I ran a quick study while enjoying my cup of coffee this morning. The results were not at all what I had expected, so I’m putting up a quick post. More analysis will be forthcoming.
I wanted to look at what happened after the Dow Jones completed a Golden Cross before the S&P 500. What would happen if you bought SPY to get a jump on the inevitable SPY Golden Cross. In other words, rather than waiting for the actual S&P 500 cross, you acted on the Dow Jones Golden Cross, but bought the S&P 500 (and substituted SPY for the S&P).
Results:
Not very pretty, eh? I was really surprised at how bearish this turned out to be. The trade by trade results on SPY show that this setup has had one buying SPY primarily during the bear markets of the last decade.
I will put some more time into this study this evening. The first thing I will do will be to use the data from the actual indicies ($DJI and $SPX) rather than the ETF data in order to look back further. The above results reflect 7 trades held for the full 252 days.
Have a great Friday!
Very nice.
Simplistic, but nonetheless thanks for sharing ‘Shed
I like that study, not necessarily for trading, but as an indication we’re in a bear market.
Have you looked at what happens when the S&P has a golden cross prior to the Dow? Or do we short the S&P when the Dow has it’s cross?
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