R48,retired at 48 wrote: I use the 200 day moving average, as crossed over by the net asset value.
I never paid much attention to tech analysis maybe because of Louis Rukeyser's disparaging attitude toward "Elves" on Wall Street Week in the 1970's. However, I roughly tried your 200day/NAV crossing system out on VEIEX with startling good results. Got interested so I've done some more careful numerical simulation programming of the system on a number of funds. Used daily closing prices from Yahoo and made the basic assumption that if the closing NAV passed through the 200-day average, with a margin of 1%, I would trade. Looked at 7 ETFs/funds. VEIEX= emerg mkts, SPY= sp500 ETF, VEXMX= extended mkt, QQQQ = NASDAQ-100 ETF, DIA= DOW 30 ETF, XLE= energy ETF, XLF= financial ETF.
Most of the Yahoo ETF data only goes back to about 1998. I used a start date at the first crossover buy opportunity in the data (varied from 1992 to 2002) and invested $10000 at that time. Buys/sells then happened automatically in the program. To be specific, if the day closing price met the criteria, then I would trade at the next day's closing price. You could more or less implement this system just by checking the closing prices every evening. Results are as follows:
Fund gotin-date price-in shares invested gotoutdate cur.value .. buy&holdvalue #of-trades
VEIEX 1996.58 .. 11.50 . 869.57 . 10000 . 2008.4326 . 40767.72 .... 13530.5 ... 22
SPY . 1995.009 . 46.00 . 217.39 . 10000 . 2007.9535 . 27289.84 .... 20105.3 ... 42
VEXMX 1992.58 .. 16.00 . 625.00 . 10000 . 2008.4791 . 17287.21 .... 15057.0 ... 66
QQQQ. 2001.93 . 42.91 . 233.05 . 10000 . 2008.6626 . 11071.13 ..... 7170.9 ... 28
DIA . 1998.962 . 88.72 . 112.71 . 10000 . 2008.0055 .. 7534.46 .... 10023.0 ... 56
XLE . 1999.781 . 26.81 . 373.00 . 10000 . 2008.5585 . 18401.06 .... 18657.5 ... 42
XLF . 2000.222 . 23.77 . 420.70 . 10000 . 2007.5236 .. 9547.64 ..... 5805.7.... 38
...................................................................................._________......_______.......
......................................................................totals.... $131,899 ..... $90,350 .....
Above table shows the buy-in dates, price, and #shares you got for $10K, along with the current value you would have if (1) you used the system, and (2) you bought and held until today. The system has you all in cash right now, having got you out somewhere between mid-2007 & summer 2008, depending on the fund, and keeping you out. Previously it had you doing an average of around 3-6 trades per year. The trades come in clusters.
Overall results are pretty good compared to buy-and-hold. In terms of the totals of the 7 funds, you are 46% better off to have used this system compared to buy-and-hold. In 5 of the 7 funds have you are much better off using the system, one (XLE) is about even, and only in DIA are you worse off to a great degree. Looking at the performance over time the system loses a lot of DIA money in 2000-2002 because the DIA price is basically stagnant but jittery, so you there are a lot of trades where you just keep losing the 2% tolerance band every time you get in and out. It adds up to a lot. Maybe there is some way you could avoid that.
Anyway, performance is not too bad at all given the market. On the other hand, any system that got you out of the market the last few of months is going to look good. Looking at the values over time the buy&hold would be better up until the last few months of the bear market.
This analysis ignores CG, dividends, and taxes.
Bottom line is I'm thinking maybe this sort of market timing is not such a bad idea. It does protect you from times such as now. Anybody have some thoughts on this?
JW