The Average Investor's Blog

A software developer view on the markets

Archive for the ‘Trades’ Category

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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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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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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The Weekly Update

Posted by The Average Investor on Oct 24, 2011

Although the mood seems to have changed, there were no major changes in the markets over the last week – the S&P 500 is the only index above its 20-week moving average.

However, as mentioned earlier, I am moving away from using exponential moving averages. For the time being I am planning to stick with simple moving average, and it was on Friday when the S&P 500 closed above its 20-week SMA (it did close above its 20-week EMA a week earlier). Thus, I will track this position using the SMA crossover.

There are a few changes coming, so stay tuned. In general, I am planning to keep track only of the S&P 500, but to extend the coverage using a few indicators on daily basis. Most of them, but not all, being moving averages. If you have any comments or suggestions – let me know.

Happy trading!

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The Weekly Update

Posted by The Average Investor on Oct 15, 2011

The last week lifted most markets around the world substantially. The gain on the S&P 500 was extraordinary – 5.93%. This steep advance to the upside, moved the S&P above its 20-week MA (as of the close on Friday).

S&P 500 with 20-week MA

The above chart reveals an interesting fact – the surge up was sufficient to penetrate only the fast 20-week EMA (the blue line), but not the 20-week SMA (the red line). Is it another whipsaw or a turn around? Only the future will tell, but based on the current chart, the re-entry is at a better level than the exit.

I will end the post with the code to generate the chart:

> library(quantmod)
> getSymbols("^GSPC", from="1900-01-01")
> png("~/ttt/sp500.png", width=480, height=320)
> chartSeries( to.weekly(GSPC), type="candlesticks", subset="2010/", theme="beige", name="S&P 500", TA=c(addEMA(20), addSMA(20)))
> dev.off()

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The Weekly Update

Posted by The Average Investor on Oct 2, 2011

No new developments this week. The bear market continues pushing the world markets down. Despite a very strong start, the US indexes ended up a bit in the red for the week. Still above the August lows, but any bad news (and there hasn’t been lack of these lately) can easily move the indexes to new lows for the year.

The ARMA strategy has been long on the S&P 500 for the week, thus it also ended down -0.4%.

Friday was also the last trading day for September, quite an ugly month – the S&P 500 was down -7.18%!

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The Weekly Update

Posted by The Average Investor on Sep 25, 2011

The bear market grind continues slowly. The world markets have suffered pretty severe losses and it is hard to think of events that can radically change this course. Most world indexes have suffered losses of more than 16%, which is the definition of a bear market I use, and most of them, but excluding the S&P 500, have suffered losses of more than 20% – the more common definition of a bear market. And don’t forget, this is on top of the fact that we never reached the peaks of 2000 and 2007, a very, very bleak picture in my opinion. According to dshort.com, the S&P 500 is 40% on inflation adjusted basis from the peak in 2000 – talk about wealth destruction!

On top of everything, the officials in charge seem to have less and less clue what to do. Just consider: the Fed chairman apparently is seeing serious down risks to the economy, less than two months after he was expecting a higher growth in the second half! Hello, if their horizon of predictions is so unreliable – why do they control the interest rate? I won’t even comment on Europe – it’s a shame!

Back to trading. This article confirms that my interpretation of Jack Schannep’s version of the Dow Theory was correct and indeed we got a buy signal in late August, which was not a buy signal according to the more conservative interpretations. At least one of the two other Dow Theorists, Richard Russell, is for sure making a big noise of the non-confirmation between the Dow Jones Industrials and the Dow Jones Transports, so I am curious to see who will end up with a better entry this time.

The ARMA strategy is down 2% for 2011. So far, the record 13% fall in August is followed by about a 1.5% gain in September. The SPY (S&P 500 ETF) for Monday is long. 🙂

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The Weekly Update

Posted by The Average Investor on Sep 4, 2011

September started with a bang on the downside, the S&P 500 down -3.69% in the two trading days, so far justifying the market neutral position established by most moving averages.

The ARMA strategy on the S&P 500 recorded August as its worst month in history (at least going back to 1950) – down -13.1%! There have been only two other occasions when it lost more than 10% in a single month. Still, it’s down about -3.3% for 2011, while the S&P 500 is down -6.65% over the same period of time.

There will be no weekly update next week, it’s vacation time! The numbers to watch for the Friday close are:

Index Crossover Close
S&P 500 $1,254.35
Nasdaq 100 $2,254.69
US REIT (VNQ) $57.82
Emerging Markets (EEM) $44.81

A close above these levels on Friday would mean that the moving average is below the price.

Happy trading!

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