The method is pretty simple. It will buy the S&P when the 12 month rate of change of the 30 Year Treasury Bond Yield is less than 9%. The position is held until the 12 month rate of change of the 30 Year Treasury Bond Yield exceeds 9% again.
According to his study from 1947 till end of 1997, the probability of win is around 65%.
When I run this same method with Dow Jones Industrial Average from 1979 till Apr 2008, I obtained the following results:
| Entry Date | Entry Price | Exit Date | Exit Price | % Change | Draw Down % | Max Gain % | Bars Held |
|---|---|---|---|---|---|---|---|
| 2/1/1979 | 839.22 | 3/1/1979 | 808.82 | -3.62 | -4.4077 | 0.5684 | 1 |
| 4/2/1979 | 859.93 | 5/1/1979 | 854.90 | -0.58 | -1.471 | 2.8712 | 1 |
| 6/1/1979 | 822.33 | 11/1/1979 | 815.70 | -0.81 | -3.2031 | 10.0361 | 5 |
| 3/2/1981 | 974.58 | 5/1/1981 | 997.75 | 2.38 | -1.9362 | 5.7871 | 2 |
| 12/1/1981 | 888.98 | 1/4/1982 | 875.00 | -1.57 | -2.9427 | 1.0709 | 1 |
| 3/1/1982 | 824.39 | 12/1/1983 | 1276.02 | 54.78 | -6.6 | 57.3224 | 21 |
| 2/1/1984 | 1220.58 | 3/1/1984 | 1154.63 | -5.4 | -8.6541 | 0.4891 | 1 |
| 9/4/1984 | 1222.39 | 5/1/1987 | 2286.36 | 87.04 | -5.5375 | 98.6608 | 32 |
| 5/2/1988 | 2032.33 | 9/4/1990 | 2614.36 | 28.64 | -5.4494 | 48.8075 | 28 |
| 10/1/1990 | 2452.48 | 11/1/1990 | 2442.33 | -0.41 | -4.4106 | 4.6023 | 1 |
| 12/3/1990 | 2559.65 | 7/1/1994 | 3624.96 | 41.62 | -4.3998 | 56.3823 | 43 |
| 4/3/1995 | 4157.69 | 1/2/1997 | 6448.27 | 55.09 | -0.6737 | 59.3183 | 21 |
| 3/3/1997 | 6877.74 | 9/1/1999 | 10828.44 | 57.44 | -8.1698 | 66.1729 | 30 |
| 4/3/2000 | 10863.28 | 5/3/2004 | 10227.27 | -5.85 | -33.8923 | 6.7857 | 49 |
| 8/2/2004 | 10138.45 | 5/1/2006 | 11367.78 | 12.13 | -4.7174 | 13.1155 | 21 |
| 10/2/2006 | 11678.99 | Open | Open | 9.77 | -1.4577 | 22.2705 | 19 |
There were total of 16 trades with 9 being profitable.
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