4 replies to this topic

[maineman]

As I posted on AUgust 9th, it is "always scary" around the SMA 200. Not uncommon to dip below on these run downs. THis time is no different. Scary. Of course only time will tell if "something is different this time".... we shall see. As for eating my hat if we are not higher within a few months, well, I am beginning to pick out a few choice beanies.... mm

[IndexTrader]

Not uncommon to dip below, but this is a pretty substantial dip. 50-60 points as I type. If nothing else, a red flag is now raised. By the way, my understanding is that if you backtested a moving average system, none of them work especially well, to include crossings of the 200 day. IT

[hiker]

hi IT.. I have a quant study on XBD conducted this week showing 50 day sma cross-under the 200 day sma in recent years...the results 51 trading days from the 'bearish' cross-under signal the index is up (left blank on purpose) of the time by an average of (left blank on purpose) with a T of 3.3, the two losers averaging only - (left blank on purpose)%. That T-statistic is significant, anything >2.0 implies statistical significance. 1996-2006

[norton]

Not uncommon to dip below, but this is a pretty substantial dip. 50-60 points as I type. If nothing else, a red flag is now raised.

By the way, my understanding is that if you backtested a moving average system, none of them work especially well, to include crossings of the 200 day.

IT

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I read a similar study a fews back, concluded that although some were better than others in terms of
being simply or exponential, time frame crossovers, etc etc - none resulted in back tested profitability
over time applied to a wide range of stocks and indexes. Yes, picking a given stock or index could
be proven profitable, but there is the rub - that would be random and blind luck.

[maineman]

I don't think you can "trade" off the SMA 200. I mention it because it is such a landmark, widely watched and talked about. When a market heads to the 200 it should get your attention.... I pointed it out, because too many folks think its just down to the 200 and bingo! up and away. What I aimed to show was that the market will quiver above and below it and in a good bull market it can be pulled down to and under the 200, like we are seeing now. If your other indicators are in synch, the point is to not be derailed simply by the so-called "failure" of the SMA 200. We've seen 50 SPX point declines under the SMA 200 before. When markets fall through the SMA 200, you begin to hear more gloom and doom speak and there is usually some fundamental "excuse" like bad mortgages, Asian Flu, "derivatives", hedge-fund failures and the like. Best not to be too distracted if you are a technical trader. mm