BTS Strength Zones — U.S. Sector ETFs Backtest

BTS Strength Zones — U.S. Sector ETFs is a long-only tactical allocation strategy built to pursue targeted equity participation from the premise that recurring calendar windows can identify favorable periods for sector exposure, using published BTS Strength Zones and a portfolio-level VIX 50/35 admission regime across sector ETFs, with SPY or SHY used when no zone is entered.

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Strategy summary

BTS Strength Zones — U.S. Sector ETFs is a long-only, event-driven tactical equity allocation model. The BTS U.S. Sectors Heatmap supplies 14 published BTS Strength Zone windows across nine sector ETFs, while a portfolio-level VIX 50/35 regime determines whether an active zone may enter.

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 nine offensive sector ETFs with two fallback ETFs:

• Communication Services: VOX
• Consumer Discretionary / Consumer Staples: XLY / XLP
• Energy / Industrials / Materials: XLE / XLI / XLB
• Health Care / Technology / Utilities: XLV / XLK / XLU
• 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 sector-ranking model: the strategy does not select only the highest-ranked sector ETF or rotate into a single winner.
• Not a fixed nine-sector 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 sector-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.

See how the BTS Heatmaps and their Strength Zones backtests are standardized for direct 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 nine sector ETFs 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

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, sector ETF selection, equal allocation across entered zones, scheduled exits, and the SPY/SHY fallback.
• Excludes: a holdings-matched comparison using the same sector 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 exceptionally strong. BTS Strength Zones — U.S. Sector ETFs produced 34.7% CAGR and $44,187 of ending capital versus 14.7% and $19,791 for buy-and-hold SPY. Strategy volatility was higher at 18.6% versus 17.1% for SPY, but its -22.6% maximum drawdown was modestly smaller and its risk-adjusted ratios were materially stronger.

Further research

• BTS Methodology
• What Makes a Backtest Reliable?
• Why a Standardized Methodology Matters in Backtesting
• How to Choose the Right Benchmark
• Strategy Library