As an investment advisor that uses Market Timing and other Tactical Approaches to the market, I get my share of criticism from the Buy and Hold crowd.  The best system over the last 12 months has been Buy and Hold.  But really, are you going to sit through 40% plus losses?  I don’t think so.  The chart below shows the Buy and Sell Signals for the 200 day moving average over the past few years.  From the chart below you can see that market timing using the 200 day moving average, a popular method used by many Endowments, Hedge Funds and Investors had you exit the S&P 500 in May 2008, avoiding the big losses of 2008 and has been long with a few whipsaws since May 2009.  A trader using the 200 day is in a Buy and Hold mode taking advantage of all the gains in the last year, yet providing risk management.  There are better trading plans to use than the 200 day on the S&P 500.  I do not use the 200 day moving average for the S&P 500.

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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. 

Security Name Trend3 Ticker
Barclays High Yield Bond Stay Long JNK
BRIC IShares Stay Long BKF
Coal Power Shares Stay Long PKOL
DB Commodity Index Stay Long DBC
Diamond Trust DOW Stay Long DIA
Energy Select SPDR Stay Long XLE
Internet Holders Stay Long HHH
IPath India Index Stay Long INP
IShare Russell 2000 Stay Long IWM
IShares 25 Index Stay 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 Long EEM
IShares Financial Sector Stay Long IYF
IShares Germany Stay Long EWG
IShares Hong Kong Stay Long EWH
IShares Latin America Stay Long ILF
IShares Mexico Stay Long EWW
IShares Mid Cap 400 Stay Long IJH
IShares MSCI EAFE Stay Long 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 Stay Long SLV
IShares South Africa Stay Long EZA
IShares South Korea Stay Long EWY
IShares Taiwan Stay Long EWT
IShares United Kingdom Stay Long EWU
NDX 100 Stay Long QQQQ
Oil Service Holders Stay Long OIH
Pharmaceutical Holders Stay Long PPH
PowerShares US Dollar Index Stay Long UUP
Russia Stay Long RSX
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 Stay Long 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 Stay Long 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