Index ETF Trading Strategy - Test Results

Well, it appears that I've not found the holy grail of technical trading that I'd hoped.  I tested four one year scenarios and one four year scenario and I've learned several things:

• I'm able to slightly out gain the market during a bear period
• I'm unable to match market performance during a bull period
• I'm unable to make modifications to the strategy that improved performance.
• I'm less enamoured with an all index strategy than I was this time last week.

Here are the raw results of my testing.  Note that in all cases, the period tested began on March 1st.  And for the first four scenarios, lasted one year.  In the last scenario, the period was four years.

As noted in the graph, I out gained the market in 2007 and 2008, but I was behind the market in 2009, 2010 and four the four year test.  And during 2009 when the opportunity for gains was greatest, I lagged the market by a significant margin.

So what usable knowledge did I gain from this?  

First, the proposed strategy seems to share the same characteristics of my current stock strategy in terms of lagging the market during bull periods.  But the lag seems to be much more significant and my ability to outpace the market during bear markets seems less, so my current strategy seems superior. 

Perhaps more surprising was the overall market results for the four year test.  A 100% index would have left me with very, very poor results had I utilized this approach.  I've been reading a lot of pro-index propaganda lately and was really starting to believe it.  So I guess this was a real set-back in my willingness to take such an approach.  I believe I'll continue my current dabbling in index ETFs, but I'm not ready to jump in with both feet.