BTS Strength Zones — Major Index ETFs Backtest
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BTS Strength Zones — Major Index ETFs strategy summary
BTS Strength Zones — Major Index ETFs is a long-only, event-driven tactical allocation strategy that uses eight published recurring calendar windows from the BTS Major Indexes Heatmap across QQQ, MDY, IJR, and IYT, with a portfolio-level VIX 50/35 regime controlling zone admission and SPY or SHY used when no zone is entered.
The strategy uses recurring calendar windows to seek targeted equity exposure. The VIX regime controls admission, scheduled zone endings control exits, and a blocked zone may enter later if the regime returns to ON while the zone remains active.
The traded set combines four offensive source-index mappings with two fallback ETFs:
- Nasdaq-100: QQQ
- S&P MidCap 400: MDY
- S&P SmallCap 600: IJR
- Dow Jones Transportation Average: IYT
- Fallback assets: SPY / SHY
Once admitted, each ETF remains held through its scheduled BTS Strength Zone and exits at the Close of its final trading day. At target-decision events, all entered BTS Strength Zone ETFs are equal-weighted.
The portfolio remains long-only and targets full investment whenever a complete target is set; temporary cash may appear only between final-zone Close exits and the next-Open portfolio reconstruction. Entered BTS Strength Zone ETFs receive the full allocation; with zero entered zones, SPY carries the ON state and SHY carries the OFF state.
What this strategy is not
- Not a VIX exit strategy: a later OFF signal does not terminate or resize a BTS Strength Zone that has already entered.
- Not a relative-strength ranking model: the strategy does not select only the highest-ranked ETF or rotate into a single winner.
- Not a fixed four-ETF basket or daily equal-weight portfolio: only entered zones receive weight, and routine market drift does not trigger rebalancing.
- Instead: it is an event-driven allocation model that admits published BTS Strength Zones while the portfolio-level VIX regime is ON, holds admitted zones to their scheduled ending, and uses SPY or SHY when no zone is entered.
How to interpret BTS Zones
BTS Zones is a systematic historical framework for identifying recurring periods of relative strength across standardized BTS Weeks.
The Tools section publishes seven BTS Heatmaps, each for a different market universe. The corresponding backtest pages apply a consistent strategy framework to the published BTS Strength Zones for each heatmap, documenting how the zones translate into portfolio positions and trading decisions.
Our BTS Heatmaps methodology explains how Strength Zones are standardized for comparison across market universes.
All BTS Heatmaps use the same governing BTS Strength Zone formulas and the same qualification, ranking, overlap, and selection rules. BTS Heatmaps are not individually tuned. Candidate windows must demonstrate persistent relative strength, statistical support, sufficient move magnitude and concentration, and acceptable quality characteristics before they can qualify.
Within each BTS Heatmap, a BTS Strength Zone is a locked recurring BTS Week interval. The same interval is fixed for every year and is not selected again after each year’s results are known.
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. Each page identifies the fixed universe used for its BTS Heatmap. On this page, the same four source-index mappings are used throughout the analysis.
The backtest applies the published BTS Strength Zones through a separate portfolio implementation. A recurring BTS Strength Zone does not necessarily produce a portfolio entry each year because entry also depends on asset eligibility, valid source history, and the portfolio-level VIX regime.
Execution, costs, dividends, portfolio accounting, and reporting follow the standard BTS Methodology.
