A week after the NYSE decided to pull bids, the volatility in the markets continues. A DOW with 100 plus days has become the norm. The technical picture of the Indexes we track in our Daily Trading Signals continues to reflect the volatility I warn about when Indexes hit certain technical levels like the 200 day moving average. You will hear more and more about the 200 day moving average by talking heads all next week.
Today, May 14, 2010 saw the ILF, Latin America ETF finding a real battle between Bulls and Bears at the 200 Day Moving Average. Last Thursday the ILF, Latin America ETF went below the 200 day, then back above, and now back below. The question for the markets it if the critical 200 day moving averages will hold, or if they will soon join shorter term moving averages in a down trend. At Seleznov Capital Advisors we watch these key levels to see the Index breaks down or the trend continues up. You can get these trading alerts nightly from our Daily Trading Signals Service. If you are using the 200 day moving average as the indicator in the ILF, Latin America ETF, just take every trade. The trend will eventually become evident.
System Trader’s and Market Timing traders may use the 200 day Simple Moving Average as their trading plan. The 200 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 50 day moving average and the 100 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 Wall Street Journal displays a 65 Day Moving Average in their charts. 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 200 day moving average? There are so many people using the 200 day moving average, that we will often see extreme volatility in indexes when they cross both above and below the 200 day moving average. It has been reported that Endowments like Harvard and Yale use the 200 Day Moving Average in modeling their portfolios.
The below chart shows the current 200 day simple moving average condition on the 50 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||Stay Long||DIA|
|Energy Select SPDR||New Short||XLE|
|Internet Holders||Stay Long||HHH|
|IPath India Index||Stay Long||INP|
|IShare Russell 2000||Stay Long||IWM|
|IShares 25 Index||Stay Short||FXI|
|IShares Australia||Stay Short||EWA|
|IShares Basic Materials||Stay Long||IYM|
|IShares DJ Real Estate||Stay Long||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||New Short||ILF|
|IShares Mexico||Stay Long||EWW|
|IShares Mid Cap 400||Stay Long||IJH|
|IShares MSCI EAFE||Stay Short||EFA|
|IShares MSCI Japan||Stay Short||EWJ|
|IShares Pacific ex Japan||Stay Short||EPP|
|IShares S&P 500 Growth||Stay Long||IVW|
|Ishares S&P Small Cap 600||Stay Long||IJR|
|IShares Silver||Stay Long||SLV|
|IShares South Africa||Stay Long||EZA|
|IShares South Korea||Stay Long||EWY|
|IShares Taiwan||Stay Short||EWT|
|IShares United Kingdom||Stay Short||EWU|
|NDX 100||Stay Long||QQQQ|
|Oil Service Holders||Stay Short||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||New Short||XLV|
|SPDR Industrial Sector||Stay Long||XLI|
|SPDR International Real Estate||Stay Short||RWX|
|SPDR Materials||New Short||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||Stay Short||USO|
|Wisdom Tree Total Dividend||Stay Long||DTD|
You should not trade any system 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 200 day moving average daily along with a number of other system trading plans.
There is No “Holy Grail” in trading systems. Do not use the 200 day SMA or any other system trading system without proper research on the asset.
For questions on rule based, system trading, contact