Daily long/short signals for S&P 500 stocks. Access to article requires DLPAL LS Signals subscription.
Recap for May 21, 2020
The S&P 500 index fell 0.8%.
The long/short strategy gained 0.3% from open to close of the day.
The SPY ETF fell 0.6% from open to close of the day.
Strategy drawdown from equity peak on April 15, 2020, is 5.1%.
Strategy maximum drawdown was 5.8% on May 14, 2020.
Since first report on March 5, 2020, the long/short strategy is gaining 15.5%*
The S&P 500 is down 5.8% since March 5, 2020.
Correlation of strategy and S&P 500 daily returns is -0.144
Below is the equity curve for S&P 500 long/short signals from 03/05/2020 to 05/21/2020 based on backtests. The equity line (black) represents the growth of the average daily change of all signals from open to close of the day. Buy and hold performance is also shown (red) along with the correlation of the daily returns.
Signals for May 22, 2020
Signal entry: open of the day. Signal exit: close of entry day.
Stock selection is made according to rank = P-delta × S.
P-delta is the directional bias P-long – P-short. S is the significance of the result.
Signal is LONG or SHORT. Last Date is the calculation date.
First Date is the first date in the historical data file for each stock.
Trade on is the signal entry. C and TS are used internally for the calculations.
For previous reports click here. (Signals start date: March 5, 2020)
Returns are calculated based on equal dollar allocation.
Signals are generated by DLPAL LS software.
Notes on Signals and Model switching
During periods of high volatility, we use a long/short strategy that avoids overnight risk by entering positions at the open and exiting at the close of the day. With this strategy, we minimize overnight risks although trying to squeeze profits from the market from open to close is challenging.
Daily open to close signals are more transaction intensive since same long/shorts may show up for next day after closed. On the other hand, these signals with entry on open and exit on close avoid overnight risk while allow more discretion and flexibility, in case that is desired.
The open to close strategy has worked well since start of these reports on March 5, 2020, but if volatility drops significantly, then regular trading hour potential will decline. When that happens we will switch to the regular Rank strategy that holds positions overnight and apply it to the S&P 100 group. The Rank strategy is based on the same principles as the one used for weekly Market Signals reports with Dow 30 stocks; all entry and exit signals apply to open of the day. What remains is to determine when to make the switch and this depends mainly on volatility. We can always switch back to the original model if volatility increases.
* Performance is based on backtests. Actual performance may vary in any direction due to high volatility periods, slippage, commissions and other know or unknown factors that may affect trading performance.
Disclaimer: The signals are generated by DLPAL LS software and are provided as an educational trading tool for informational purposes only and do not constitute investment advice. We do not warrant the accuracy, completeness, fitness or timeliness for any particular purposes of the DLPAL LS signals. Under no circumstances the DLPAL LS signals should be treated as financial advice. The author of this website is not a registered financial adviser. Before subscribing read our full Disclaimer and Terms and Conditions. Acceptance of terms and conditions is required before subscribing.