Wednesday the market posted an inside day. I haven't discussed inside days in a while. For those unfamiliar an inside day is simply a day that makes a lower high and a higher low than the day before. Over the last decade, when the market has been trading below the 200ma, inside days have suggested negative short-term implications. Below is a table that demonstrates this.
Of course there are other nuances and filters that could be applied that could increase or decrease this edge. But generally there has been a poor track record following inside days. It's been fairly steady, too. This can be seen in the equity curve below which uses a 2-day holding period.
So actually you could have run this differently to produce an edge by going short instead of going long?
ReplyDeleteYee,
ReplyDeleteI run all studies to "go long". Visually it makes it less confusing to see if there is an upside edge or a downside edge. Lots of green, positive numbers suggests an upside edge. Lots of red, negative numbers suggests a downside edge.
So yes, in this case if I ran it to "sell short" then it would have produced the same results but with positive returns.
Best,
Rob
do it Fridays alone, you will get even a bigger edge to the short side ..
ReplyDelete