The Death Cross has occurred 6 times in the past 12 years but
only marked the beginning of a new downtrend in two of these
instances. (See Chart)
The first took place coming out of the uptrend into 2000. The
second one followed coming off the highs of 2007. It is true that
each of these was followed by extreme moves moves lower, however,
they also followed multi-year uptrends.
However,when the Death Cross followed only a year or two of
upside, such as the four that failed to lead to a reversal, the
outcome was the start of another swing to the upside within the
larger uptrends. This was the case in 1998, 1999, 2004 and
2006.
Does anyone have statistics on the effectiveness of using the
golden/death cross as a long-term system? Matt has posted
some statistics, but, unless I'm totally misreading them, the
return is pretty meager.
Posted by axehandle on 6th of Jul 2010 at 02:07 pm
what if you just follow the crosses; getting back in on
whipsaws? Do the whipsaws hurt you too much or do you just get back
on the train for further gains if it crosses back up?
A few days ago, MoneyWeek magazine here in the UK supplied the
following information regarding the golden/death cross:
"...the reason I maintain that the 200-day moving average must be
sloping downis
that otherwise the death cross is not such an effective signal.
Since 1962, the S&P 500 has seen 25 occasions when the 50-day
moving average has crossed down through the 200. Of these, 13 have
resulted in continued declines. That's little better than 50:50.
"However, if you only count the incidents when the 200-day
moving average was declining, suddenly the probability of a
successful trade increases: you rule out nine of the 12 poor
signals, delay three of the accurate ones by a few days and only
miss two of the good ones..."
The converse rule does not apply to the golden cross.
The great death cross of late 2007 is one such instance in which
the 200 MA was sloping up. However, the 'delay' lasts just a few
days.
Overall, I do not know whether this modified strategy yields a
greater net profit.
The Death Cross Is Not Always a Killer
Posted by keithbob on 6th of Jul 2010 at 01:49 pm
The Death Cross has occurred 6 times in the past 12 years but only marked the beginning of a new downtrend in two of these instances. (See Chart)
The first took place coming out of the uptrend into 2000. The second one followed coming off the highs of 2007. It is true that each of these was followed by extreme moves moves lower, however, they also followed multi-year uptrends.
However,when the Death Cross followed only a year or two of upside, such as the four that failed to lead to a reversal, the outcome was the start of another swing to the upside within the larger uptrends. This was the case in 1998, 1999, 2004 and 2006.
Does anyone have statistics on
Posted by algyros on 7th of Jul 2010 at 08:00 am
Does anyone have statistics on the effectiveness of using the golden/death cross as a long-term system? Matt has posted some statistics, but, unless I'm totally misreading them, the return is pretty meager.
50/200 cross
Posted by Michael on 7th of Jul 2010 at 08:50 am
I can't do it now, dealing with some stuff, but anyone with TS or MC can run a simple backtest of the moving average crossover.
what if you just follow
Posted by axehandle on 6th of Jul 2010 at 02:07 pm
what if you just follow the crosses; getting back in on whipsaws? Do the whipsaws hurt you too much or do you just get back on the train for further gains if it crosses back up?
Title: Modified Death Cross Strategy A
Posted by philosoraptor on 6th of Jul 2010 at 01:59 pm
A few days ago, MoneyWeek magazine here in the UK supplied the following information regarding the golden/death cross:
"...the reason I maintain that the 200-day moving average must be sloping downis that otherwise the death cross is not such an effective signal. Since 1962, the S&P 500 has seen 25 occasions when the 50-day moving average has crossed down through the 200. Of these, 13 have resulted in continued declines. That's little better than 50:50.
"However, if you only count the incidents when the 200-day moving average was declining, suddenly the probability of a successful trade increases: you rule out nine of the 12 poor signals, delay three of the accurate ones by a few days and only miss two of the good ones..."
The converse rule does not apply to the golden cross.
The great death cross of late 2007 is one such instance in which the 200 MA was sloping up. However, the 'delay' lasts just a few days.
Overall, I do not know whether this modified strategy yields a greater net profit.
thank you
Posted by stitch on 6th of Jul 2010 at 01:59 pm
thank you