Report summary
| Item | Value |
|---|---|
| Strategy | BTS Strength Zones — Major Index ETFs |
| Category | Tactical allocation / VIX-regime BTS Strength Zones |
| Universe | QQQ, MDY, IJR, IYT, SPY, SHY; $VIX is a non-traded reference |
| Trade Direction | Long-only allocation |
| Free Preview Window | 2021–2025 (5 years); BTS uses the five most recent whole calendar years for free previews. |
| Full Backtest Period | 2004–2025 (22 years); BTS uses the available whole-calendar-year window supported by required ETF history and methodology rules. |
| Window Start Rule | The last valid pre-window $VIX Close establishes the opening regime; active BTS Strength Zones and the fallback allocation are then evaluated at the first strategy Open. |
| Starting Capital | $10,000 |
| Primary Benchmark | SPY buy-and-hold |
| Methodology Version | BTS-3377 |
| Publication Date | June 27, 2026 |
| Source / Credit | Brian Ernest Metzger; BTS Zones methodology and BTS Major Indexes Heatmap |
Benchmark summary
BTS Strength Zones are defined using relative performance versus $SPX. Separately, the primary portfolio benchmark is buy-and-hold SPY, which preserves continuous passive exposure to the broad U.S. equity market.
All reported performance measures the complete modeled BTS Zones portfolio implementation, not the BTS Strength Zone methodology in isolation.
For the benchmark-selection framework, see How to Choose the Right Benchmark.
- Primary Benchmark: buy-and-hold SPY.
- Preserves: continuous passive broad U.S. equity-market exposure.
- Removes: the published BTS Strength Zone schedule, VIX-gated admission, major-index ETF selection, equal allocation across entered zones, scheduled exits, and the SPY/SHY fallback.
- Excludes: a holdings-matched comparison using the same major-index ETF holdings. The performance difference versus SPY therefore cannot be attributed to the BTS Strength Zone schedule alone.
Key metrics: 2021–2025 free preview
- The free preview is a recent-window orientation tool, not the complete evidence set.
- A five-year free-preview window can be useful, but it can also overstate or understate the full historical tradeoff.
- The full report expands the scorecard across the complete report window and adds the path-level interpretation behind the headline numbers.
The recent window was positive but mixed. BTS Zones produced 16.2% CAGR and $21,144 of ending capital versus 14.7% and $19,791 for buy-and-hold SPY. Strategy volatility was higher at 18.5% versus 17.1% for SPY, and strategy max drawdown was deeper at -26.1% versus -24.5%. The preview therefore supports a modest return edge, not a clean recent-window risk advantage.
| Category | Metric | Strategy | Benchmark |
|---|---|---|---|
| Activity | Time in Market | 98.8% | 100.0% |
| Activity | Trades per Year | 35.8 | — |
| Activity | Win Rate | 72.1% | — |
| Risk | Volatility | 18.5% | 17.1% |
| Risk | Max Drawdown | -26.1% | -24.5% |
| Risk | Sharpe Ratio | 0.9 | 0.9 |
| Risk | Calmar Ratio | 0.6 | 0.6 |
| Result | CAGR | 16.2% | 14.7% |
| Result | Ending Capital | $21,144 | $19,791 |
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Rules and mechanics
This section explains how the tested strategy decides what to hold and how those choices differ from the benchmark.
Decision rules
- Use the BTS heat map as the authoritative source for the published BTS Strength Zone windows and their timing.
- Use exactly eight BTS Strength Zones across QQQ, MDY, IJR, and IYT, with SPY and SHY as fallback holdings. Use $VIX solely as a non-traded reference series.
- Maintain one portfolio-level VIX regime. An OFF event occurs when $VIX Close(t) crosses strictly above 50; an ON event occurs when $VIX Close(t) crosses strictly below 35. Otherwise, retain the prior regime. Initialize the regime for the first strategy Open from the last valid pre-window $VIX Close: above 50 = OFF; otherwise ON.
- At the first true Open of a BTS Strength Zone, enter its ETF when the regime for that Open is ON. When the regime is OFF, leave the zone active but unentered.
- If an active zone was blocked while OFF, admit it at the first true Open after the regime changes to ON, but only when that execution Open remains inside the zone.
- Once admitted, hold the ETF unchanged through its scheduled BTS Strength Zone and exit at the Close of the zone’s final true trading day.
- When one or more BTS Strength Zone ETFs are entered, allocate 100% equally across the entered ETFs and allocate 0% to SPY and SHY. Active but unentered zones remain at 0%.
