Comments on: ETF Investing: Buy-and-Hold vs. Moving Averages

By: Tom Lydon

Tom Lydon — Tue, 22 Sep 2009 12:22:45 +0000

Prof. Robert Shiller has maintained a database of historic S&P performance that begins in January 1871, available to the public. You can find his research and other interesting things here:
http://politicalcalculations.blogspot.com/2006/...

By: darren

darren — Tue, 22 Sep 2009 04:12:42 +0000

- From Wikipedia:
Standard & Poor's introduced its first stock index in 1923. Before 1957, its primary daily stock market index was the “S&P 90,” a value weighted index based on 90 stocks. By linking this index to the S&P 500 index, the latter has been extended back to 1918. Standard & Poor's also published a weekly index of 423 companies. The S&P 500 index in its present form began on March 4, 1957.

So how do you have 138 years of monthly data?

By: Tom Lydon

Tom Lydon — Wed, 08 Jul 2009 12:24:40 +0000

Thanks for your comments, deep. In our opinion, the potential for a long-term uptrend exists when the position crosses its 200-day moving average. It doesn't always pan out, but it has you in place to participate if the long-term uptrend does materialize. Other non-emotional ways to evaluate a position include looking at the fundamentals, examining your risk tolerance, diversification within the fund, your current position and fees. If all that lines up and the position is right for you, take it.

By: deep

deep — Tue, 07 Jul 2009 22:17:22 +0000

Tom, thanks for your response. I've read that posts of yours, as well as your book and other posts here on the moving average technique. I've been applying the ideas, but look forward to elaboration or further details. For example, what might be some quantitative / emotion eliminated approaches to evaluating the potential for a long term up trend? You do a great job of segmenting the market and evaluating the various ETF tools out there, what analytical tools could people use to evaluate trading outlook? The ETF analyzer can show us performance to date, but quantitative approaches could be used for potential performance? This is especially relevant to your position that buy and hold is dead and it better to pay attention to the trends. Perhaps this has already been addressed through technical analysis or magic eight balls but I'd be interested in hearing your take nonetheless.

By: Tom Lydon

Tom Lydon — Tue, 07 Jul 2009 12:23:51 +0000

Ninan, the money is considered a free agent – it doesn't necessarily have to go back into the position you just sold.

Deep, the trend following method is designed to give investors the opportunity to take a position in time for a potential long-term uptrend. Obviously, not every position is going to go on those long-term trends, but when one does, it could lead to success. The plan is designed to eliminate emotions and enter/exit the market based on signals. A more thorough discussion of the trend-following strategy can be found in our special report:

http://www.etftrends.com/2008/07/an-etf-trend-f...

By: deep

deep — Mon, 06 Jul 2009 16:39:51 +0000

Doesn't this and other methods advocated here using the MA not just result in buying high and selling low? For example if someone were to buy into an ETF which then proceeds to tank and go beneath the moving average.

I think it would be helpful to expand on the MA techniques often described here with additional if-then recommendations. Also address the issue of security trending up or down even if purchased above the MA.

E.G.

If below EMA and trending down = sell and stay out
If above EMA and trending down = set stop for exit
If above EMA and trending up = hold
If below EMA and trending up = set order for entry

Then

If exiting and ETF trends back up = Set a buy order to buy in at exit price
If exiting and ETF trending down = stay out
If entering and ETF trending up = stay in
If entering and ETF trending down = set a stop loss (sell) order to sell at entry price

Comments / thoughts / feedback?

By: ninan

ninan — Mon, 06 Jul 2009 11:33:13 +0000

Your strategy of selling below 200 MA or on a 8% decline from the top seems fine. When do you enter after the 8% decline if you are still above the 200MA