The Average Investor's Blog

A software developer view on the markets

The Weekly Update

Posted by The Average Investor on Jul 5, 2011

A huge week for the markets enough for all indexes to close above their 20-week moving average. The correction was not deep enough, the surge on the upside was quite powerful, and the re-entry ended up being about 3% higher than the previous exit on the S&P 500. The situation in the other indexes were similar.

Contrast this with the behavior on the (longer term) 10-month EMA. Although the S&P was certainly within a striking range, it ended up closing the month of June above it, thus, continuing the long position established at the end of September 2010.

Another interesting (but commonly overlooked) factor to consider when following a MA strategy is the dividend situation. Following the 20-week MA, for instance, the sell signal came before the ex-date for the second quarter. This amounts to another 0.43% “missed” gains, bringing the total cost for exiting and re-entering to about 3.4%. Certainly random, but an important factor still and worth modeling especially for higher-yielding instruments.

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