Golden/Death Cross Model With Initial Claims Filter That Yields 16% Per Year

So far I’ve shown you 2 simple trading models that use 1 indicator per model: a Golden/Death Cross model and an Initial Claims model.

Here’s the beauty. When you combine 2 simple ideas and models together, you make it even better. Remember, I said traders who combine fundamentals with technicals perform the best.

Here’s the new model. It’s based off of the Golden/Death Cross Model, but it’s combined with an Initial Claims filter.

BUY indicator

Indicator: Buy SSO when the S&P 500 makes a “golden cross”, AND… the 50sma remains above its 200sma for 5 consecutive trading days (in other words, the S&P made a “golden cross” 5 days ago).

Position size: 100% long

*”Golden cross” is when the S&P 500’s 50 daily moving average rises above its 200 daily moving average.

*SSO is the S&P 500’s 2x leveraged ETF.

SELL indicators

Only SELL your SSO if both of these indicators occur:

Indicator 1: When the S&P 500 makes a “death cross”, AND…

Indicator 2: Initial Claims is above its 52 week (1 year) moving average for 8 consecutive weeks (2 months).

Position size: when you sell, shift to 100% cash.

*A “death cross” occurs when the S&P 500’s 50 daily moving average crosses below its 200 daily moving average.

Rationale behind the Initial Claims filter

As you can see, the basis of this trading model is still the Golden/Death Cross. The Initial Claims filter helps the Golden/Death Cross model with its main disadvantage. I said on the Golden/Death Cross model

This Golden/Death Cross Model underperforms “buy and hold” during a bull market because you miss out on some parts of the bull market. (Remember what the study said: the “death cross” is more often a bullish sign than a bearish sign during a bear market).

This Golden/Death Cross Model outperforms buy and hold during a bear market because you sit in cash while “buy and hold” gets clobbered.