Hi all,
I have further developed my original strategy that I posted here to be less aggressive in order to become more suitable for the average investor in terms of risk tolerance. Since I want to compare my strategy to the typical retail investor's moderately conservative allocation of 40% stocks and 60% bonds, I am using $AOM (iShares Core Moderate Allocation ETF) as my benchmark.
Instead of shorting $VXX (or long $XIV) with 100% of the portfolio's cash every time there's a bullish WVF signal, the algo only does so with 20% of the portfolio's cash and the remaining 80% balance is parked in $AGG to hedge as well as collect yield. When there's a bearish WVF signal, the algo dumps everything and moves the entire portfolio in $TLT, which is considered a safe-haven asset. If less risk/volatility is desired, simply reduce the short-$VXX/long-$XIV portion and increase the $AGG portion. If more risk/performance is desired, do the opposite.
As you can see, for the returns generated, the algo has very impressive Beta, Sharpe, Max Drawdown, and Volatility ratings.
TRADING RULES
28-day WVF cross> 14 = sell $TLT + short $VXX + buy $AGG
28-day WVF cross< 14 = cover $VXX + sell $AGG + buy $TLT