A Simple And Timeless Way To Trade The S&P 500 Successfully, Part 2

John Gilluly profile picture
John Gilluly
2.67K Followers

Summary

  • The benefits of trading the SPX 500 along its 200-day simple moving average are discussed.
  • Results: no negative years, CAGR of 9.48%, and a gross return of 1,054% (1992-2020).
  • Trading strategy protects an investor from bear markets.
  • Article was first written on March 21, 2009. Updated on November 8, 2013, and is reviewed here today.

A Simple And Timeless Way To Trade The S&P 500 Successfully was first published by Seeking Alpha seven years ago.

It proposes a simple strategy: buy the SPX 500 when it breaks above its 300-day SMA average (the red line in the linked chart), and sell when it goes below it. For our purposes here, I am substituting the 200-day SMA because it is higher-performing when compared to the 300-day SMA.

The original article generated a significant response and a good degree of controversy too (which surprised me), but it was all constructive criticism. I have added 7 years of data to the original spreadsheet, and ran the 200-day and 300-day moving-average crossovers again, using Excel functions for the calculations.

The Data

  • 7,116 trading days are included in this study. It runs from January 2, 1992, to April 1, 2020.
  • The raw information is available here: Excel:1. SPX Data 1992-2020 w/chart.
  • There were 180 trades (in and out) with the 200-day SMA. See link: Excel: 2.~ 200-300 day return 1992-2020.
  • There were 128 trades (in and out) with the 300-day SMA. See same link: Excel: 2.~ 200-300 day return 1992-2020.
  • The last sell date was March 5, 2020.

50-Day M/A

  • The 50-day SMA is also recorded alongside the 200- and 300-day databases, but no trades are listed for it.
  • However, the 50-day moving average could be used to augment the results of the 200-day strategy by providing a leading indicator at the tail end of a bear market, just as a new bull market is emerging (it leads the 200-day SMA by approximately 20 days).
  • You would buy when the upward trend of the SPX 500 crosses the 50-day SMA, and look for final confirmation at the 200-day SMA. The 50-day cross-over is clearly visible on a chart (for example, see

This article was written by

John Gilluly profile picture
2.67K Followers
I have invested for 33 years. I only write articles for Seeking Alpha when I think that there is something timely to invest in. I look for opportunities in mispriced assets that are temporarily out of favor. These investments can be very short term to long term, depending on the primary trend of the market. ***Sentiment indicators factor significantly into my choices. I combine them with simple technical studies before I trade. The entry-point, its original trade date and time, has an enormous effect on the efficacy of an investment over time. ***I have found that determining and following the primary trend of the market (in all time frames) is the key to successful investing: to be bullish when it is time to be bullish, and bearish when it is time to be bearish. ***Fundamental analysis may be good training for the mind in assessing worthy companies, but it is not the primary reason that investors buy and sell stocks. ***Like captains who steer their boats across the waves of the sea, wise investors carefully observe the movements in the water beneath them. A favorable trend can literally pull you along.***In commenting on such timeliness, Shakespeare once wrote, "There is a tide in the affairs of men, Which (when) taken at the flood, leads on to fortune. Omitted, all the voyage of their life is bound in shallows and in miseries. On such a full sea are we now afloat. And we must take the current when it serves, or lose our ventures."

Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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