BTS Zones — Major Indexes Backtest

BTS Zones — Major Indexes 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 major-index exposure, using published BTS Strength Zones and a portfolio-level VIX 50/35 admission regime across QQQ, MDY, IJR, and IYT, with SPY or SHY used when no zone is entered.

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Strategy summary

BTS Zones — Major Indexes is a long-only, event-driven tactical equity allocation model. The BTS heat map supplies eight published BTS Strength Zone windows across four major-index 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 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 its allocation is set. Entered BTS Strength Zone ETFs receive the full allocation; with zero entered zones, SPY carries the ON state and SHY carries the OFF state. The backtest evaluates whether combining the published BTS Strength Zones with VIX-gated admission adds value relative to passive SPY ownership.

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.

Report summary

Benchmark summary

The primary benchmark is buy-and-hold SPY. It preserves broad U.S. equity-market exposure through continuous passive ownership of SPY.

The strategy adds published BTS Strength Zone timing, VIX-gated admission, equal allocation across entered zones, and an SPY/SHY fallback when zero zones are entered.

The comparison therefore tests whether the strategy’s calendar-zone and admission decisions added value relative to passive SPY ownership.

For the benchmark-selection framework, see How to Choose the Right Benchmark.

• Primary Benchmark: buy-and-hold SPY.
• Preserves: broad U.S. equity-market exposure through continuous passive SPY ownership.
• Removes: published BTS Strength Zone timing, VIX-gated admission, equal allocation across entered zones, and the SPY/SHY fallback.
• Excludes: other tactical allocation, ranking, and market-timing rules that are not part of this strategy.

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.

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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 eight 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

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.

Further research

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