50 Day Moving Average Again

Discussion in 'Technical Analysis' started by hwaxen, May 7, 2003.

  1. hwaxen


    In late March I mentioned how I used the time above and below the 50 day moving average as a guide to the technical strength of a stock or index.

    The S&P 500 Cash Index continues to expand its time above not only its 50 day moving average but now it is also expanding its time above its 200 day moving average.

    By looking at the average time spent above the average and comparing it to the average time spent below, I believe you eliminate some of the whipsaws that occur with simple moving average crossovers.
  2. i look at the 10 day MA breaking the 200 day. the 50 day MA breaking the 200 day is even better, and of course that takes a much longer duration of the price being above or below, like you said, and to me is more reliable.
  3. If a person is a trend trader and happens to use signals from MA indictors, the person gives up much of the maoney making potential right from the get go.

    You suggest that "whipsawing" is also part of your picture. This puts you in a place where apparently the MA signals you are using for exits are equally challenged as are those for entry.

    When you observe that the longer 200MA is supporting whatever in the trends seen by the 50MA, it appears that you are not going to able to sharpen your performance simply because you are looking away from the potential opportunities instead of toward them.

    The traditional 50MA (40MA sometimes) and the 200MA were invented before the PC during the era of ticker tapes. It must be brutal to pass on so much potential profit and money making by sticking to such signals from such lagging indicators.

    Consider how to make money by not "bridging" over profit cycles undetected by your present viewpoint.
  4. there are 1000's of reasons to use all variations of the moving averages. but if you look at SFO mag's article from March 2003, page 98, you will see a great backtesting setup of moving average crossovers from 1985 to present on the S&P futures contract. the 40 and 200 day tend not to be the best indicators for profitability. the 163 day MA turned out to be the best point as a crossover line for profits. i tend to use closer averages like 20 and 24 (days) to gauge the general trend for the systems that i develop and trade. even then however, you will get whipsawed when the market is choppy. but the long-term profits add up if you can wait through the sideways markets (with proper stops and money management).

  5. maxpi


    There seems to be a tendency of big moves towards the mean with 163 day average. Perhaps it is because nobody uses it? Or the mathematics of the other averages causes the trades and subsequent congestion to occur at price levels on either side of it?

  6. tmb


    For the SPX, though the 50-day MA has not yet closed above the 200-day MA in this rally, that test seems to be coming VERY soon. It don't believe it closed above it EVEN ONCE in the move that topped in March 2002, though it came very close in early May, after the decline was already underway. That was also the closest it has come since the fall of 2000.
  7. the 50 day moving average is primed to go thru the 200 day on the upside. the last time the 50 day was ove the 200 was nov 2000, in which a sharp selloff, followed by a failed and faded rally occurred. I say shorts watch your asses!! see if the 50 goes above the 200 and hangs above for a few days
  8. good post. totally agree.
  9. "If a person is a trend trader and happens to use signals from MA indictors, the person gives up much of the maoney making potential right from the get go."

    the idea is to wait until a trend is confirmed before jumping on it, thereby avoiding being early. Not everybody trades that way, to each his own. Many people who have survived a long time as traders wait for confirmation before doing anything, most people aren't that patient and are more afraid of missing profits than protecting their principal.