9 Sig

Overview

The 9% Signal (9 Sig) is the most aggressive tier of Jason Kelly's Signal plan family. It pairs TQQQ — the ProShares UltraPro QQQ 3x leveraged Nasdaq-100 ETF — with a bond fund and rebalances quarterly to a 9% quarterly growth target.

The plan belongs to a three-tier family based on leverage multiplier. The quarterly target scales with the fund's leverage ratio: 3% × 1x (unleveraged, 3 Sig), 3% × 2x (6 Sig), 3% × 3x (9 Sig). The 9% target derives from the Nasdaq-100's historical annual return of approximately 12–14%, which corresponds to roughly 3% per quarter. Applied to a 3x leveraged fund, the equivalent quarterly target is 9%.

The core mechanics — value averaging, signal line calculation, quarterly execution, and the 30 Down Rule — are the same across all three plans. The differences are the fund used, the quarterly target percentage, the 30 Down Rule's ignore count, and some additional safeguards unique to 9 Sig that manage the extreme volatility of 3x leverage.

The system is described as purely reactive: there are no forecasts, no market timing decisions, and no macroeconomic analysis. Each quarter, the investor compares the current TQQQ balance to a target balance that grows at 9% per quarter. If below target, buy. If above target, sell the excess. The bond fund serves as the reserve for purchases and the destination for profits.

Jason Kelly created 9 Sig as an extension of the 3 Sig system he introduced in his 2015 book The 3% Signal. The 9 Sig plan is managed through The Kelly Letter subscription service and is not covered in a standalone book. Kelly's own account following 9 Sig grew from approximately $733,000 in January 2018 to approximately $5.9 million by the end of December 2024.

Rules and Logic

Starting allocation

The 60/40 allocation is both the starting position and the target to which the plan resets after the 30 Down phase ends. During normal operation, the actual ratio drifts continuously — it has ranged historically as high as 99% TQQQ depending on market conditions.

The official plan uses AGG as the bond fund. Community practitioners often substitute short-term Treasury ETFs (SGOV, TBLL), money market funds (SPAXX), or other stable instruments to avoid the interest rate sensitivity of intermediate-term bond funds.

Signal line calculation

All new cash contributed during a quarter goes entirely to the bond fund. At rebalancing time, half of those contributions is added to the signal line target.

Quarterly rebalancing

Additional safeguards (9 Sig only)

90% Buying Power Throttle: No single quarterly buy signal may use more than 90% of the current bond fund balance. This preserves a minimum reserve after large purchases and prevents a single extreme buy signal from exhausting the entire buffer.

Spike Reset Trigger: If all three of the following conditions are true simultaneously, the plan resets TQQQ to a 60% allocation:

• TQQQ's quarterly gain was 100% or more
• The TQQQ balance after the quarterly rebalance is between 60% and 100% of total portfolio
• The plan is not currently in a 30 Down no-sell period

This rule books profits during extreme bull-market spikes and rebuilds the bond buffer while TQQQ is at an elevated price.

30 Down Rule

The 30 Down Rule activates when TQQQ's quarterly closing price falls at least 30% below its quarterly closing price high within the rolling past two years. Only quarterly closing prices are monitored — intra-quarter prices do not trigger the rule.

When active: the next 2 sell signals are ignored. Buy signals during the locked phase are followed as normal. After 2 sell signals have been ignored (within two years), the plan resets to the 60/40 base allocation and resumes normal operations.

Historical 30 Down activations for 9 Sig:

• Spring 2020 (COVID crash): Plan locked through the 2020–2021 recovery. TQQQ allocation ran as high as 99% while locked in. The lock prevented selling during the ascent. The plan eventually signaled a rebalance reset near the recovery peak and resumed normal operations.
• 2022 (Federal Reserve rate hike cycle): TQQQ dropped sharply. Plan locked in. Bond fund was exhausted by mid-2022, leaving the plan at 100% TQQQ with no buffer. The 30 Down rule prevented any sell signals during the subsequent recovery. The plan reset to 60/40 in January 2024 after the two ignored-sell threshold was reached.

Performance Notes

The 9% quarterly signal projects to approximately 41.2% annually (1.09⁴ − 1 ≈ 41.16%). This is the target growth rate for the TQQQ position each quarter, funded from bonds when the market falls short.

