Fund-index regime, put-call confirmation, then the tracking fund

Locate the fund-index regime first

The archive treated a diversified mutual fund with an unchanged mandate as an index-proxy. Management turnover inside the portfolio still left a relatively stable response to market conditions, so the fund could stand in for a broad stock index.

That idea was applied to a published basket of 20 large diversified stock funds. The basket was paired with a 50-day moving average and read as a fund-index-trend: a cross above marked a buy-side regime, and a cross below marked a sell-side regime.

Require a put-call confirmation second

Crosses of that fund-index average were not used alone. A sentiment overlay was required as a second check against whipsaws.

The overlay was a weekly put-call-ratio built from S&P 100 options. Call volume over call open interest was divided by put volume over put open interest, scaled by 100, and plotted against the Friday S&P 500 close.

A 10-week average of that weekly series was used as a momentum compass. A rising average was read as continuation of an advance, and a falling average as the reverse.

An S&P 500 peak unmatched by a peak in the put-call series was treated as a nonconfirmation. That reading could justify selling only a portion of fund shares rather than the whole line.

Scale only the fund that tracks

After the index and options layers turned higher, several funds were compared. The largest commitment went to the fund with the strongest response, confirmed by a break above that fund's own 10-week average. That last check is the fund-average-filter.

A significant break below the chosen fund's 10-week average was treated as a caution signal even if the broader trend and momentum layers were still positive. A non-tracking fund was to be exchanged for one that followed.

The first joint signal did not take the full intended stock-fund line. Staged-allocation committed only part of that capital on the first joint signal and added after a successful retest.

How the 1990 to 1991 window used the layers

In the October 1990 to mid-1991 window, the fund index carved a late-September head-and-shoulders low and crossed its 50-day average in November. A 30% to 50% initial stock-fund commitment was described while the put-call 10-week average had turned up but weekly readings stayed subdued.

A December to January pullback held the fund-index 50-day average and coincided with a defined put-call peak. Later, smaller put-call peaks against a still-rising S&P 500, plus a downturn in the ratio average, were read as an early sideways warning used to reduce fund exposure on rallies.