Here is a SPY Filter that beats the SP500 handily since 1998 if someone wants to code it

OK, what follows is a list of a fairly lengthy set of calculations. If you are not a “numbers geek” you might consider skipping down to the actual results.

A = Daily High

B = Daily Low

C = Daily Close

D = 200-day moving average of daily closing prices

E = Daily True High (Today’s high or yesterday’s low, whichever is greater)

F = Daily True Low (Today’s low or yesterday’s high, whichever is lower)

G = Daily True Range (E-F)

H = Average Daily Price (A + B) / 2

I = 15-day Average of H

J = 15-day Average of G

K = MVCI = (C-I) / (J * Square Root of 2))

L = Buy Signal Cutoff Value

M = # days to hold a long position

Figure 1 displays an Excel spreadsheet with these calculations.

1 Figure 1 – Excel spreadsheet for MVCI (whatever that means) Indicator

Hmmm, maybe I do have too much time on my hands. But I digress. In (slightly long-winded) English, the indicator is calculated by:

1) Subtracting the 15-day average of the average daily price (defined as( [high]+[low]/2)) from today’s closing price, and dividing that result by;

2) The 15-day average of the Average True Range times the square root of 2

Don’t ask me how someone came up with multiplying something by the square root of 2 because, well, heck I don’t even know what MVCI stands for, so how would I know?

The default value for variable L is -0.51. The default value for M is 22 days.

A “Buy Signal” occurs when:

1) The closing price for SPY is above its 200-day simple moving average AND;

2) The MVCI value for that day is -0.51 or less. So when a buy signal occurs the trader buys SPY and holds it for 22 trading days.

If MVCI drops below -0.51 during these 22 days then the 22 day holding period starts again at 22, i.e., positions can be held for longer than 22 days.

Figure 2 displays the fluctuations of the MVCI since 12/31/2012 with the -0.51 level highlighted in red. 2Figure 2 – The MVCI (whatever that means) indicator in action

So in a nutshell, anytime SPY is above its 200-day moving average each day the MVCI is below -0.51 starts a 22 day holding period.

Crazy , right?

Well, maybe we should consider the results first.

The Results

For the record:

-$1,000 invested in SPY using MVCI in the manner described here grew to $4,417 (+342%)

-$1,000 invested in SPY on a buy-and-hold basis grew to $1,848 (+84.8%)

Not to discourage your efforts, but that's a 9% annualized yield. You can hit 12% with just a simple moving average crossover technique. (Of course, in all situations when you compare to buy and hold you need to account for taxes and fees.)

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