BTS Strength Zones — Major Index ETFs Backtest Results
Backtested Strategies has published BTS Strength Zones — Major Index ETFs Backtest, a new report on a long-only tactical allocation model using eight published BTS Strength Zones across QQQ, MDY, IJR, and IYT. Over the 2004–2025 whole-calendar-year report window, the complete modeled BTS Strength Zones portfolio produced 14.5% CAGR versus 10.6% for buy-and-hold SPY. Over that 22-year period, a $10,000 starting value grew to $198,004 for the strategy and $91,344 for SPY. Maximum drawdown was -26.1% versus -55.2% for SPY, while volatility was lower at 17.6% versus 18.8%.
BTS Strength Zones — Major Index ETFs Backtest applies the same governing BTS Strength Zone formulas and rules used across BTS Heatmaps, with a portfolio-level VIX 50/35 regime controlling admission. That common design supports direct comparison with other BTS Zones backtests without changing the governing strategy rules or heatmap formulas.
Results
The chart shows a long-term performance lead built despite a 685-day underwater period during 2007–2009 and a separate maximum drawdown late in the sample. The strategy finished ahead of SPY with lower full-window volatility, but its path still included prolonged losses and periods of relative lag.
Time in Market was 98.8%, indicating near-continuous exposure rather than an extended defensive cash posture. Unlike the newer stock- and ETF-universe studies, the Major Index ETFs strategy also recorded lower full-window volatility than SPY.
Maximum drawdown reached -26.1%, versus -55.2% for SPY. The strategy’s worst episode ran from November 25, 2024, through April 21, 2025, and recovered by December 10, 2025. Its longest underwater period lasted 685 calendar days during 2007–2009, compared with 1,773 days for SPY. The evidence supports a materially shallower worst loss and shorter recovery burden, not immunity from prolonged drawdowns.
The return advantage appeared in both SPY up years and the selected SPY down years. In SPY up years, BTS Strength Zones produced 19.6% filtered CAGR versus 16.6% for SPY, with a smaller worst within-year drawdown. Across the three SPY down years—2008, 2018, and 2022—the strategy produced -13.0% filtered CAGR versus -21.0% for SPY, while volatility was 22.8% versus 29.4% and worst within-year drawdown was -23.0% versus -47.1%. The result supports downside containment, not loss avoidance.
The full-period result was supported across most, but not all, rolling windows. BTS Strength Zones beat SPY on CAGR in 91.3% of rolling three-year windows and 93.2% of rolling five-year windows, while producing a higher Sharpe ratio in 73.8% and 84.4%, respectively. Lower volatility and smaller maximum drawdowns were less consistent over three-year windows but appeared in 59.0% and 60.0% of five-year windows. The strategy’s worst rolling five-year CAGR remained positive at 4.2%, while SPY’s was -6.7%.
Methodology
The model uses exactly eight published BTS Strength Zones across QQQ, MDY, IJR, and IYT. A portfolio-level VIX 50/35 regime determines whether an ETF associated with an active BTS Strength Zone may enter the portfolio. Once admitted, the ETF remains held through the scheduled end of its BTS Strength Zone.
At target-decision events, the portfolio allocates equally across entered BTS Strength Zone ETFs. When no BTS Strength Zone is entered, the portfolio holds SPY while the regime is ON and SHY while it is OFF.
Reported performance reflects the full modeled portfolio, including entered ETFs and SPY/SHY fallback holdings.
Backtest results follow the BTS Methodology, which sets common conventions for data and calendar alignment, execution pricing, missing-data and end-of-range handling, trading costs and spread-aware slippage, portfolio accounting, cash and dividend treatment, benchmark conventions, reporting windows, performance metric calculations, and, where reported, market-capacity screening. Strategy-specific rules, universes, eligibility, timing, sizing, and constraints are defined in each report.
Caveats
The published BTS Strength Zones are derived from historical data and should be understood as in-sample findings, not as forecasts or independent out-of-sample validation.
The full-window risk advantage did not persist in the 2021–2025 preview. Strategy volatility was 18.5% versus 17.1% for SPY, and maximum drawdown was -26.1% versus -24.5%. The favorable 2004–2025 risk comparison should therefore not be generalized to every subperiod.
Near-continuous exposure remained high at 98.8%, and the strategy still experienced a -26.1% maximum drawdown. The result is not a cash-like or crash-avoidance profile.
Implementation burden was lower than in the larger-universe studies but remained active at 34.4 modeled executions per year. Relative lags also occurred, including a 12.9-percentage-point calendar-year lag in 2006 and a 3.8-point annualized lag in the weakest rolling three-year comparison with SPY.
Market capacity
The market-capacity screen produced an overall GREEN status at the modeled account scale. All 756 requested execution events were assessable, giving 100.00% event-count and gross-notional coverage. Every usable event was classified as market capacity likely; no event reached the questionable or unlikely categories.
The most constrained event involved IYT on July 19, 2024, when modeled gross shares equaled 0.32% of the highest daily volume observed during the prior 21 trading sessions. The tested trades were therefore small relative to the recent peak-volume record across the four offensive ETFs.
The GREEN status does not mean the strategy can be scaled without limit. The screen compares modeled shares with recent peak volume; it does not estimate typical daily liquidity, distinguish continuous-session volume from auction volume, or model bid-ask spreads, order-book depth, market impact, intraday liquidity, or realized slippage. It should be read as evidence that the tested account scale was compatible with the available volume record, not as a universal statement about deployable capital.
Read the report
The full BTS Strength Zones — Major Index ETFs Backtest report includes preview and full-period metrics, complete strategy rules and mechanics, equity-curve and drawdown-profile charts, caution flags, failure-mode analysis, market-capacity results, calendar-year returns, SPY up-year and down-year diagnostics, rolling-window results, pseudocode, and implementation guardrails.
About Backtested Strategies
Backtested Strategies (BTS), operated by Marquantex LLC, is a financial research publisher built around the BTS Methodology, a standardized framework for testing trading strategies with stated rules, consistent assumptions, benchmark discipline, cost and slippage treatment, portfolio accounting, and clear interpretation so readers can evaluate market ideas through evidence rather than hype or unsupported claims.