A weekly QQQ strategy

I was browsing my twitter feed this week and saw a couple old Quantifiable Edges posts (here and here) linked to by @PsychTrader. The two posts were written in mid-2009 and detail a simple weekly strategy that uses the relative performance of the S&P 500 and Nasdaq indexes to time the market. They showed how investing in the SP 500 or Nasdaq  when Nasdaq has been outperforming (based on 10 week relative performance) has generally beat out buy and hold.

Since the posts were written a while ago, I took it on myself to test out the strat with recent data.  I used SPY and QQQ weekly data from Yahoo Finance for my test.  I compared price performance (adjusted for dividends) over 10 week periods. All performance calculations and trades take place at the end of the week.  One tweak I made was to add a lagging week between a signal change and when a trade takes place.  An example – if at the end of a week SPY goes from outperforming to underperforming over the past 10 weeks, I will not adjust holdings until the end of the following week. This seemed to enhance returns but results will be similar without it.

Below I will examine holding QQQ or cash depending on whether QQQ is outperforming or underperforming SPY. I’ll leave it to the reader to test holding SPY.

First let’s look at the period from 1999 (inception of QQQ) to the end of 2008.  The strategy to invest in QQQ when it underperformed SPY got crushed during the bear markets and just treaded water during the bull market.  The inverse strategy did much better and held its ground through bull and bear period alike.

QQQ weekly strat 1

What happened from 2009 forward? Take a look.

QQQ weekly strat 2

The strategy that sucked big time before has been steadily rocketing higher while the formerly better strategy has been treading water.

I guess this is just another example of strategies being turned on their head at the market’s whim.  This is one I’ll be keeping tabs on going forward.


On a personal note, I’m proud to announce that my wife recently gave birth to our first child, a beautiful baby girl.  We are greatly blessed if a bit sleep deprived.  Still trying to keep up on markets but can be challenging while juggling my new dad responsibilities.  :-)

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Posted on November 16, 2013, in Other. Bookmark the permalink. 2 Comments.

  1. Be aware, being a dad is going to be a lot of work and a lot of happiness for life. :) Congratulations!

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