Quantitative Models

Quantitative Models

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Strategy Rules - Sectors Monthly Rotation Model

STRATEGY 1

Monthly Rebalancing:

  • At the beginning of a new month, close the previous position and open a new one based on the model’s recommendation.

Same Recommendation as Last Month:

  • If the new month’s recommendation matches the previous month’s, do nothing and hold the position. The model confirms that the current sector remains the optimal investment choice.
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STRATEGY 2

Monthly Trading Only:

  • Trades are only opened on the first available day of a new month, provided the SPY price is above its 200-day moving average (200 MA).

200 MA Filter:

  • If SPY closes below the 200 MA, any active trade is immediately closed.

No Mid-Month Entries:

  • If the 200 MA condition is not met at the start of the month, no trades are opened until the next month’s first available trading day.
  • If you closed a position mid month due to 200 MA rule, then a few days later SPY closes back above 200 MA, don’t enter, wait for next month.

Same Recommendation as Last Month:

  • If the new month’s recommendation matches the previous month’s, do nothing and hold the position. The model confirms that the current sector remains the optimal investment choice.

Same Recommendation as Last Month:

  • If the new month’s recommendation matches the previous month’s, do nothing and hold the position. The model confirms that the current sector remains the optimal investment choice.
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Step-by-Step Example (Strategy 2)

  • Open new trade on March 1st (SPY close > 200 MA).
  • On March 11th: SPY close > 200 MA: Do nothing, hold the position.
  • On March 12th: SPY close < 200 MA: Close the position and move to cash.
  • On March 18th: SPY close > 200 MA: Do nothing. Wait for next month’s recommendations. If SPY close > 200 MA on April 1st, go long on. Otherwise stay in cash.
  • Open new trade on April 1st (SPY close > 200 MA).