Kelly Letter official portfolio

The 2023 result was driven by two factors: TQQQ's recovery from 2022 lows, and the 30 Down lock-in that kept the plan at 99% TQQQ allocation through the entire year rather than selling into the recovery.

Independent corrected backtest — BestFolio (2024, real data only)

This window (2010–2026) is almost entirely within an exceptionally favorable period for the Nasdaq-100. 9 Sig's Sharpe ratio is higher than 6 Sig's despite its deeper leverage because TQQQ's risk-adjusted returns in the test window were exceptional.

Simulated dot-com bubble scenario

Without ongoing cash contributions, 9 Sig through the dot-com crash (2000–2002) would have taken approximately 18–20 years to recover to pre-crash levels. The 2004–2024 period (avoiding the crash) simulated a CAGR of approximately 25%. Note: simulated TQQQ data for pre-2009 periods uses a mathematical approximation and cannot be verified with the same confidence as actual fund returns.

Closed-system stress test (BestFolio bootstrap)

Testing 2,000 resampled 27-year histories of 9 Sig's actual returns:

• Median outcome: −98% maximum drawdown with 7.7× terminal multiple
• Worst 5%: effectively total loss
• Best 5%: −82% drawdown with 3,665× terminal multiple

The −99.73% closed-system drawdown in an extended synthetic dot-com scenario is described as "not a tail event — it is essentially the median" without ongoing contributions.

Risks and Caveats

The plan is not viable as a closed system without ongoing contributions. Regular contributions refill the bond buffer after bear market drawdowns, raise the signal line, and sustain the buy-low mechanic. Without contributions, a severe and extended bear market exhausts the bond fund, leaving 100% TQQQ at a depressed price with nothing left to buy further dips. The dot-com simulation shows this can result in 18–20 years to break even.

3x leverage amplifies losses at a non-linear rate. TQQQ resets its 3x leverage ratio daily. A 50% decline in the Nasdaq-100 does not produce a 150% loss in TQQQ — it produces a near-total wipeout due to daily compounding of amplified moves. Recovering a 77% loss requires a 335% gain.

Bond buffer depletion. In 2022, the 9 Sig plan exhausted its bond buffer mid-year. With no bonds remaining, every subsequent buy signal went unfunded. The plan held 100% TQQQ through the rest of 2022 with no ability to buy at the lows. This occurred in a real live account.

Bond fund losses in rising rate environments. AGG lost value in 2022 due to the rate hiking cycle, simultaneously with TQQQ's decline. Community members have migrated to short-term Treasury ETFs (SGOV, TBLL) and money market funds for the bond sleeve precisely to avoid this correlation.

TQQQ volatility decay. TQQQ resets its leverage daily. In sideways, choppy markets, the mathematical effect of daily compounding produces a performance drag against the theoretical 3x return of the Nasdaq-100. The offset from quarterly rebalancing is partial, not complete.

The 9% target does not adapt to market conditions. The signal line grows at 9% per quarter regardless of valuations or market regimes. In sustained bear markets, the plan keeps buying. There is no mechanism to recognize that recovery may be delayed.

Sequence of returns risk at entry. Entering 9 Sig near a market peak with a large lump sum and immediately encountering a multi-year bear market is the worst-case scenario. New investors are sometimes advised to consider a scaled-in entry rather than immediate full deployment.

Tax drag in taxable accounts. Quarterly sell signals on TQQQ in a taxable account generate short-term capital gains at ordinary income rates. Tax-advantaged accounts are strongly preferred.

Resources

The 3% Signal (Jason Kelly, 2015, Plume/Penguin) — covers the core signal mechanics in detail via the unleveraged 3 Sig plan; these apply directly to 9 Sig with TQQQ and the 9% target substituted. ISBN: 978-0142180952.

The Kelly Letter (jasonkelly.com) — Jason Kelly's subscriber newsletter. Contains the official weekly plan status, current TQQQ signal line value, 30 Down Rule state, and all plan rules including the Spike Reset and 90% throttle that are not publicly documented elsewhere.

jasonkelly.com/resources/strategies/ — Free public summary of all three plans.

BestFolio corrected backtest — Independent analysis with corrected implementation across all three plans; includes 9 Sig's closed-system stress test and the five simulation errors present in prior community tools.