Friday, January 1, 2021

SPXS&P 500 Index Daily Chart Displays Keybot the Quant Algorithm Turns in 2020

2020 was a wild ride with the February-March waterfall crash as the coronavirus (COVID-19) pandemic took hold. The S&P 500 Index (SPX; the US stock market) gains +16% in 2020 a lot of that during the last two months and all of it on Federal Reserve monetary stimulus and Congressional fiscal stimulus. The SPX prints an all-time record high at 3760.20 and all-time record closing high at 3756.07 both on 12/31/20 the last trading day of 2020.

Keybot the Quant logs another phenomenal year the actual trading triggered by the quant gains a huge +58% easily outperforming every quant on Wall Street bar a handful. That will make you smile. The quant program, which triggers the buy and sell signals, gains +29% in 2020. Keybot cycles in and out of both 1x and 2x leveraged ETF's which accounts for the differences in percentages as well as mechanical inefficiencies. The 2x ETF's can chew up a portfolio in market conditions like the messy clusters in late April and May and September. The choppy sideways action chews up bulls and bears alike and it does not matter what side you are playing because everyone turns into chop suey. Some of the investment houses pulled the plug on their quants during the year since their programs could not handle the price action. Keybot yawns. It eats this price action for breakfast like no other quant.

There were a few healthy rallies where the bread and butter was made on the long side at the start of the year, the pop off the March bottom if you timed it correctly (Keybot is not designed to catch exact tops or bottoms) only into early April, then the late May early June pop, then the early July pop, then the August pop, then the rally at the end of the year. On the short side, catching the February-March downdraft was a money-maker (The Keystone Speculator called that top on a technical basis with the charts at the same time Keybot flipped short). Also the early September top and flush lower was a bear money-maker and again, Keystone called that top technically at the same time Keybot the Quant was flipping to the short side.

It is great satisfaction to call a top with the charts and then for Keybot to flip short to verify the top. The one method is skilled technical analysis in reading charts correctly (reference The Keystone Speculator site) and the other method is Keybot the Quant that only see's 1's and 0's (this site). As 2021 begins, we shall see if Keybot flips long to embrace the frothy rally, or, if the quant simply remains short waiting for the stock market to fall apart. Usually, new money comes into the market during the first few days of the year creating lift. Also, the Santa Claus rally runs from Christmas Eve through the first two days of the new year which would be through Tuesday, 1/5/21, so that may provide the bulls a further reason to hang on, or not.

This year (2021) is starting the same way as last year (2020). Traders euphorically bullish believing that stocks can only move higher. Younger folks thinking they are Jesse Livermore are sending stimulus checks to their brokers and betting on stocks. That same party was in full swing one year ago, until it wasn't.

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