Pre-Bear Market Comparisons
It is interesting to compare the results of the 1971-2000 period to the 1971-2004 period, which includes the bear market of 2000-2002. Using the 90% (buy) and 80% (sell) parameters between 1971 and 2000 would have produced rates of return while invested of 34% and maximum drawdowns of only 8.6%, with 72% of trades profitable. Major drawdowns of the new high/new low timing models took place during 2001 and 2002.
The bear market certainly affected the historical performance of this and many other stock market timing indicators, which underlines the importance of employing long and diversified periods of stock market history in research and in any evaluation of stock market-timing techniques.
The New York Stock Exchange Advance-Decline Line
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