date: 65% were no longer even top 10." So is this even a problem that we need to solve? On average we'd only be selling a stock 2 weeks early.

10) How often does it happen, that a top 10 stock that you hold has a sharp dropoff in daily dollar volume before the next normal trading date?

11) My big question is "Is this actionable?"

I tested on ChatGPT today to see if getting out of a stock when its [dollar] volume falls compared to its norm, and you can add 1.4% CAGR by doing so when

ADV10 / ADV90 < 0.50

A few questions & comments":

I fed Chatgpt the price and volume history of all Nasdaq100 members that I already gave the group, so that was in fact a backtest, better than gtr since we can actually look at each stock's identity which gtr did not allow.

Yes ADV# mean "average dollar volume over the last # trading days"

Where can you get ADV10 & ADV90? Daily. I paid Norgate for the data.

Yahoo has average trading volumes. If you only owned 5 stocks it would not be that burdensome to keep track.

What do you do when you have sold a stock early but it is still in the topN picks on the next portfolio trading date? You cannot get in and get out simultaneously, so what do you do?
I pretended you re-purchased it the next month if it were still in your top 5 list then (82% of the time it isn't going to be).

Do you or should you bypass buying a new topN stock that has this declining ADV10/ADV90?
o for example:

Rank Nasdaq-100 stocks by 9-month momentum.
Start from rank #1.
If rank #1 has bad dollar volume, skip it.
Check rank #2, #3, etc.
Continue until five acceptable stocks are selected.

The key result was:

ADV10 / ADV90 < 0.50, which helped in the daily mid-month sell test, did not help in monthly-skip form.
It reduced CAGR versus baseline.

The only monthly-skip variant that improved was:

skip if ADV10 / ADV30 < 0.60

But you could use that .6 standarad.


"By your normal next trade date: 65% were no longer even top 10." So is this even a problem that we need to solve? On average we'd only be selling a stock 2 weeks early."
It would take extra work for 1.4% added CAGR. Probably not worth the effort for me but for people doing automated trading it would be.

10) How often does it happen, that a top 10 stock that you hold has a sharp dropoff in daily dollar volume before the next normal trading date?
Results:

Starting rank when held Frequency of early-sale trigger before next rebalance
#1 stock 6.8%
Top 5 holdings overall 11.9%
Top 10 holdings overall 14.8%
So best ranked stocks it is not very common.

My big question is "Is this actionable?"
Depends on how greedy you are and if you can automate or want to check daily. Over time an added 1.4% compounds to a big number; Wall Street heads have rolled for less than 1.4%

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