It is a mean reversal bet. It can work. But what if one of the ETFs goes to zero? Then the algorithm will continously buy that all the way down.
Erm - edit - scratch that: But what if one of the ETFs goes to the moon? Then the algorithm will continously sell that all the way up.
That is not what this algorithm would do.
As I read it, the strategy never goes long -- it's always simply short one ETF. The bad cases look like "one sector consistently outperforms", or "leading sectors have bull runs of consecutive days before losing steam".
Sorry guys - it should have said: All the way to the moon.
The algorithm has a buddy:
The algorithm of just buying the worst performing etf of yesterday.
Using the OP's data, that inverse algo is a dead loser.
It will short it for one market day and then ignore it.
It would short for the next day too if the EFT was growing enough.