Free Range Stocks

S&P 500 Moving Average Slope

Market timing indicators based on moving averages have been around for more than 50 years. Their popularity increased substantially when Faber published a paper in 2007 showing a 10 month moving average signal outperforming buy-and-hold for the S&P 500 over a 100 year period.

50-day and 200-day averages are probably the most common time frames. This indicator uses the 200 day moving average for the S&P 500, with a twist. If today's Simple Moving Average (SMA) is greater than the SMA calculated five trading days earlier, the signal is bullish. Otherwise, it's bearish. To reduce the whipsaw created by repeated signals as the S&P 500 crosses the moving average, the signal doesn't trigger until it's crossed the moving average by more than .01%. This means there are really three states: If the moving average has increase by more than .01% in the previous week, the signal is bullish. If it has decreased by more than .01% in the previous week, the signal is bearish. Otherwise, the signal is unchanged and remains in the state corresponding to its most recent signal.

This indicator is one of three used in the Combination Indicator. The configuration used here was described by tpoto on 27 September 2008 in this post. More information can be found here.

Historical Results

Since 1970, this signal has had the following results. Interest rates and transaction costs are both ignored, i.e. assumed to be zero.

Returns staying in the market the entire time
Total calendar days 16596
CAGR 7.15%
Maximum drawdown 56.8%

Returns using the New High Lately strategy
Total calendar days long the market 11851 (71.4% of the time)
Total calendar days sitting in cash 4745 (29.6% of the time)
Overall CAGR (assuming 0% interest when in cash) 7.28%
CAGR while long the market 10.34%
Market CAGR while you sat in cash -0.42%
Maximum drawdown 35.1%
Average signals per year 1.74

CAGR while in:
 Date  Signal  Price  Days  Stock Cash
 1970-12-04 Buy 89.46   
 1971-10-25 Sell  95.10  325 7.1% 
 1972-01-24 Buy  102.57  91 35.5% 
 1973-04-30 Sell  106.97  462 3.4% 
 1975-03-27 Buy  83.85  696 -12.0% 
 1975-04-07 Sell  80.35  11 -75.7% 
 1975-04-16 Buy  86.60 1990.5% 
 1976-11-10 Sell  98.81  574 8.8% 
 1976-11-19 Buy  101.92 251.7% 
 1977-03-03 Sell  100.88  104 -3.5% 
 1978-05-17 Buy  99.60  440 -1.1% 
 1978-06-28 Sell  95.40  42 -31.2% 
 1978-07-03 Buy  95.09 -21.2% 
 1979-02-26 Sell  97.67  238 4.2% 
 1979-03-09 Buy  99.54  11 87.7% 
 1979-04-24 Sell  102.20  46 23.3% 
 1979-07-10 Buy  104.20  77 9.6% 
 1980-03-26 Sell  98.68  260 -7.4% 
 1980-04-15 Buy  102.63  20 104.8% 
 1980-04-18 Sell  100.55 -91.7% 
 1980-05-27 Buy  111.40  39 161.1% 
 1981-07-06 Sell  127.37  405 12.8% 
 1981-07-20 Buy  128.72  14 31.7% 
 1981-07-29 Sell  129.16 14.9% 
 1982-09-17 Buy  122.55  415 -4.5% 
 1984-01-30 Sell  162.87  500 23.1% 
 1984-08-27 Buy  166.44  210 3.8% 
 1984-09-25 Sell  165.62  29 -6.0% 
 1984-10-18 Buy  168.10  23 26.6% 
 1987-10-21 Sell  258.38  1098 15.4% 
 1988-07-08 Buy  270.02  261 6.4% 
 1988-11-18 Sell  266.47  133 -3.6% 
 1988-11-30 Buy  273.70  12 125.9% 
 1990-04-23 Sell  331.05  509 14.6% 
 1990-05-15 Buy  354.28  22 208.3% 
 1990-06-27 Sell  355.14  43 2.1% 
 1990-07-03 Buy  360.16 135.0% 
 1990-08-10 Sell  335.52  38 -49.4% 
 1991-02-13 Buy  369.02  187 20.4% 
 1992-10-05 Sell  407.57  600 6.2% 
 1992-10-22 Buy  414.90  17 46.7% 
 1994-04-07 Sell  450.88  532 5.9% 
 1994-04-12 Buy  447.57 -41.6% 
 1994-04-19 Sell  442.54 -44.6% 
 1994-06-10 Buy  458.67  52 28.6% 
 1994-06-22 Sell  453.09  12 -31.1% 
 1994-08-29 Buy  474.59  68 28.3% 
 1994-09-26 Sell  460.82  28 -31.9% 
 1994-12-20 Buy  457.10  85 -3.4% 
 2000-10-02 Sell  1436.23  2113 21.9% 
 2000-11-03 Buy  1426.69  32 -7.3% 
 2000-11-20 Sell  1342.62  17 -72.9% 
 2001-12-13 Buy  1119.38  388 -15.7% 
 2001-12-18 Sell  1142.92 357.3% 
 2001-12-27 Buy  1157.13 65.1% 
 2002-01-08 Sell  1160.71  12 9.9% 
 2002-06-12 Buy  1020.26  155 -26.2% 
 2002-06-21 Sell  989.14 -71.6% 
 2003-04-09 Buy  865.99  292 -15.3% 
 2003-05-09 Sell  933.41  30 149.1% 
 2003-05-20 Buy  919.73  11 -38.8% 
 2004-09-28 Sell  1110.06  497 14.8% 
 2004-11-09 Buy  1164.08  42 51.2% 
 2005-10-24 Sell  1199.38  349 3.2% 
 2005-11-07 Buy  1222.81  14 65.7% 
 2008-01-07 Sell  1416.18  791 7.0% 
 2009-07-17 Buy  940.38  557 -23.5% 
 2010-07-01 Sell  1027.37  349 9.7% 
 2010-07-16 Buy  1064.88  15 139.5% 
 2010-08-17 Sell  1092.54  32 34.0% 
 2010-09-22 Buy  1134.28  36 46.3% 
 2011-08-11 Sell  1172.64  323 3.8% 
 2012-02-09 Buy  1351.95  182 33.1% 
 2015-08-24 Sell  1893.21  1292 10.0% 
 2015-10-29 Buy  2089.41  66 72.6% 
 2015-11-10 Sell  2081.72  12 -10.6% 
 2015-11-25 Buy  2088.87  15 8.7% 
 2015-12-07 Sell  2077.07  12 -15.8% 
 2016-05-12 Buy  2064.11  157 -1.4% 
 Green is good.  Red is bad. 
Last updated: 10 March 2018
See Graph or Main Timing Screen for current indicator value.