Systematic Trader’s will use the 50 day Simple Moving Average as their trading plan. The 50 day moving average is a good trading plan for indexes and ETF’s that have trend following characteristics. It can produce disastrous results if used for every index or ETF.
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 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 40 most actively traded ETF’s.
| Security Name | Above 50 | Ticker Symbol |
| BRIC IShares | Above | BKF |
| Coal Power Shares | Above | PKOL |
| DB Commodity Index | Above | DBC |
| Diamond Trust DOW | Above | DIA |
| EWY | Above | EWY |
| IPath India Index | Above | INP |
| IShare Russell 2000 | Above | IWM |
| IShares 25 Index | Above | FXI |
| IShares Australia | Above | EWA |
| IShares Basic Materials | Above | IYM |
| IShares DJ Real Estate | Above | IYR |
| Ishares DJ Transportation | Above | IYT |
| IShares Germany | Above | EWG |
| IShares Hong Kong | Above | EWH |
| IShares Latin America | Above | ILF |
| IShares Mexico | Above | EWW |
| IShares Mid Cap 400 | Above | IJH |
| IShares MSCI EAFE | Above | EFA |
| IShares MSCI Japan | Above | EWJ |
| IShares Pacific ex Japan | Above | EPP |
| IShares S&P 500 Growth | Above | IVW |
| Ishares S&P Small Cap 600 | Above | IJR |
| IShares Silver | Above | SLV |
| IShares South Africa | Above | EZA |
| IShares Taiwan | Above | EWT |
| IShares United Kingdom | Above | EWU |
| NDX 100 | Above | QQQQ |
| Pharmaceutical Holders | Above | PPH |
| Russia | Above | RSX |
| S&P 500 | Above | SPY |
| Semiconductor Holders | Above | SMH |
| SPDR Consumer Descretionary | Above | XLY |
| SPDR Consumer Staples | Above | XLP |
| SPDR Gold Shares | Above | GLD |
| SPDR Healthcare | Above | XLV |
| SPDR Indutrial Sector | Above | XLI |
| SPDR Materials | Above | XLB |
| SPDR Metal & Mining | Above | XME |
| SPDR Mid Cap | Above | MDY |
| SPDR Technology | Above | XLK |
| Steel Market Vector | Above | SLX |
| Energy Select SPDR | Below | XLE |
| IShares Financial Sector | Below | IYF |
| Oil Service Holders | Below | OIH |
| SPDR International Real Estate | Below | RWX |
| SPDR S&P Homebuilders | Below | XHB |
| US Oil | Below | USO |
You should not trade any systematic trading plan without proper back testing and analysis of the trading characteristics of the index, stock or ETF you are trading.
This is a snap shot and you should 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 systematic trading plans.
There is No “Holy Grail” in trading systems. Do not use the 50 day SMA or any other systematic trading system without proper research on the asset.
For questions on systematic trading, contact mark@seleznovcapitaladvisors.com
