I spent some time a year ago to study and build this algorithm based around bulls / bears momentum. My aim was to take advantage of the lag pricing between two 3x inverse ETFs. IE, ERX and ERY. If ERX trend up ERY has to trend down as they are an inverse of it each other. There are time when ERX or ERY lag behind the other thus creating opportunity for quick hedges.
However, this algorithm required exponential leverage. Just want to share my results. Let me know if it is of any use to you.
Hello Patrick,
It appears that you are comparing the price of the ETFs directly to one another. Some ETFs, especially leveraged ones suffer from decay and as such over time their price will decline (this is compensated for by having reverse stock splits). Because they use options, their price can maintain momentum for longer periods of time if the underlying asset has a streak or momentum for several days. But during times of whipsaw and volatility, these leveraged ETFs loose value quickly.
Have a good day.
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