- With zero entered BTS Strength Zone ETFs and the regime ON, allocate 100% to SPY.
- With zero entered BTS Strength Zone ETFs and the regime OFF, allocate 100% to SHY.
- Rebalance only at target-decision events: the first strategy Open, a BTS Strength Zone admission Open, the first true Open after final-zone Close exits, or a no-zone VIX transition that changes the SPY/SHY fallback.
- At a final-zone Close, liquidate the ending BTS Strength Zone positions only. Hold the resulting cash temporarily and rebuild the complete target portfolio at the next true Open.
Illustration
The illustration below is a sample BTS Heatmap. BTS Weeks run across the top, green horizontal lines mark published BTS Strength Zones, and the black triangle marks the current BTS Week. The vertical separator lines divide the calendar into Quarters.
How to read the illustration
- Black triangle: Marks the current BTS Week.
- Green horizontal lines: Mark published BTS Strength Zones.
- Vertical separator lines: Mark Quarter boundaries.
- BTS Week labels: Label the BTS Weeks across the calendar year. See Tools — Methodology notes for more information about BTS Weeks.
View the BTS Major Indexes Heatmap to see the full schedule of published BTS Strength Zones.
Strategy and benchmark mechanics
The table below compares the strategy and benchmark mechanics side by side. The objective is to show what the active rules add, remove, or change relative to the benchmark.
| Setting | Strategy | Benchmark |
|---|---|---|
| Portfolio Type | Long-only, event-driven tactical allocation. | Single-symbol SPY buy-and-hold benchmark. |
| Portfolio Construction | Equal-weight the full portfolio across entered BTS Strength Zone ETFs; with zero entered zones, allocate 100% to SPY while the regime is ON or 100% to SHY while it is OFF. | Allocate 100% to SPY after initial entry and hold it throughout the test. |
| Leverage / Shorting | No leverage and no short positions. | No leverage and no short positions. |
| Active Decision | Use published BTS Strength Zones and the VIX 50/35 regime to determine zone admission and the SPY/SHY fallback state. | Hold SPY continuously after the initial benchmark entry. |
| Signal Timing | Maintain one persistent portfolio-level VIX regime, initialized from the last valid pre-window $VIX Close and updated only on strict crossings above 50 (OFF) or below 35 (ON), effective at the next trading-day Open. A published BTS Strength Zone may be admitted only at an eligible Open while the regime is ON. | No recurring signal after the initial benchmark entry. |
| Execution Timing | BTS Strength Zone admissions and event rebalances occur at the applicable Open. Entered zones exit at their final-zone Close, with portfolio reconstruction at the next trading-day Open. | Initial SPY entry follows the benchmark execution convention; the position then remains buy-and-hold. |
| Cash Treatment | Residual cash from whole-share sizing and portfolio cashflows remains in cash and earns 0% until the next strategy action. Final-zone Close proceeds remain in cash until the next trading-day Open. | Residual benchmark cash remains in cash and earns 0% under BTS benchmark conventions. |
| Dividend Treatment | Ordinary dividends are posted to portfolio cash and become deployable at the next strategy action; they are not embedded in signal inputs. | The benchmark uses total-return accounting with ordinary dividends reinvested synthetically. |
| Costs | Strategy trades include commissions and spread-aware slippage under BTS execution-pricing conventions. | Benchmark entry and terminal reporting close use BTS benchmark transaction-cost assumptions; synthetic dividend reinvestment is costless. |
| Role in Comparison | Tests the published BTS Strength Zone schedule, VIX-gated admission, equal allocation across entered zones, and the SPY/SHY fallback rule. | Preserves passive U.S. equity exposure as the control for evaluating the strategy’s active decisions. |
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Full backtest history
Full backtest history shows the complete scorecard, path behavior, caution flags, failure modes, and portfolio-role framing behind the tested result.
