• Investing
  • Stock
Round Table Thoughts
  • Economy
  • Editor’s Pick
Home Stock Who will Win the Battle for the 200-day SMA?
Stock

Who will Win the Battle for the 200-day SMA?

by November 4, 2023
by November 4, 2023 0 comment
Share
0
FacebookTwitterPinterestWhatsapp

The S&P 500 is battling the 200-day SMA with four crosses over the last eleven days. We are also seeing a rise in volatility as this market benchmark plunged 5.86% in nine days (18-27 October) and then surged 5.85% the last five days. With such conditions, it is a good time to step back and look for ways to filter the noise. Today’s report will show a technique and quantify the signals with a back test. Read to the end for an offer to access the extended version of this report.

The chart below shows the S&P 500 with the 200-day SMA (red line) and the Percent above MA (1,200) indicator. This indicator shows the percentage difference between the close and the 200-day. It turns green when SPX crosses above the 200-day SMA and red when it crosses below. SPX crossed its 200-day SMA 195 times since January 2000. Anyone trading such a signal would experience lots of whipsaws and relatively small returns.

As the table below shows, there were 93 trades since January 2000. This means there were over 180 crosses of the 200-day moving average. Buy-and-hold for the S&P 500 generated a 4.66% Compound Annual Return with a 56.73% Maximum Drawdown. In contrast, trading the 200-day cross returned 3.65% with a Maximum Drawdown of 21.31%. This moving average cross strategy reduced the drawdown, but the whipsaws ate into the returns.

Chartists can improve performance by adding a filter. The next image shows the Percent above MA indicator with a 3% filter. This means the S&P 500 must be at least 3% above its 200-day SMA to generate a buy signal and 3% below its 200-day SMA for a sell signal. This strategy turned bullish on January 31st and remains bullish. The 5-day SMA was 2.9% below the 200-day SMA on October 27th and did not trigger a sell signal. According to this measure, the S&P 500 is still in a long-term uptrend.

This simple filter seriously reduced the number of whipsaws because there were only 13 trades. The table below also shows a much improved performance. Compound Annual Return improved to 6% and the Maximum Drawdown dropped to 21.31%. The Win Rate more than tripled with an increase from 25% to 77%.

The S&P 500 is the most widely followed benchmark for US stocks and the 200-day SMA is the most popular long-term moving average. Perhaps the 200-day SMA works well for the S&P 500 because some many traders, investors and institutions watch it. While it may be a self-fulfilling prophecy, it is important to know the status of the S&P 500 because this is the single most important barometer for US stocks. In general, positive outcomes are more likely when the S&P 500 is above its 200-day SMA and negative outcomes are more likely when the index is below its 200-day.

Can we improve performance even more? How do the Nasdaq 100, S&P MidCap 400 and Russell 2000 perform with long-term timing? This report continues for subscribers to TrendInvestorPro. Look for the update on Sunday. Take a one month trial for just $7. We will take smoothing one step further and then test the results for the major stock indexes. This report includes expanded performance metrics and chart signal examples. Click here for more information.

///////////////////////////////////////

You Might Also Like
  • Shopify Stock Shatters Expectations: What You Need to Know About Its Rise
  • 3 Unique RSI Techniques to Maximize Your Investments
  • SNEAK PEEK! Revealing The Future Of StockCharts With New “Technology Previews”
  • May Begins A Very Strong Period For Growth Stocks
Share
0
FacebookTwitterPinterestWhatsapp

previous post
Congress faces steep climb to avoid government shutdown less than two weeks away
next post
Week Ahead: Broader Markets Set To Relatively Underperform; What These Nifty Levels Closely

You may also like

Week Ahead: NIFTY Violates Important Levels; Stay Cautious And Selective...

October 2, 2023

Tech Stocks Plunge: What This Means for Investors

November 16, 2024

Week Ahead: Upsides For NIFTY May Stay Capped; Sectoral Landscape...

April 28, 2024

Ending The Sloppy Choppy Phase

May 13, 2023

The Halftime Show: Is Tech Becoming a Safe Haven?

