SPY's Friday close was the second consecutive below the simple 100DMA, after a long period above the moving average.
Going back to 1993, checked for instances when SPY closed <> 100DMA. Here are the mean returns for the next 5d, 10d, and 20d:
One-Sample T: 5d, 10d, 20d
Test of mu = 0 vs not = 0
Variable N Mean StDev SE Mean 95% CI T P
5d 18 0.010 0.021 0.005 (-0.00057, 0.02114) 2.00 0.062
10d 18 0.007 0.023 0.005 (-0.00447, 0.01933) 1.32 0.205
20d 18 0.004 0.040 0.009 (-0.01570, 0.02430) 0.45 0.656All up, if not significantly. If only it were that easy…
Yes indeed, Kim, if only it were that easy.
Your observation, while true, might be just as incomplete and misleading as the blanket statement you are implicitly deriding, namely: "the market closed under its 100-day SMA, therefore it's bearish".It is also useless to a short-term trader since you're not saying anything about 6-hour, 12-hour, 1-day…4-day returns. You will probably find that a system that gets short after 2 consecutive closes under the 100-day SMA following 20 consecutive closes above the 100-day SMA and covers after a close above the 10-day SMA (or something along those lines: it's my turn to be incomplete and potentially misleading but I believe I'm right - If I find the time to run the numbers I'll be sure to post them here and/or on my blog) has made money since 1993.
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