Dow Jones: New All-Time High Strategy

A new trading strategy for the Dow Jones Industrial Average suggests buying at all-time highs can be surprisingly profitable. This approach, rooted in the concept of momentum, hinges on purchasing the Dow only after it's been a while without setting a new high.

Unlikely Wisdom

• The strategy capitalizes on momentum, a trend where stocks on the rise are likely to keep rising.

• It targets periods post-bear market or extended declines, aiming for market turnarounds.

• Historical data since 1970 shows this method's effectiveness, with the signal being triggered just seven times.

The Numbers Speak

• Average returns post-signal are impressive: 0.20% in 1 month, 2.56% in 3 months, 6.78% in 6 months, and a notable 16.86% in 12 months.

• 85% success rate for a positive return after a year.

• Total return of 222.2% if acted on all seven instances.

While it's a rare occurrence, keeping an eye out for this signal could spell substantial gains.

Original Article

If you want to dig deeper into this subject and look into Trading rules and backtest the original article can be found on Quantified Strategies.

Stochastic Indicator: The Underrated Market Navigator

Often overshadowed by the popular RSI, the Stochastic Indicator is useful. This indicator, dating back to the 1950s, offers a unique perspective by measuring the current price relative to a range over a set period.

Understanding Stochastics

• Stochastics oscillate between 0 and 100, indicating oversold and overbought conditions.

• It differs from RSI by focusing on the price position relative to a recent high-low range, rather than the velocity of price movements.

Strategy Insights

• Stochastic strategies work in mean-reversion setups, particularly effective for stock indices.

• Optimal settings vary across markets; what works for stocks may not suit commodities.

Tested Approaches

• Short-term overbought/oversold strategy: Best with short lookback and smoothing periods.

• %K and %D crossovers: Tested, but less effective than overbought/oversold strategy.

RSI vs. Stochastic

• Both oscillate between 0 to 100, but differ subtly in what they measure.

• Testing reveals Stochastics outperforming RSI in certain trading strategies, suggesting its potential as a robust tool.

Despite its less mainstream status, Stochastic might make a valuable addition to a trader's toolkit.

Original Article

If you want to dig deeper into this subject and look into Trading rules and backtest the original article can be found on Quantified Strategies.

Riding the Highs: Investing in International Stocks at Peak Performance

Investing in international stocks at their all-time highs? It sounds risky, but it's a strategy with surprising merits. Forget the old mantra of "buy low, sell high." This approach embraces momentum investing, betting on stocks that show no sign of slowing down. Here's why it might just be a winning tactic:

Momentum has worked in the past: Stocks at their peak often signal a strong trend, perhaps backed by solid fundamentals or positive market sentiment. This momentum can drive further gains, making these stocks attractive for investors.

Market Love: When a stock hits a record high, it grabs the attention of both retail and institutional investors, riding a wave of confidence and market recognition.

The Numbers Game: Our backtest, using the Vanguard Total Intl Stock Index Inv (VGTSX), showed that while the Compound Annual Growth Rate (CAGR) was slightly lower than a traditional buy-and-hold strategy (3.35% vs. 4.59%), the risk-adjusted return was significantly higher, and the maximum drawdown was less than half.

Historical Proof: Extending the backtest to 1926 (Meb Faber did it), we found even more robust results. The strategy showed similar returns to the buy-and-hold approach but with much lower volatility and maximum drawdown.

The Bottom Line: While buying at all-time highs perhaps goes against traditional wisdom, it offers a lower-risk, momentum-based strategy for international stocks. But, as always, do your due diligence and backtest yourself.

Original Article

If you want to dig deeper into this subject and look into Trading rules and backtest the original article can be found on Quantified Strategies.

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