March 20, 2023

Is This BUD Still For You?

May 29, 2023

Week Ahead: NIFTY May Stay Subdued Over the Truncated Week;...

April 13, 2024

Week Ahead: NIFTY Likely To Ring In The New Year...

December 30, 2023

Daily Briefing Notes for the Market

May 8, 2023

How Would YOU Rank the Magnificent 7 Stocks?

March 19, 2024

    Stay updated with the latest news, exclusive offers, and special promotions. Sign up now and be the first to know! As a member, you'll receive curated content, insider tips, and invitations to exclusive events. Don't miss out on being part of something special.


    By opting in you agree to receive emails from us and our affiliates. Your information is secure and your privacy is protected.

    Recent Posts

    • Breakouts, Momentum & Moving Averages: 10 Must-See Stock Charts Right Now

      May 31, 2025
    • Leadership Rotation Could Confirm Corrective Phase

      May 30, 2025
    • Run Your Stock Portfolio Like a Pro Sports Team

      May 30, 2025
    • U.S. foreign tax bill sends jitters across Wall Street

      May 30, 2025
    • Amazon taps Xbox co-founder to lead new team developing ‘breakthrough’ consumer products

      May 30, 2025

    Popular Posts

    • 1

      Trump-era China sanctions ended by Biden may be...

      June 27, 2024 2,765 views
    • 2

      Walz’s honeymoon with China gets fresh scrutiny as...

      August 9, 2024 2,472 views
    • 3

      Biden appointee played key role in recruiting Chinese...

      June 25, 2024 2,451 views
    • 4

      Shein’s global ambitions leaves some cybersecurity experts fearful...

      July 10, 2024 2,432 views
    • 5

      Harris VP pick spent years promoting research facility...

      August 29, 2024 2,308 views

    Categories

    • Economy (7,009)
    • Editor's Pick (2,106)
    • Investing (538)
    • Stock (2,581)

    Popular Posts

    • 1

      Trump-era China sanctions ended by Biden may be revived under new House GOP bill

      June 27, 2024
    • 2

      Walz’s honeymoon with China gets fresh scrutiny as Harris camp blasts ‘lying’ critics

      August 9, 2024
    • 3

      Biden appointee played key role in recruiting Chinese businesses to Delaware: ‘Longtime friends’

      June 25, 2024
    • 4

      Shein’s global ambitions leaves some cybersecurity experts fearful of Chinese spy threats

      July 10, 2024
    • 5

      Harris VP pick spent years promoting research facility that collaborated with ‘Chinese military company’

      August 29, 2024

    Latest News

    • Breakouts, Momentum & Moving Averages: 10 Must-See Stock Charts Right...

      May 31, 2025
    • Leadership Rotation Could Confirm Corrective Phase

      May 30, 2025
    • Run Your Stock Portfolio Like a Pro Sports Team

      May 30, 2025

    Categories

    • Economy (7,009)
    • Editor's Pick (2,106)
    • Investing (538)
    • Stock (2,581)

    Disclaimer: RoundTableThoughts.com, its managers, its employees, and assigns (collectively “The Company”) do not make any guarantee or warranty about what is advertised above. Information provided by this website is for research purposes only and should not be considered as personalized financial advice. The Company is not affiliated with, nor does it receive compensation from, any specific security. The Company is not registered or licensed by any governing body in any jurisdiction to give investing advice or provide investment recommendation. Any investments recommended here should be taken into consideration only after consulting with your investment advisor and after reviewing the prospectus or financial statements of the company.

    Copyright © 2024 RoundTableThoughts.com. All Rights Reserved.

    Round Table Thoughts
    • Investing
    • Stock
    Round Table Thoughts
    • Economy
    • Editor’s Pick

    Read alsox

    DP Trading Room: PMO Sort on...

    July 15, 2024

    The Hoax of Modern Finance –...

    March 7, 2024

    Bearish Formation Threatens Gold’s Advance

    December 13, 2024
    Sign In

    Keep me signed in until I sign out

    Forgot your password?

    Password Recovery

    A new password will be emailed to you.

    Have received a new password? Login here