Use Minervini Trend Template Criteria to Time SPY?

A subscriber proposed using Minervini Trend Template criteria to time broad U.S. stock market proxies such as SPDR S&P 500 ETF Trust (SPY). Specifically, use leveraged versions of SPY when SPY meets the following seven criteria:

1. SPY is above both its 150-day and 200-day simple moving averages (SMA150 and SMA200).
2. SMA150 is above SMA200.
3. SMA200 trends up for at least one month.
4. SMA50 is above both SMA150 and SMA200.
5. SPY is above its SMA50.
6. SPY is at least 30% above its 52-week (252-day) low.
7. SPY is within 25% percent of its 52-week (252-day) high.

To investigate, we apply the above criteria to daily raw (not dividend-adjusted) SPY daily closes, with criteria 6 and 7 pushing the start of performance testing to January 1994. We use dividend-adjusted daily closes to calculate returns, assuming zero returns when not in SPY. We assume SPY-cash switches occur at the same close as signals, requiring slight anticipation of signals. We consider each of the seven criteria alone and in aggregate (the template). We focus on percentage of time in SPY, number of SPY-cash switches, average daily return, standard deviation of daily returns and daily reward/risk (average return divided by standard deviation) as key performance statistics. Using daily dividend-adjusted and unadjusted prices for SPY during late January 1993 through early March 2023, we find that: (more…)