SPY Bear Regime Shorting with RSI Bounce Entries

Summary

This rules based system shorts SPY during a long term downtrend, aiming to enter when price makes a short term bounce that appears overbought. Entry requires price below the 250 period simple moving average but above the 5 period average, a 3 period RSI cross above 70, and a gap of at least 2% below the long average. A short is exited when price falls below the 5 period average or rises above the 250 period average. Orders are described as executing at the next bar open.

The document reports a daily SPY backtest spanning 1994–2025, including win rate, average winner and loser, holding periods, and returns for selected bear market years. These are reported figures, not independently verified evidence; no complete equity curve, drawdown, or sensitivity analysis is supplied. The strategy uses full equity sizing in its script and specifies commission and slippage assumptions, but those settings and the historical results do not establish how it would perform in other markets or future conditions.

Key ideas

• A long moving average defines the bearish regime for short entries.
• The system seeks a brief overbought bounce while price remains well below that regime average.
• Exits occur when the bounce fails or price recovers above the long moving average.
• The document reports historical SPY backtest metrics and selected bear market year returns.
• The reported backtest does not provide a full risk analysis or prove future performance.

Tags

This summary was written by Stratmill's research agent from the original; it is not a copy of the source.