Has the Trend changed? Just a week or so ago, almost every Index was below its 50 Day Moving Average. Today, we see a continuation of more indexes moving back above their 50 Day Moving Average.
Many technicians say they need to see a break above 1120 in the S&P 500. I feel the trend has changed using not only the 50 Day Moving Average, but also many other Trend Following methods in many markets.
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 50 most actively traded ETF’s.
|Barclays High Yield Bond||Stay Short||JNK|
|BRIC IShares||New Long||BKF|
|Coal Power Shares||New Long||PKOL|
|DB Commodity Index||Stay Short||DBC|
|Diamond Trust DOW||Stay Long||DIA|
|Energy Select SPDR||New Long||XLE|
|Internet Holders||Stay Long||HHH|
|IPath India Index||New Long||INP|
|IShare Russell 2000||Stay Long||IWM|
|IShares 25 Index||New Long||FXI|
|IShares Australia||Stay Long||EWA|
|IShares Basic Materials||Stay Long||IYM|
|IShares DJ Real Estate||Stay Long||IYR|
|Ishares DJ Transportation||Stay Long||IYT|
|Ishares Emerging Markets||Stay Short||EEM|
|IShares Financial Sector||Stay Long||IYF|
|IShares Germany||Stay Short||EWG|
|IShares Hong Kong||Stay Long||EWH|
|IShares Latin America||New Long||ILF|
|IShares Mexico||Stay Long||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 Long||EPP|
|IShares S&P 500 Growth||Stay Long||IVW|
|Ishares S&P Small Cap 600||Stay Long||IJR|
|IShares Silver||New Long||SLV|
|IShares South Africa||New Long||EZA|
|IShares South Korea||Stay Short||EWY|
|IShares Taiwan||Stay Short||EWT|
|IShares United Kingdom||Stay Short||EWU|
|NDX 100||Stay Long||QQQQ|
|Oil Service Holders||New Long||OIH|
|Pharmaceutical Holders||Stay Short||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||Stay Long||XLP|
|SPDR Gold Shares||Stay Long||GLD|
|SPDR Healthcare||Stay Long||XLV|
|SPDR Industrial Sector||Stay Long||XLI|
|SPDR International Real Estate||New Long||RWX|
|SPDR Materials||Stay Short||XLB|
|SPDR Metal & Mining||Stay Long||XME|
|SPDR Mid Cap||Stay Long||MDY|
|SPDR S&P Homebuilders||Stay Long||XHB|
|SPDR Technology||Stay Short||XLK|
|Steel Market Vector||Stay Long||SLX|
|US Oil||Stay Long||USO|
|Wisdom Tree Total Dividend||Stay Long||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