The Old Moving Average Indicator

I don’t know if this stuff is still a topic of conversation here on the new boards. I just noticed today that the S&P is just barely above the 40 week SMA and closed over the 10 month SMA at end of November.

The Naz is hovering just below both. But surprisingly the DJIA has closed above the 10 month SMA for the second month in a row and is more than 4% above the 42 week SMA. Anybody’s Spider sense tingling? To me it looks like a paradox. No way should any of this look so close to a buy but I can’t pretend it’s not there.

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Oh it’s a buy, but for how long is the question?

Andy

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Here’s why I mention it. Because the 40 week and 10 month MA have been shown to be effective timing mechanisms. NOT WITHOUT some whipsaws, not perfect, granted.

Here’s what’s got me looking. The market usually turns before the actual situation hits. i.e. Turns down before a recession and up before it’s over.
The market has already been downward going on a year. I keep hearing “recession” but other than two consecutive quarters of ho-hum, NOT shocking economic numbers, we haven’t exactly been suffering.

If we have a REAL recession it’ll be next year, short and hardly another 1929. I cannot see anything out there, other than incessant warnings about some fantasmic bubbles, that is going to be all that bad. Employment doesn’t seem to give a crap. Everybody’s working. Nothing else will matter in the end.

Ergo, this just might be the ever-popular “inflection point.” Recession bottoms in Spring/Summer … stock market turns upwards 6-ish months prior. I’ve seen recent numbers showing S&P 500 PE ratio is about 20 and the PE 10 is 27. Still high but not terribly high for modern times.

I am no expert, that’s one reason I read and occasionally post here. This board is called Mechanical Investing so, I guess if you are a fan of the 10 month SMA you’ll be buying tomorrow…? I won’t but I hate getting mixed signals.

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No I get it but this is a really weird market. Everything is topsy turvy and hard to know what might happen.

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I was looking at the MA for the Dow, Nasdaq, AMEX, Russell, NYSE and some are above the 200 MA, some are in between the 200 MA. I would guess that when all are above the 200 MA that would be the entry point. It looks like a buy might happen soon!
I like to time the market irregardless of what the experts say…doc

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The Market Trend Indicators that I was posting weekly on this board are available at the Foolish Workshop now.

My strategy is to begin buying(Risk_On) when 10 of the 15 are Bullish.
On 30Nov-2022 the count was 5 of 15.

GD_

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Ref my recent post on GTAA indicators at end of November.

Some of the asset classes are “crossing” back into bullish / investable state.

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It is ALWAYS hard to know what might happen.

It’s fairly easy to know what might happen. Even a long list of possibilities can be analyzed and triaged. It’s hard to know what will happen.

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It looks like the moving averages all moved up into the buy range. Guess its time to get back into the market with the pension plan…doc

How do you mean “All”? Which MA’s are you looking at? The only “hard buys” for lack of a more realistic way to say it, that I see, are on the DJIA, and the 10 month MA on the S&P. And here I use for reference only the simple timing systems previously discussed over the years on this forum.

I have stayed away from complicated things because they don’t seem to work any better and are still subject to whipsaws. Maybe not the same ones a 40 week MA would give you but a whipsaw is a whipsaw.

I follow all the moving averages looking at the 200 and 50 DMA. This includes AMEX, Russell and even the overseas exchanges. Whipsaws are always possible, but its better to lose a little on a whipsaw vs riding the market from the top all the way down to the bottom as so many do…doc

OH! Absolutely. That’s why I’m here hah hah. I’ve been doing it since some time in 2000 when I could no longer lie to myself about the stock stock market.

I went to cash in my pension plan in January 2022 and have been sitting on the side until Monday when I will jump back in. Back in the fall of 2007 (Nov I think) I went to cash and back into the market in early 2009. My friends all lost 40-50% (2008) in their pension plans because you can’t time the market. Conventional wisdom from average stock advisors at the major brokerages doesn’t seem to give anyone financial freedom. If they did we would have a forum where we would be sharing our different excellent advisors names and how they did for us performance wise. My own experience is that these average desk jockey joes aren’t wealthy, don’t have much of a portfolio and are just parroting what their bosses are telling them to push. My very humble 2 cents worth…doc

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I use GTR’s NHNL signal. It does change too often for most folks. Has done well the last few years when it was needed. Luckily Robbie still has GTR updating soon after market closing so trading can be done in after hours. Greatly appreciated.

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Could you share that link to the NHNL signal?
I know I’ve seen it, but don’t seem to have bookmarked the link.

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It’s so refreshing to have people posting and asking about MI and mechanical asset allocation signals that I will post the key ones in case you need them.

For what it’s worth, the S&P and Nasdaq are very close to getting back above their 33, 40 and 45-week moving averages. The EAFE index broke above its decisively in the last few weeks, so “Foreign Developed” has become investable again.

We’re definitely in a period that’s at risk of whipsaw due to interest rate decisions and reactions, and perception of recession risk and timing. But as MI-ers we don’t guess.

If you would like links to other MA or breadth signals, please ask.

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There are many different variations of NHNL. Different moving averages, different sources of new high/new lows, ect. I like the GTR one by Robbie that can be run daily using the instructions lohill gives each week…

"Here are the recent Bear Catcher Combined signals as taken from GTR1 using GTR1 Helper 4.5. The complete set of signals may be found by running GTR1 with the BCC url: GTR1 Backtester
Launch the url, take the option for Detailed Report and check the box for Signal Values. Finally, click “Run Backtest” and then download the report.

Larry"

In the spreadsheet that I see daily after running this, when the current value in column D exceeds -0.4 then GTR’s version of NHNL will have turned positive. It is now -1.815. It may change soon and it is prone to whipsaws like other timing signals. This can be run daily. Lohill shows the results at week end of GTR’s NHNL as well as the other GTR signals. These are pretty good signals, but not great. I hope others will use GTR daily so Robbie will continue to see it is worth maintaining the GTR website.

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Hi Ironzi,

I am sorry for such a naïve question, but just wanted to make sure I understood this right.

“In the spreadsheet that I see daily after running this, when the current value in column D exceeds -0.4 then GTR’s version of NHNL will have turned positive.”

when you say exceeds -0.4; Are you referring to in absolute value or in actual value?

For example, would -0.5 be considered a trigger? or would it be a -0.3?

Also, how does one decide when the reversal happens (from bullish to bearish)

thanks again,
Charlie

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Hi Flying Circus,

Thanks so much for posting this. Again, sorry for this naïve question, but can you please let me know if I am right in the following assumptions:

  1. For NH/NL, we need to see the blue line going above 0 - is that right?
    So, since currently this is -64.27, we are moving towards zero but not yet there?

  2. For the simple moving average, we need to see the blue line above the red line?
    (which has not happened yet)

  3. And for the 99D, we need to see the blue steps going up?
    (pardon me, but this seems to be going down the whole year, even during the violent bear market rallies or have I completely failed to grasp this).

Again I have vey minimal knowledge on these and just trying to understand this if possible.
Thanks again for taking the time to post this.

Charlie

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