so you want to buy the breakout on $SPY

so you want to buy the breakout on $SPY

6apr2015

 

with $SPY closing above previous day’s high ( our criteria for breakout ) , the below study

1) Below the trading odds for $SPY for going long on any day since Y2K , and exiting after 1/2/3/4/5/10/20 trading days

Exit # Wins % Wins Avg% Med% Avg Win % Avg Loss % Pay Off Max Loss % PF OAPF STDEV T-Test
t+1 3836 2076 54.1 0.02 0.07 0.82 -0.91 0.90 -9.84 1.06 1.05 1.28 1.21
t+2 3835 2081 54.3 0.05 0.12 1.17 -1.28 0.91 -13.35 1.08 1.08 1.75 1.75
t+3 3834 2146 56.0 0.07 0.21 1.38 -1.58 0.87 -13.38 1.11 1.10 2.06 2.19
t+4 3833 2108 55.0 0.10 0.25 1.60 -1.74 0.92 -17.79 1.13 1.12 2.34 2.57
t+5 3832 2131 55.6 0.12 0.28 1.76 -1.94 0.91 -19.79 1.14 1.14 2.58 2.87
t+10 3827 2220 58.0 0.23 0.56 2.34 -2.68 0.87 -26.77 1.22 1.21 3.44 4.13
t+20 3817 2338 61.3 0.46 1.09 3.29 -4.01 0.82 -29.40 1.32 1.32 4.76 5.95
1st +’ve exit in 5 days 3836 3095 80.7 0.13 0.38 0.78 -2.58 0.30 -19.79 1.26 1.26 1.87 4.44

PF: Profit Factor, and OAPF is the outlier adjusted profit factor ( which is profit factor recalculated after removing the maximum winner )

2) Below the trading odds for $SPY for going long at close , when $SPY closes above previous day’s high 

Exit # Wins % Wins Avg% Med% Avg Win % Avg Loss % Pay Off Max Loss % PF OAPF STDEV T-Test
t+1 1148 614 53.5 -0.05 0.04 0.57 -0.77 0.74 -8.86 0.87 0.86 0.99 -1.77
t+2 1147 620 54.1 -0.07 0.08 0.87 -1.18 0.73 -11.18 0.89 0.88 1.50 -1.67
t+3 1147 642 56.0 -0.03 0.16 1.09 -1.46 0.75 -7.52 0.96 0.95 1.75 -0.60
t+4 1147 628 54.8 -0.01 0.19 1.29 -1.60 0.81 -11.92 0.98 0.98 1.99 -0.24
t+5 1146 623 54.4 -0.03 0.20 1.43 -1.77 0.81 -17.24 0.96 0.95 2.23 -0.43
t+10 1146 673 58.7 0.07 0.55 1.95 -2.61 0.75 -24.91 1.09 1.08 3.09 0.72
t+20 1142 688 60.2 0.33 0.94 2.99 -3.71 0.81 -29.40 1.26 1.25 4.48 2.47
1st +’ve exit in 5 days 1148 927 80.7 -0.01 0.29 0.58 -2.48 0.23 -17.24 0.98 0.97 1.63 -0.24

3) Below the trading odds for $SPY for going long at close , when $SPY closes below previous day’s low ( breakdown)

Exit # Wins % Wins Avg% Med% Avg Win % Avg Loss % Pay Off Max Loss % PF OAPF STDEV T-Test
t+1 915 517 56.5 0.12 0.20 1.01 -1.02 0.98 -7.42 1.26 1.24 1.53 2.45
t+2 915 484 52.9 0.17 0.09 1.51 -1.34 1.13 -9.34 1.25 1.24 2.05 2.47
t+3 914 520 56.9 0.23 0.30 1.66 -1.66 1.00 -13.38 1.33 1.31 2.35 2.99
t+4 913 515 56.4 0.28 0.33 1.95 -1.89 1.03 -17.79 1.34 1.33 2.71 3.09
t+5 913 528 57.8 0.38 0.44 2.15 -2.05 1.05 -19.79 1.46 1.45 2.95 3.87
t+10 910 547 60.1 0.56 0.88 2.84 -2.88 0.99 -16.95 1.51 1.50 3.85 4.37
t+20 908 568 62.6 0.81 1.26 3.84 -4.24 0.90 -24.63 1.52 1.50 5.22 4.68
1st +’ve exit in 5 days 914 757 82.8 0.33 0.50 0.97 -2.80 0.35 -19.79 1.69 1.66 2.12 4.65

conclusion : buying $SPY breakout was never profitable , while buying a breakdown was profitable , and indeed buying breakdown’s would have matched the returns of buy and hold returns , just by being in the market for 915/3836 ( 23.8%) days .. 

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