Which Trend Following System is best? There are many good trend following plans that can help to protect and grow your portfolio. The 50 day moving average is not always the best and often are has many bad signals that need to be reversed. In this recent market correction, the 50 day has been a good trading system. It gave Short Signals early that helped anyone profit from those signals. Yesterday, May 18, 2010 a Sell Signal for the IYR, Dow Jones U.S. Real Estate Index issued a Sell Signal. The IYR has not done well with the 50 day moving average. We shall see if this lasts or gets reversed. We track 29 trading plans and provide Daily Signals for 53 Indexes in our Daily Trading Signal Service Today there were several new Buy Signals. We monitor trading signals for 53 Indexes at www.seleznovcapitaladvisors.com
System 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 Wall Street Journal displays the 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 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 table 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||Stay Short||BKF|
|Coal Power Shares||Stay Short||PKOL|
|DB Commodity Index||Stay Short||DBC|
|Diamond Trust DOW||Stay Short||DIA|
|Energy Select SPDR||Stay Short||XLE|
|Internet Holders||Stay Short||HHH|
|IPath India Index||Stay Short||INP|
|IShare Russell 2000||Stay Short||IWM|
|IShares 25 Index||Stay Short||FXI|
|IShares Australia||Stay Short||EWA|
|IShares Basic Materials||Stay Short||IYM|
|IShares DJ Real Estate||Stay Short||IYR|
|Ishares DJ Transportation||Stay Short||IYT|
|Ishares Emerging Markets||Stay Short||EEM|
|IShares Financial Sector||Stay Short||IYF|
|IShares Germany||Stay Short||EWG|
|IShares Hong Kong||Stay Short||EWH|
|IShares Latin America||Stay Short||ILF|
|IShares Mexico||Stay Short||EWW|
|IShares Mid Cap 400||Stay Short||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 Short||IVW|
|Ishares S&P Small Cap 600||Stay Short||IJR|
|IShares Silver||Stay Long||SLV|
|IShares South Africa||Stay Short||EZA|
|IShares South Korea||Stay Short||EWY|
|IShares Taiwan||Stay Short||EWT|
|IShares United Kingdom||Stay Short||EWU|
|NDX 100||Stay Short||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 Short||RSP|
|S&P 500||Stay Short||SPY|
|Semiconductor Holders||Stay Short||SMH|
|SPDR Consumer Descretionary||Stay Short||XLY|
|SPDR Consumer Staples||Stay Short||XLP|
|SPDR Gold Shares||Stay Long||GLD|
|SPDR Healthcare||Stay Short||XLV|
|SPDR Industrial Sector||Stay Short||XLI|
|SPDR International Real Estate||Stay Short||RWX|
|SPDR Materials||Stay Short||XLB|
|SPDR Metal & Mining||Stay Short||XME|
|SPDR Mid Cap||Stay Short||MDY|
|SPDR S&P Homebuilders||Stay Short||XHB|
|SPDR Technology||Stay Short||XLK|
|Steel Market Vector||Stay Short||SLX|
|US Oil||Stay Short||USO|
|Wisdom Tree Total Dividend||Stay Short||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 50 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 50 day SMA or any other system trading system without proper research on the asset.
For questions on rule based, system trading, contact