Key metrics: 2004–2025 full backtest
| Category | Metric | Strategy | Benchmark |
|---|---|---|---|
| Activity | Time in Market | 98.8% | 100.0% |
| Activity | Trades per Year | 34.4 | — |
| Activity | Win Rate | 68.4% | — |
| Risk | Volatility | 17.6% | 18.8% |
| Risk | Max Drawdown | -26.1% | -55.2% |
| Risk | Sharpe Ratio | 0.9 | 0.6 |
| Risk | Calmar Ratio | 0.6 | 0.2 |
| Result | CAGR | 14.5% | 10.6% |
| Result | Ending Capital | $198,004 | $91,344 |
What the scorecard shows
Key takeaways
- The strategy compounded faster than buy-and-hold SPY over the full report window. It finished with a higher CAGR and substantially more ending capital.
- The full-history path was less severe than the benchmark’s. Volatility was modestly lower and maximum drawdown was materially smaller.
- The recent preview did not repeat the full-history risk advantage. The 2021–2025 window retained a return edge but did not show the same risk improvement.
Over the full report window, the backtest shows a favorable combination of compounding and downside containment relative to passive SPY ownership. The strategy’s activity level was much higher than the benchmark’s, so the result depends on the tested calendar windows, admission rules, event timing, and implementation conventions rather than on passive market exposure alone.
Caution flags
| Flag | Why it matters | Where to review the evidence |
|---|---|---|
| Recent-window risk edge was absent | In 2021–2025, strategy volatility was 18.5% versus 17.1% for SPY and max drawdown was -26.1% versus -24.5%. | Free-preview scorecard |
| Material losses still occurred | A -26.1% maximum drawdown remains a large portfolio loss even though it was much smaller than SPY’s full-window drawdown. | Full scorecard; drawdown profile |
| Near-continuous exposure is not cash-like defense | Time in Market was 98.8%; market exposure remained high outside brief transition gaps. | Key metrics: 2004–2025 full backtest; Equity curve |
| Active implementation burden remains | The strategy averaged 34.4 modeled executions per year over the 2004–2025 full window. Trades per Year excludes the terminal reporting close. | Key metrics: 2004–2025 full backtest |
| Relative lags still occurred | The largest calendar-year lag was 12.9 percentage points in 2006; the worst three-year rolling lag was 3.8 points per year. | Annual and rolling diagnostics |
Equity curve
BTS Zones finished far ahead of buy-and-hold SPY, but the path was still equity-like rather than defensive.
What the equity curve shows
The strategy’s advantage accumulated across multiple cycles rather than from one isolated crisis trade. BTS Zones finished at $198,004 versus $91,344 for buy-and-hold SPY, while experiencing a much smaller decline during 2008–2009.
The curve was not uniformly defensive. The strategy reached a peak on Nov. 25, 2024, fell 26.1% by Apr. 21, 2025, and did not recover that peak until Dec. 10, 2025. It then reached a new high on Dec. 11 before ending the year 3.3% below that peak.
The endpoint gap supports a strong long-run compounding result, but the 2025 drawdown shows that the strategy still accepted material equity risk. The path is better described as active downside containment than as continuous low-volatility defense.
Drawdown profile
The drawdown profile isolates each series’ decline from its own prior equity peak and shows how loss depth, recovery, and time underwater differed between the strategy and buy-and-hold SPY.
| Metric | Strategy | Benchmark |
|---|---|---|
| Max drawdown | -26.1% | -55.2% |
| Peak-to-trough window | Nov. 25, 2024 to Apr. 21, 2025 | Oct. 9, 2007 to Mar. 9, 2009 |
| Recovery from max drawdown | Dec. 10, 2025 | Aug. 16, 2012 |
| Longest drawdown period | Oct. 31, 2007 to Sept. 15, 2009 (685 calendar days) | Oct. 9, 2007 to Aug. 16, 2012 (1,773 calendar days) |
| Ending drawdown | -3.3% | -1.3% |
The drawdown profile shows a materially shallower worst loss and shorter recovery burden than buy-and-hold SPY.
