What is happening with Commodities? It was interesting to see while almost every equity Index and Sector is above its 50 day moving average, the Commodities are failing below. Today, March 19, 2010 the OIH, Oil Service Holders and the GLD, SPDR Gold Shares has fallen below their 50 day moving averages. The DB Commodity Index was below and remains so at today’s close. Is this an early warning sign of trouble in that Sector?
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 chart shows the current 50 day simple moving average condition on the 50 most actively traded ETF’s.
|Barclays High Yield Bond||Stay Long||JNK|
|BRIC IShares||Stay Long||BKF|
|Coal Power Shares||Stay Long||PKOL|
|DB Commodity Index||Stay Short||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||New Short||OIH|
|Pharmaceutical Holders||Stay Long||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||New Short||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 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