STREET DOGS: There are plenty false-positive signals
But there were plenty of false-positive signals. In fact, the S&P 500 has crossed the 200-day average 150 times since 1997
From Ben Carlson at A Wealth of Common Sense: The 200-day moving average works better as an indicator of the type of market environment we are in than as a timing signal. Over the past 90 years [US] stocks have spent about two-thirds of the time above the 200-day mark and one-third of the time below; up-trending markets above the moving average showed higher average returns and lower than average volatility than markets below the moving average. [Looking at the S&P 500], an investor who used the 200 day as a signal to get out of the market would have missed the majority of the losses from the huge market crashes of both 2000-02 and 2007-09. But there were plenty of false-positive signals. In fact, the S&P 500 has crossed the 200-day average 150 times since 1997. In that time, there were only 11 market corrections when stocks fell 10% or worse … making a false breakdown a higher probability event than further deterioration in the markets. Jeremy Siegel tested the 200-day signal from ...
Would you like to comment on this article?
Sign up (it's quick and free) or sign in now.
Please read our Comment Policy before commenting.
Subscribe now to unlock this article.
Support BusinessLIVE’s award-winning journalism for R129 per month (digital access only).
There’s never been a more important time to support independent journalism in SA. Our subscription packages now offer an ad-free experience for readers.
Cancel anytime.
Questions? Email helpdesk@businesslive.co.za or call 0860 52 52 00. Got a subscription voucher? Redeem it now.