So I’m still sick. Still running a fever. This is getting a little ridiculous.
Nothing better to do than to play around with some statistics.
I’ve been hearing some chatter about the indices being extended above their moving averages for longer than is normal, so I decided to take a look at this.
- As of 2.4.2011, the $SPX (S&P 500) is above its 50 day moving average for the 108th day.
- The record for this metric was set on 1.9.1996 when the $SPX was above its 50dma for the 257th day.
- The 2nd highest number of days above the 50dma was set on 2.26.2007 with 149 days.
- The 3rd highest was set on 6.6.1961 with 145 days above the average.
To look at the stats from another angle, I created a buy rule where we buy the close when the $SPX has been trading above the 50dma for the 100th day. This trade is then held for 50 trading days.
Results:
- 13 trades
- Average trade of 1.55%
- 61.54% winners
But we need to compare these results against a buy and hold of the $SPX.
Rules for the Buy and Hold: Buy if the close is above the 50dma. Hold for 50 days.
Results:
- 220 trades
- Average trade of 1.37%
- 59.09% winners
Summary:
Although the sample size is small, it appears there is still some meat left on the rally bone, even after trading above the 50dma for 100 days.
At currently 108 days above the average, the $SPX is getting close to record setting territory.
nice analysis. May i ask what software package are you using to make your graph?
Em, Amibroker generates the stats and those are imported as a .csv into Excel to make the graph.
Cheers!
A guy on CNBC is talking about the same analysis that you just did
Of course they are. Ever since I took out Dennis the Clown Kneale on CNBC primetime, they are always coming here to leech ideas.
Strangely enough, had Dennis lasted long enough, his predictions would have been shown to be true.