The NASDAQ 100 Index closes today at all-time high. Is it time to sell and go away. Our model tells not yet.
The current signal (Long NDX and short INDU, market is up) since April 30 is performing well. The long/short position is making 0.8% and the market timing is net 2.04% in NDX, or 1.4% in SPX.
We are waiting for the short signal to reverse the trade.
Study from academic researchers and industry practitioners has demonstrated that pairs trading strategy has the potential to generate consistent and stable risk adjusted returns in all market conditions. Our own research has also illustrated that pairs trading strategy can be implemented on daily base as well as intraday base. This blog will show the real out-of-sample pairs trades between NASDAQ 100 Index and Dow Jones Industry AVG Index, and the implied market timing.
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