The strategy’s worst episode occurred from late 2024 into 2025, while its longest underwater period remained tied to the 2007–2009 cycle. Reduced drawdown depth did not eliminate long recovery periods or ending drawdown.
Failure modes and tradeoffs
The strategy did not eliminate timing risk. Its worst loss remained substantial, and the recent preview shows that the model can carry more volatility and drawdown than SPY even when it retains a return advantage.
The second tradeoff is implementation burden. The tested result depends on an active, event-driven allocation process with recurring admissions, exits, and fallback changes rather than passive equity ownership.
The third tradeoff is opportunity cost. Some calendar years and rolling windows favored SPY, so the full-window advantage required tolerating periods of relative underperformance.
Market capacity screen
Overall market capacity screen: GREEN
| Status | Ratified two-gate rule |
|---|---|
| GREEN — current status | Unlikely share is no more than 1.0% and Non-likely share is no more than 5.0%. |
| ORANGE | Unlikely share is above 1.0% through 5.0%, or Non-likely share is above 5.0% through 10.0%, unless a RED condition applies. |
| RED | Unlikely share is above 5.0%, or Non-likely share is above 10.0%. |
This screen uses the compounded backtest’s modeled share quantities at the modeled account scale. It compares every aggregated symbol-date execution event with the highest daily share volume observed during the prior 21 trading sessions. Same-symbol executions on the same date are combined using gross shares, the execution date is excluded from the volume window, and the terminal reporting liquidation is excluded.
For definitions, thresholds, coverage requirements, and interpretation limits, see the market capacity methodology.
| Requested events | Usable events | Unassessable events | Event-count coverage | Gross-notional coverage |
|---|---|---|---|---|
| 756 | 756 | 0 | 100.00% | 100.00% |
| Capacity classification | Participation in prior-21-session peak volume | Usable execution events | Share of usable events |
|---|---|---|---|
| Market capacity likely | At or below 5% | 756 | 100.00% |
| Market capacity questionable | Above 5% through 10% | 0 | 0.00% |
| Market capacity unlikely | Above 10% | 0 | 0.00% |
| Total usable | — | 756 | 100.00% |
| Status gate | Current share | Gate result |
|---|---|---|
| Unlikely-event share | 0.00% | GREEN |
| Non-likely share: Questionable plus Unlikely | 0.00% | GREEN |
| Overall: worse of the two gates | — | GREEN |
No usable execution event exceeded the 5% Market capacity questionable threshold. The most constrained usable event was IYT on July 19, 2024, when modeled gross shares equaled 0.32% of the highest daily volume observed during the prior 21 trading sessions.
This is a recent peak-volume screen at the modeled account scale. It does not measure typical daily liquidity, distinguish continuous-session volume from auction volume, or model intraday liquidity, bid-ask spreads, order-book depth, market impact, or realized slippage.
Where this strategy may fit
Based on this test, BTS Strength Zones — Major Index ETFs is best read as a tactical major-index allocation model whose value depends on the interaction between published calendar windows, VIX-gated admission, and event-driven portfolio construction.
Benefit
The strategy’s clearest benefit was not simply a higher return. It paired 14.5% CAGR with a -26.1% maximum drawdown, versus 10.6% and -55.2% for SPY, while remaining invested 98.8% of the time. In this backtest, rotating among major-index exposures improved both compounding and the depth of the worst loss without relying on long periods in cash.
Cost
The improvement was not uniform. The 2021–2025 preview kept a return edge but lost the full-history risk advantage, and some calendar years and rolling windows favored SPY. Receiving the long-run benefit required 34.4 trades per year, near-continuous equity exposure, and tolerance for periods when an active allocation process was more volatile or less rewarding than simply holding the benchmark.
Role
The strategy may serve as an active broad-equity allocation sleeve that shifts among major-index ETFs while remaining largely invested. It is better suited to investors seeking tactical return and drawdown improvement than dependable defense, with tolerance for periods when passive SPY exposure performs better.