S&P500 20 Days New Low Bullish Reversal

Here is a breadth driven trading model based on S&P500’s 20 days new low market breadth data. It is not something complex and everyone can follow easily. It performs very well with reasonable drawdown.

For those who are not familiar with the concept of market breadth, please read my article series, Market Breadth Primer.

20 Days New Low

The custom market breadth 20 Days New Low of S&P500 is the number of stocks in S&P500 that traded below the lowest low made within the past 20 days. Notice that a stock does not have to be closing below the lowest close made within the past 20 days to be counted.

The daily closing value of 20 days new low on S&P500 components is available from Daily Market Breadth Monitor (US Indices). You can also find the other custom market breadth data there. They are updated daily after market close.

Performance

Following is a chart of Emini S&P500. The 2nd pane is the 20 days new high reading of the components within S&P500. The 3rd pane is the 20 days new low reading of the components within S&P500. At the bottom it is the net performance gain in dollars for trading one single Emini S&P contract.

The winning rate is just 56% and the model only trades the market several times a year.

Generating $28,000 over 5 year period after commission is pretty impressive consider it stays in the market less than 10% of the time.

But the most impressive thing with the model is that it does not even involve price in its trading rules.

The Rules

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