Future Retirement Success
  • Politics
  • Business
  • Investing
  • Stocks
  • Politics
  • Business
  • Investing
  • Stocks

Future Retirement Success

Stocks

Quantifying the Battle for the 200-day – It’s Elementary

by August 19, 2022
August 19, 2022
Quantifying the Battle for the 200-day – It’s Elementary

The S&P 500 SPDR (SPY) surged to its falling 200-day SMA here in August and even edged above this key level intraday on Tuesday. Even though the ETF is close to crossing above the 200-day, chartists would be better off taking a step back to avoid a whipsaw. Note that SPY has crossed the 200-day SMA over 150 times since 2000. This may not seem like many for a 22 year period, but these crosses tend to cluster because the 200-day SMA is a real battle zone.

The chart above shows SPY with the 200-day SMA and the Percent Above MA (1,200,1) in the indicator window. First, notice that SPY crossed the 200-day SMA ten times from late January to mid April (blue shading). Talk about whipsawing. The indicator in the lower window visualizes these crosses by turning positive (green) when the 1-day SMA (close) crosses above the 200-day SMA and red when below.

Chartists can reduce whipsaws and improve performance by smoothing closing prices with a short moving average. This could be 5, 20 or even 50 days. The 50/200 cross, also known as the golden cross, is perhaps the most popular combination. I prefer a 5-day SMA because the 20 and 50 day SMAs lag too much and generate bigger drawdowns (think March 2020). The next chart shows the 5-day crossing the 200-day just five times from late January to mid April. The indicator window shows Percent Above MA (5, 200, 1) confirming these crosses. This indicator is part of the TrendInvestorPro Indicator Edge Plugin for StockCharts ACP.

Now let’s quantify performance with a backtest. Since 2000, buying and selling the close/200-day SMA cross generated 83 trades with an annual return of 4.53%, a win rate of 34% and a maximum drawdown of 14.7%. There are two crosses for every trade and dividends were not included. Buying and selling the 5/200 day SMA cross generated just 31 trades with an annual return of 5.6%, a win rate of 42% and a Maximum Drawdown of 20%. The higher annual return and better win rate make the 5/200 cross a more robust strategy. Also note that SPY remains in a long-term downtrend because it is below the falling 200-day and the 5-day is below the 200-day. It’s elementary my dear Watson.

This week at TrendInvestorPro, the Composite Breadth Model hit a make of break level and two inputs turned bullish the last two weeks, but three remain bearish. Our recent focus has been on seasonality, oil, energy ETFs and agriculture ETFs. Click here for immediate access to our reports and weekly video.

The StochClose, the Trend Composite, ATR Trailing Stop and eight other indicators are part of the TIP Indicator Edge Plugin for StockCharts ACP. Click here to take your analysis process to the next level.

—————————————

0
FacebookTwitterGoogle +Pinterest
previous post
Looking at Topping Patterns
next post
Oil and Gas – Calling Crude Oil’s Bluff?

You may also like

Week Ahead: NIFTY May Stay Vulnerable At Higher...

October 7, 2023

Sector Rotation Signals an Important Week Ahead for...

September 22, 2023

1-2-3 Reversal Pattern: What It Is and How...

July 24, 2024

Watch the Ebb and Flow — This Market...

July 21, 2023

XLF’s Record Highs: Buy the Dip or Bail...

January 31, 2025

Improve Your Entry Points

August 10, 2023

S&P 500 on Its Way to Highs: Will...

July 21, 2023

Sector Rotation + SPY Seasonality = Trouble for...

April 30, 2025

Will the Market Internals Turn More Bearish?

March 8, 2023

Rates Look Set to Rise as TLT Resumes...

March 17, 2024

    Get free access to all of the retirement secrets and income strategies from our experts! or Join The Exclusive Subscription Today And Get the Premium Articles Acess for Free

    By opting in you agree to receive emails from us and our affiliates. Your information is secure and your privacy is protected.

    Recent Posts

    • TSA tells Americans their Costco cards won’t fly at airport security despite love for hot dogs

      June 7, 2025
    • Trump announces China will restart rare earth mineral shipments to US after productive call

      June 7, 2025
    • Musk feud presents ‘unprecedented’ dynamic compared to past Trump disputes: expert

      June 7, 2025
    • Snub of Musk’s NASA nominee ally preceded sudden ‘big, beautiful bill’ criticism, Trump feud

      June 6, 2025
    • Supreme Court rules DOGE can access Social Security information

      June 6, 2025
    • US sanctions money laundering network aiding Iran as regime faces nuclear reprimand at IAEA

      June 6, 2025

    Categories

    • Business (8,149)
    • Investing (2,019)
    • Politics (15,558)
    • Stocks (3,134)
    • About us
    • Privacy Policy
    • Terms & Conditions

    Disclaimer: futureretirementsuccess.com, its managers, its employees, and assigns (collectively “The Company”) do not make any guarantee or warranty about what is advertised above. Information provided by this website is for research purposes only and should not be considered as personalized financial advice. The Company is not affiliated with, nor does it receive compensation from, any specific security. The Company is not registered or licensed by any governing body in any jurisdiction to give investing advice or provide investment recommendation. Any investments recommended here should be taken into consideration only after consulting with your investment advisor and after reviewing the prospectus or financial statements of the company.

    Copyright © 2025 futureretirementsuccess.com | All Rights Reserved