In conjunction with yesterday’s post this is the short side of the Mosaic 3 Finger setup, where Highest is replaced with Lowest and > is replaced with <. perhaps surprisingly the reverse model produced similar performance metrics to long side model. given positive momentum in spy since crash you might expect short trades substantially under perform which is clearly not case. response several emails on topic can review original finger post href="http://bzbtrader.blogspot.com/2008/08/3-finger-lead.html">here and note some of the model nuances described.
Note that the short side Reverse system traded 12 times during the same period that the Long side version traded 12 times…a nice balance of momentum. While this short trading system produces respectable results for SPY it is not part of the Mosaic momentum following strategy only because we are not concerned with actually trading our Mosaic position, but only adding to it incrementally. On the other hand, if the intent is to reduce an open SPY position then the 3 Finger Reverse signal is a useful tool in timing and/or confirming an exit strategy.
