The Improved R2 Strategy: 84% Correct with Just 6 Rules (zz)

http://www.tradingmarkets.com/.site/stocks/commentary/editorial/The-Improved-R2-Strategy.cfm

http://www.tradingmarkets.com/free-tools/rsi-solver

In early 2005, we published the R2 Strategy on TradingMarkets
which quickly became one of our more popular strategies. The strategy was also
presented at "The Traders Expo" in Fort Lauderdale last year. In the "MoneyShow.com
Best Webcasts of 2006" it was voted the number one presentation in the "Best for
Traders" category. We recently updated and improved our research, leading
to this article that shares our latest findings with you.

What is the Improved R2 Strategy?

The Improved R2 Strategy is a simple six-rule Market Timing Strategy
which uses the 2-period RSI as its primary tool. Our research has shown that
there is little statistical evidence using the standard 14-period RSI. But, when
you shorten the period to a 2-, 3- or 4-period RSI, test results significantly
improve. By using the 2-period RSI as we do here, you can see back-tested
results of 84.31% correct in the S&P 500 Index going back to 1995 (12 years).


Here are the Rules:

The SPX is above its 200-day simple moving average (you can use any S&P 500 derivative product, including the SPYs, E-minis, etc).

Day 1 - the 2-period RSI is below 65. This tells us that the market is in a neutral to possibly
oversold condition.

Day 2 - the 2-period RSI closes lower than Day 1.

Day 3 - the 2-period RSI closes lower than Day 2.

Buy the market (SPX, SPY, E-mini, etc) on the close Day 3.

Exit when the 2-period RSI closes above 75.