re: An Examination of The Golden and Death Crosses

There's a lot here to reply here; forgive me because I will jump around a bit.

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Of course I'm aware that the Death Cross for 2018 has not yet occurred, but we appear to be quickly approaching it, which is why I assume this thread was created.

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Actually, I just recently learned enough about thinkorswim's automated backtesting abilities and thinkscript to adjust and test out strategies on a very basic level. I can't do too much because I'm not a programmer and don't understand programming language enough to do complex things (yet). However, by examining a few scripts, I was able to turn the default Golden Cross breakout script into the one I provided. I also adjusted the GC breakout script to buy GC's and go neutral at Death Crosses. As of close Friday, that strategy's profit was 2920.36, 160 points behind the GC-DC long-short strategy (SPX closed at 2781.01 and chart began at 17.76).

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why not set the positions at something like +1.5 and -0.5 instead?

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The two options that I'm aware of to determine position size only accept whole numbers, and having different sized longs and shorts requires editing the code.

As far as CAPE and the Buffett indicator go, if I don't have a thinkscript of them to look at, I can't include them in a strategy. For me, trying to code them would be like trying to bake a souffle in an easy bake oven.

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What is your methodology for buying the dips though? If your position is to advocate for passive investing over chasing better performance using market statistics, then you seem to be contradicting yourself if you advise people to buy on dips.

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The TL;DR was really for the buy and hold types here; they aren't likely to get into the nitty gritty trying to generate alpha or index-beating returns. So when I say buy the dips, I just mean that they should keep doing what many say they're doing: buying dips. I wouldn't advise them to wait to buy on GC's, for example, because several months or more than a year could pass before one happens, and they'd miss out on upside in the meantime. Likewise, I said to "ignore the Death Cross boogeyman" because only 30% of Death Crosses were profitable to short with the strategy (and it should be noted that 1 of those 14 profitable Death Crosses produced a whole 0.02 points). Plus, going neutral at a Death Cross would probably be worse than buy and hold due to taxes. I should have stated who I was speaking to, though.

But for you and me and anyone else actually interested enough in this to roll up their sleeves, there's more in the OP. I don't think the strategy, as shown, is that impressive, though. Like I said, taxes, fees, and slippage would have a negative effect on the strategy's outcome. I can't say how much because that would require accounting for those things in decades past. Also of note is that my chart only has daily open, high, low, and close data from 1962 onwards. Before then, I only have daily closes, which throws off the results a bit more when you consider that the strategy trades at the open, not close.

And when accounting for compounding, the GC-DC long-short strategy turns out to be a failure compared to buy and hold. The strategy would have produced a return of 10,090.05%. Buy and hold would've produced a return of either 15,414.92% (if starting from the beginning of the chart) or 12,848.54% (if starting when the GC-DC strategy first enters a position). Here's a spreadsheet I adjusted to compound the results.