10-Month SMA Timing Model, Backtest Video

The 10-month SMA timing model makes one decision per month. That simplicity is the entire point. This backtest asks the only question that matters. Does the drawdown control earn its keep when you pay for it in lag and whipsaw?

At month-end, the rule asks a single question about trend persistence and flips exposure in or out. That simplicity is the appeal. It is also the failure mode. A slow filter can reduce exposure during prolonged selloffs, but it can also re-enter late after sharp bottoms and get chopped up when price ranges around the moving average.

This video backtests the full rule set on SPY under explicit timing and assumptions, then reads the scorecard in a fixed order. Exposure and trading behavior come first, risk comes next, payoff comes last. Then we walk the equity curve so you can see the exact regimes where the model protects you, and the exact regimes where it taxes you for that protection.

Why the 10-Month SMA Timing Model gets attention

The 10-month SMA timing model sits near the center of risk-reduction timing research because it reduces the idea to one transparent, auditable decision rule. It was popularized by Mebane Faber and is widely cited because it is simple enough to implement, benchmark, and stress-test without a large parameter stack.

The core hypothesis is simple. Trend persistence exists, and large drawdowns often unfold over many months rather than days. A monthly filter tries to exit only after deterioration is sustained and re-enter only after recovery is sustained. If that premise holds, the expected benefit is primarily drawdown and volatility control, not a guaranteed improvement in terminal return.

Skeptics focus on the failure modes that the rule cannot avoid. A monthly SMA filter can lag at turning points, and it can whipsaw in sideways markets when price repeatedly crosses the trend line. That is why this episode treats the model as an exposure overlay and evaluates it as a trade-off across regimes, not as a story about forecasting.

What the video delivers

  1. The full strategy spec. Every input, condition, and decision rule is stated explicitly.
  2. Signal and execution timing. Signal evaluation and trade execution are specified so the backtest is reproducible.
  3. Implementation-grade clarity. Definitions and rules are stated explicitly to reduce ambiguity.
  4. A transparent benchmark. The benchmark is run under the same assumptions for a clean comparison.
  5. On-screen backtest settings. Timeframe, costs, cash treatment, and exclusions are stated in the video.
  6. A head-to-head scorecard with a fixed order. Exposure first, risk second, payoff last.
  7. An equity-curve walkthrough that matches the scorecard. Narration ties the numbers to what actually happened across the backtest window.
  8. Regime-aware interpretation. The episode pressure-tests strategy behavior through distinct market conditions.
  9. Frictions treated as real. Time in market, trades per year, and costs are stated so you can judge whether it clears your trading constraints.
  10. A structured conclusion. Summarized as Benefit, Cost, Role so you can evaluate it quickly and consistently.

Head-to-head scorecard

Watch the video to see the full head-to-head scorecard unblurred. The values are blurred here on purpose because the scorecard is not meant to be skimmed in isolation. In the episode, we reveal it in a fixed order and tie the numbers to the equity curve so you can see exactly what drove each line.

Trading rules

This strategy is defined by a single state variable: whether SPY’s month-end close is above or below its 10-month simple moving average (SMA). Signals are evaluated and trades execute on the month-end close (trade-on-close; assumes a market-on-close order). Let “t” denote the month-end signal bar.

Chart labels, indicators and trading logic

Markers identify the bar where the event occurs. They are not plotted at the exact fill price.

  • Red “staircase” line indicates the 10-month simple moving average.
  • Blue dots indicate month-end price bars.
  • Green up arrows indicate entry execution bars, filled at Close(t).
  • Red down arrows indicate exit execution bars, filled at Close(t).

Entry
At Close(t) on the last trading day of the month, if the month-end close is strictly above the 10-month SMA, signal a buy on that bar and execute the trade at Close(t).

Exit
At Close(t) on the last trading day of the month, if the month-end close is strictly below the 10-month SMA, signal a sell on that bar and execute the trade at Close(t).

Equal case
If the month-end close equals the 10-month SMA, maintain the prior position.

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