House ( a.k.a $GS) as an indicator for $SPY future returns

House ( a.k.a $GS) as an indicator for $SPY future returns

donate @ http://www.redcross.org.ph/donate  / for the victims of Philippine Typhoon

not so reformed broker

image courtesy @Josh Brown a.k.a Reformed Broker

with the headlines in India ( where we come from) around brokerage industry being

40,000 jobs lost as brokerages shut shop despite market surge & with

my dear friend and MTA board of Director @Sushil Kedia making a query at daily speculations   The Best Time to Buy Stocks, from Sushil Kedia 

after re-reading that page 17 from The Education of a Speculator where the rule of the thumb is “buy when brokerage profits are in red , sell when brokerage profits are high ” , but how times have changed ,

below the $GS ( a.k.a house , and the largest institutional brokerage house ?? ) and $SPY relationships on a monthly closing levels

1) $SPY returns for any random month , since 2000

assuming one goes long at the last trading days of the month at close and exits at the close of the last trading day of the next month

  • Winners : 97
  • Losers : 69
  • % Winners : 58%
  • Average Change % : 0.40
  • Median Change % : 0.99
  • Maximum Gain % : 10.91
  • Maximum Loss % : -16.52
  • Average Gain %if Winner : 3.32
  • Average Loss % if Loser : -3.76
  • Average Gain % / Average Loss % : 0.88

2) $SPY returns for next month, when $GS gains for the current month , since 2000.

  • Winners : 58
  • Losers : 34
  • % Winners : 63%
  • Average Change % : 0.94
  • Median Change % : 1.28
  • Maximum Gain % : 9.93
  • Maximum Loss % : -10.49
  • Average Gain %if Winner : 3.18
  • Average Loss % if Loser : -2.97
  • Average Gain % / Average Loss % : 1.07

that’s 54 basis points of out-performance and the % winners increasing by 5% , when $GS fares better during the current month .

3) $SPY returns for next month, when $GS lost for the current month , since 2000.

  • Winners : 39
  • Losers : 35
  • % Winners : 53%
  • Average Change % : -0.28
  • Median Change % : 0.25
  • Maximum Gain % : 10.91
  • Maximum Loss % : -16.52
  • Average Gain %if Winner : 3.52
  • Average Loss % if Loser : -4.51
  • Average Gain % / Average Loss % : 0.78

68 basis point of under performance !!

conclusion : follow the house,  to get a slightly better gauge of the next month $SPY returns  , and keep an eye for the ever changing cycles , and test/retest any hypothesis written in any book out there , doesn’t matter it could be the top 10 investing /trading books of all time

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