Price Action Lab Blog Wishes You a Happy and Prosperous New Year!
Market Recap and Comments (December 27 – December 31, 2021)
Stocks (SPY) were up 0.9% to end the year with 28.7% gain. Commodities (DBC) rose 0.6%. Gold (GLD) added 1.2%. Bonds (TLT) fell 0.2%. DBC finished the year up the most (+41.4%) year-to-date while TLT was down the most (-4.6%.)
All active strategies were up in the last week of the year. ETFRNW finished the year up the most (+22.5%) while DOWWN managed to gain 5.5% for the year after a mid October rebound.
Starting with this report, SPYLMAW has been terminated and replaced with a tactical asset allocation strategy based on price series momentum (TFD3W). There is a minor change to ETFNRW strategy for exposure to international stock markets.
Weekly Strategies Performance in 2021
The average performance of all strategies was 15.2% at 2% drawdown. Sharpe was about 1. Click here for all weekly reports for 2021. A few comments about the strategies:
SPY ETF Mean-reversion (MRSPYW) finished the year up 17.7% gain with only 8 trades and 7 winners (exposure was only 26.5%.) This was a good year for mean-reversion strategies due to many dip buying formations.
Dow 30 long/short with features generated by DLPAL LS software staged a strong rebound after falling about 10% by March 2021. The strategy finished with 5.5% gain. This was a rough year for long/short due to the strong bull market in equities but the positive performance indicates the features used are robust.
For 2022 our dual objective with weekly strategies is the same as before: provide sufficient diversification and minimize drawdown. Alpha generation is not one of our objectives with these particular strategies but leveraged alpha is possible due to a low expected drawdown of the ensemble.
The updated set for 2022 includes only six strategies since ETF2RW was terminated. In the future we may add more strategies. Note that we expect frequent overlapping of signals for TFD3W, ETF4RW and ETFNRW strategies but this may contribute at times towards reducing equity volatility.
Strategy positions and performance as of close of Friday, December 31, 2021.
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