The 2018 market close for the major indexes finished: SP500: -7% Dow30: -6% NASDAQ: -5.5% [SP500 (black line), Dow30 (blue line), & Nasdaq (brown line) performance comparison (in percentage) for 2018] ------------------------------------------------------------------------------------------- The point of demarcation defining a long term Bull market versus Bear market is the 40 month moving average. When the SP500 is in a long term Bull Market, its monthly candle closes above the 40ma. When the SP500 is in a long term Bear Market, its monthly candle closes below the 40ma. [SP500, 26 years, monthly candles, 40ma] ----------------------------------------------------------------------------------------- The 2018 December candle closed above the 40ma, leaving the Bull Market intact for 2018. Note: The 2018 December candle spiked below the 40ma intramonth, pulling off a monthly closing save for the Bull Market in the last week! (very similar to Jan 2016). [SP500, 5 years, monthly candles, 40ma]
I have been following this long term investing chart technique since the 1980's and its never been wrong.
As beneficiaries of this multi-decade bull market, we agree with what you said. As a intermediate term swing trader of options, I can appreciate your statements. But if we day trade options, how is it going to help us? Happy New Year and welcome back to sunny California.
Your 100% correct, it won't help the intermediate or short term trader. I was simply trying to report the condition the market was left in at the close of 2018, using the most time proven method that I know of. ironchef, thanks for the welcome back to CA, but it was just a temporary visit until we can sell our WA home.
I agree with your conclusion based on data I'm looking at (which could change during the year). However, in your system the candle closed above the 40-month MA in Dec. 99, Dec. 00, Dec. 08 and Dec. of last year. In all four cases, the market fell the following year. I wish there was such an easy, foolproof way to predict the trend for an entire year, but unfortunately there isn't.
Your missing my point. This isn't an end of year predictor of a bear market. Its anytime "whenever" the first candle that has a monthly close below the 40ma occurs, the months (or years) following that close are a bear market. Lets look at a close up the months your referring to: [Dec 99 and Dec 00 closed above the 40ma, but Feb 2001 closed below the 40ma and a +2 year bear market followed: [SP500, 1/4/1999 to 12/30/2004, monthly candles, 40ma] ---------------------------------------------------------------------------------------------------- Dec 08 was a mile below the 40ma, so lets back up to the beginning of that bear market on June 08 which definitively closed below the 40ma, and a multi month bear market followed: [SP500, 1/4/2007 to 12/30/2011, monthly candles, 40ma] ------------------------------------------------------------------------------------------------- Dec of last year did not close below the 40ma. Again, this this "is not" an end of year indicator that predicts the following new year. Whenever you finally see a definitive monthly close below the 40ma, a bear market usually follows. It could happen next month, the month after....etc...or not at all. [SP500, 1/4/2014 to 12/31/2018, monthly candles, 40ma]
%% Could work long term for SPY; as far as long term SPY, looks like hold + gets dividends works better.NOT a prediction.That 40 month moving average is pretty good on commissions LOL-true
I meant Dec. 07. My bad. Yes, it's a lot more accurate than something like the 200-day MA, which whipsaws like crazy. There are a few whipsaws, though, such as the first half of 2008 where it closes above the 40-month MA then back above it. You'd lose a bit of money due to whipsawing if you were using the system to time your 401(k) in mutual funds or something. Also, the exit points and re-entry points aren't too far apart. For example, you exit the dot-com crash just below 1250 and re-enter above 1100. You'd still do better than buy-and-hold if you went to cash/bonds at the exit candles, but I'd be curious how it performs relative to buy-and-hold for the last 50 years or so. My guess is about the same with some reduction in drawdowns and volatility--which is pretty good. I'm think you'd get whipsawed in the '87 crash (which fully recovered in less than 2 years) and you would've been better just holding, though. And again, I'm talking about long-term timing with funds (no leverage)...not swing or day trading.
To address a few of your concerns: (1): The whipsaw that took place on March 2008 candle closing slightly below the 40ma and then closing back above the 40ma on April 2008: A: Did you notice me mention a definitive close below the 40ma a few times? A definitive close below the 40ma is -1.5% or greater below the 40ma. The March 2008 close below the 40ma was less than that, therefore I ignored it. (With any kind of logic, one needs a logic control subset to prevent finite variables.) [SP500, 1/4/2008 to 12/30/2008, monthly candles, 40ma] --------------------------------------------------------------------------------------------------- (2): (Re-Entry) Exit points and re-entry points aren't too far apart: A Your right. If you look at the 26 year chart below of the SP500, monthly candles, 20ma and 40ma, you will gain a lot of the index value by re-entering the SP500 on a monthly close above the 20ma, and then exiting on a monthly close below the 40ma. [SP500, 26 years, monthly candles, 20ma and 40ma]