Short-Term Combined Model

Smart Money Confidence is a model that aggregates indicators reflecting sentiment among investors that tend to use the stock market to hedge underlying positions. Or, they're just contrarian investors who prefer to sell into a rising market and buy into a declining one.

Time Frame: Short-Term | Update Schedule: Daily | Source: SentimenTrader

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Construction:

The Short-Term Combined Model is an ensemble models consisting of fourteen short-term sentiment indicators. The indicators used to create this ensemble model are:

  • STEM.MR Model
  • Short-term Optimism Index (Optix)
  • SPY Optix
  • OEX Put/Call Ratio
  • ISE Call/Put Ratio
  • ISE Equity Call/Put Ratio
  • S&P 500 Price Oscillator
  • NYSE TICK
  • Rydex Beta Chase Index
  • Rydex Bull/Bear RSI Spread
  • SPY Fund Flow
  • SPY Breadth (% > 10 Day Avg)
  • Short-Term Risk Levels
  • ISE Index Call/Put Ratio

As with most of our indicators, signals work best when going counter to the trend. For example, buying when the model drops below -10 when stocks are in a general uptrend is more likely to work out than when stocks are in a downtrend (say, below the 200-day moving average).

Also, failures contain good information. If stocks cannot rally after the model drops below -10 or, even more meaningfully, below -12, then there is heavy supply and stocks will likely continue their downtrend in the weeks ahead.

Model’s general rules

  • 1.) Consider going long the S&P 500 when the Short Term Combined model reading is below -10.
  • 2.) When the Short Term Combined model reading is above 13.5, SELL.

You can do 1 of 5 things when you SELL:

  1. Model: Shift into 100% cash
  2. Model (Multi-Asset Aggregate Bonds): Buy and hold a Aggregate Bond ETF (AGG)
  3. Model (Multi-Asset Corporate Bonds): Buy and hold a US Corporate Bond ETF (LQD)
  4. Model (Multi-Asset Treasury Bonds): Buy and hold a US Treasury Bond ETF (TLT)
  5. Model (Gold): Buy and hold a Gold ETF (GLD)

Performance

  • Last updated April 2026
  • Backtest timeframe: 2006-07-01 to 2026-04-30. NOTE: These dates were chosen to provide the same coverage across all signals and ETF's used in those signals and are dependant on ETF start dates.
  • For all backtests shown, we used active and accessible ETF's (e.g., SPY, QQQ, TLT, LQD, etc). The prices of these ETF's are split and dividend adjusted.
  • Shorting is performed by buying inverse ETFs. For these backtests, we used SH to short the S&P500 and PSQ to short the NASDAQ. Using leveraged ETFs like SSO (2x) and UPRO (3x) may increase your returns and drawdowns. NOTE: For the REIT Trading Model, no shorting is done as their isn't an ETF with enough history and activity to cover the timeframe.
  • Historical returns shown below include transaction fees of $1.5 per order (e.g., $3 per round-trip) but does not include slippage.

Model's average annual returns

  1. Model: 10.47%
  2. Model (long/short) - SH: 18.04%
  3. Model (long/short) - PSQ: 9.12%
  4. Model (Multi-Asset Aggregate Bonds) - AGG: 11.33%
  5. Model (Multi-Asset Corporate Bonds) - LQD: 12.59%
  6. Model (Multi-Asset Treasury Bonds) - TLT: 13.04%
  7. Model (Gold) - GLD: 17.89%

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