Systematic Trader’s and Market Timing traders may use the 50 day Simple Moving Average as their trading plan. The 50 day moving average is basic technical analysis. It is a good market timing trading plan for active trading in indexes and ETF’s that have trend following characteristics. It can produce disastrous results if used for every stock index, ETF, or stock.
Other widely followed moving averages are the 100 day moving average and the 200 day moving average. Some money managers will use these moving averages with a shorter moving average and use the cross of the shorter moving average above or below the longer moving average to generate trading signals. The goal of two moving averages and even 3 moving averages is to eliminate whipsaws that often occur with moving averages as a technical analysis indicator.
Why should you care about the signals produced with the 50 day moving average? There are so many people using the 50 day moving average, that we will often see extreme volatility in indexes when they cross both above and below the 50 day moving average.
The below chart shows the current 50 day simple moving average condition on the 40 most actively traded ETF’s.
|Barclays High Yield Bond||Stay Long||JNK|
|BRIC IShares||Stay Short||BKF|
|Coal Power Shares||New Short||PKOL|
|DB Commodity Index||Stay Short||DBC|
|Diamond Trust DOW||New Short||DIA|
|Energy Select SPDR||Stay Long||XLE|
|Internet Holders||Stay Short||HHH|
|IPath India Index||New Short||INP|
|IShare Russell 2000||Stay Long||IWM|
|IShares 25 Index||Stay Short||FXI|
|IShares Australia||Stay Short||EWA|
|IShares Basic Materials||New Short||IYM|
|IShares DJ Real Estate||New Short||IYR|
|Ishares DJ Transportation||Stay Long||IYT|
|Ishares Emerging Markets||New Short||EEM|
|IShares Financial Sector||Stay Long||IYF|
|IShares Germany||Stay Short||EWG|
|IShares Hong Kong||Stay Short||EWH|
|IShares Latin America||Stay Short||ILF|
|IShares Mexico||New Short||EWW|
|IShares Mid Cap 400||Stay Long||IJH|
|IShares MSCI EAFE||Stay Short||EFA|
|IShares MSCI Japan||Stay Long||EWJ|
|IShares Pacific ex Japan||Stay Short||EPP|
|IShares S&P 500 Growth||New Short||IVW|
|Ishares S&P Small Cap 600||Stay Long||IJR|
|IShares Silver||New Short||SLV|
|IShares South Africa||Stay Short||EZA|
|IShares South Korea||Stay Long||EWY|
|IShares Taiwan||Stay Long||EWT|
|IShares United Kingdom||New Short||EWU|
|NDX 100||Stay Long||QQQQ|
|Oil Service Holders||Stay Long||OIH|
|Pharmaceutical Holders||Stay Long||PPH|
|PowerShares US Dollar Index||Stay Long||UUP|
|RYDEX S&P 500 Equal Weight||Stay Long||RSP|
|S&P 500||Stay Long||SPY|
|Semiconductor Holders||Stay Long||SMH|
|SPDR Consumer Descretionary||Stay Long||XLY|
|SPDR Consumer Staples||New Short||XLP|
|SPDR Gold Shares||Stay Short||GLD|
|SPDR Healthcare||Stay Long||XLV|
|SPDR Industrial Sector||Stay Long||XLI|
|SPDR International Real Estate||New Short||RWX|
|SPDR Materials||Stay Long||XLB|
|SPDR Metal & Mining||Stay Long||XME|
|SPDR Mid Cap||Stay Long||MDY|
|SPDR S&P Homebuilders||Stay Long||XHB|
|SPDR Technology||Stay Long||XLK|
|Steel Market Vector||Stay Long||SLX|
|US Oil||New Short||USO|
|Wisdom Tree Total Dividend||New Short||DTD|
You should not trade any systematic trading plan without proper back testing and analysis of the trading characteristics of the index, stock or ETF you are trading.
These trading signals are provided courtesy of the website you are viewing this information should not be used without research and advice from a financial professional.
Be aware that this condition can and will change any day in the future.
We monitor the 50 day moving average daily along with a number of other systematic trading plans.
There is No “Holy Grail” in trading systems. Do not use the 50 day SMA or any other systematic trading system without proper research on the asset.
For questions on rule based, systematic trading, contact