The Average Investor's Blog

A software developer view on the markets

Archive for the ‘Market Timing’ Category

The DVI indicator turning

Posted by The Average Investor on Dec 23, 2011

A close on the SPY of above $124.46 (which is -0.65% from the yesterday’s close) will signal a short position according to the DVI indicator, which has been exceptionally successful in predicting the SPY this year (which means nothing of course:)).

It is interesting to note that a close above $126.10 will be above the 200-day moving average. Something unseen since Dec 7th, and the last time this (SPY closing above its 200 day SMA) happened for more than 3 days in a row, was back in August.

In any case, happy trading and merry holidays!

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DVI Position Change

Posted by The Average Investor on Dec 13, 2011

Just a heads up that the DVI indicator will indicate a long position as of today’s close as long as the SPY closes below $127.17 (which is 2.38% higher than Monday’s close). The short has been in place since the close of December 1, for a negligible gain as of yesterday’s close. For more details how to pre-compute the DVI actions, see my previous post.

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The Weekly Update

Posted by The Average Investor on Dec 4, 2011

The markets had their best week in more than 2 years, more precisely since March 2009. The S&P 500 ended up the week a whopping 7.31% higher. The up-move was sufficient to push the index above it’s 20-week moving average. It seems I did the math wrong in my previous post. 🙂

The last week also marked the end of month. As of the end of November, the performance of the indicators stood as follows:

Indicator Gain/Loss
Buy and Hold -0.70%
DVI 22.24%
ARMA -5.32%

An impressive performance by the DVI indicator! Let’s see how the year ends.

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Friday Indicator Preview

Posted by The Average Investor on Dec 2, 2011

Unless the markets close sharply higher, more than 5.13% on the S&P 500, the 20-week moving average will be above the close, thus, no changes to its out-of-market status. Likewise, the contrarian DVI indicator is also indicating a short as of the Friday’s close and so does my ARMA indicators for most of the values (a bit unstable today). Are the indicators foreseeing something we can’t grasp by our emotional thinking? Next week will tell.

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S&P 500 10 month SMA action preview

Posted by The Average Investor on Nov 30, 2011

Today is the last trading day for the month and the markets are exploding, so are we close to the S&P 500 closing above its 10-month (or 12-month) moving average? The answer is negative. Unless the SPY (the most liquid S&P 500 ETF) closes at $128.81 or higher, we will still end November below the 10-month SMA. This is 7.23% higher than Thursday’s close. Not quite likely, but hey, put a LOC (limit order at the close) in your Interactive Brokers account.

To compute these values, I use a parallel approach to the one shown for the DVI indicator. The code will be posted soon, but right now I am quite busy with some improvements on the ARMA/GARCH strategies.

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The Weekly Update

Posted by The Average Investor on Nov 20, 2011

A very ugly week in the markets. The S&P 500 lost -3.69%, which put it below its 20-week moving average. The index was above this moving average since Oct 21, catching some of the October rally, but last week slammed this trade into losing territory, -1.61%.

The market was down 4 of the 5 trading days. The DVI indicator was short on Monday (winning) and Tuesday (losing) and wend long afterwards (losing). This resulted in a lost of only -2.8%.

The real loser was my ARMA indicator. Yes that’s right, it was even worst. It got the market direction wrong every single day of the week for a whopping -4.67% lost.

Both DVI and ARMA are long for Monday (check the right bar on the blog) and they seem to indicate that markets are entering into oversold territory.

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The Weekly Update

Posted by The Average Investor on Nov 12, 2011

Positive, but very volatile week. Here is the performance up-to-date for the two (imaginary) positions based on long term moving averages:

Moving Average Position Since Gain
20 Week Long (SPY) 2011-10-21 2.17%
10 Month Out (IEF) 2011-08-31 0.67%

I am dropping the 200-day moving average because it is hard to follow on weekly basis.

The DVI indicator was long for the entire week, so it followed the performance of the index – 0.94%. As of the Friday close however the DVI indicator went above 0.5, which indicates a short position for Monday.

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S&P 500 10 month MA action preview

Posted by The Average Investor on Oct 30, 2011

Monday is the last trading day of October. At the beginning of the month it was hard to foresee a position change at the end October, because the index would need to close a whopping 14.03% above the the close of September 30, 2011. Now, with one trading day to go, the impossible has become a reality, a close above $1,290.14, up only 0.39% from the close on Friday, will put the S&P 500 above its 10-month moving average.

The number on the SPY is a bit different. This ETF needs to close at or above $130.15, about 1.20% above Friday’s close, to end the month above its 10-month moving average. Not impossible, but certainly more unlikely.

Let’s see what tomorrow brings.

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The Weekly Update

Posted by The Average Investor on Oct 30, 2011

It has been awhile since we had long positions to follow on the 20-week moving average, but here we are, with a huge single week gain, thanks to the jump after Europe promised to throw more money on a problem created by too much money … Amazing how these things work in “real” life (punt intended), isn’t it.

Helped by the huge move on Thursday, the S&P 500 ended up above its 200-day moving average.

Moving Average Position Since Gain
200 Day Long (SPY) 2011-10-27 -0.00%
20 Week Long (SPY) 2011-10-21 3.73%
10 Month Out (IEF) 2011-08-31 -0.83%

This is the first time I am using the above format, so some clarification is appropriate. First, from now on, I will be following only the S&P 500. For the long MA positions, I will be using the SPY to compute the returns, while for the neutral positions, I will be using the returns on IEF, the iShares Lehman 7-10 Year Treasury Bond ETF.

The format of the table on the right of the main article has also change. It will reflect the positions on S&P 500 based on various indicators.

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S&P 500 approaching the 200-day moving average

Posted by The Average Investor on Oct 27, 2011

With an agreement from Europe, backed by lots of money, tomorrow is likely to be a huge green day in the markets. In order to close above its 200-day moving average, the S&P 500 needs to close above $1,274.19, or +2.59%. Quite possible, if not tomorrow, certainly over the next few days (the breaking point is valid only for tomorrow, but it should be close to the right number anyways). From technical perspective, it starts to look more and more like we are done with the correction. Surprisingly, (tongue in chick) the fundamentals are pointing to the same conclusion.

Happy trading!

Posted in Market Timing, Strategies | 1 Comment »

 
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