SPX Crosses Below 50-Day Moving Average: It Matters, Sometimes

Monday, 19 August 2013

On Friday S&P500 closed below its 50-day simple moving average for the first time since 3 July.

SPX, SMA50 + SMA200, 2013

While the classical signal emerging from this situation would be to go short, in an uptrend like this more people will probably be looking at going long, betting on S&P500 to “reject” or “kiss” the moving average and resume the uptrend.

Below you can see how this simple strategy would have worked in the past.

Buy at close when SPX closes below SMA50 after at least 20 days above, sell at close N trading days later

Not as consistently bullish as one would think, especially during the first few days.