RSI 14/Threshold 30 Applied to SPY with Fixed Holding Interval

Referring to commonly used Relative Strength Index (RSI) oversold parameter settings, but seeking to avoid exiting rebounds too soon, a subscriber asked about performances of the following four rules as applied to SPDR S&P 500 ETF Trust (SPY):

1. Buy when daily RSI 14 falls under 30 and hold for six months.
2. Buy when daily RSI 14 rises above 30 and hold for six months.
3. Buy when weekly RSI 14 falls under 30 and hold for six months.
4. Buy when weekly RSI 14 rises above 30 and hold for six months.

To investigate, we use a 126-day (26-week) holding interval for daily (weekly) calculations. We assume that overlapping signals reset the clock. In other words, if there are buy signals while already in SPY, we extend the holding interval to six months after the last overlapping buy signal. We ignore frictions for switching between SPY and cash and assume no return on cash. We ignore tax implications of trading. We use buy-and-hold SPY as a benchmark. Key metrics are compound annual growth rate (CAGR) and maximum drawdown (MaxDD), but we also look at average 6-month returns and return volatilities while in SPY. Using daily and weekly raw (for RSI calculations) and dividend-adjusted (for return calculations) SPY closing prices from the end of January 1993 through mid-August 2023, we find that: