Thursday, October 28, 2010

Death Cross on S&P 500 - Myth?

Nicholas DeVore | Stone | Getty Images
Death Cross tests show there isn't much death. The test was to buy the S&P 500 on the close of the day that the 50 day MA crosses below the 200 day MA. Any signal is considered a 'true signal'; i.e. signals with a downward or upward sloping 200 day MA were considered valid. The most recent 'Death Cross' sell signal for the S&P 500 was 1022.58 on 7/2/10 and the most recent 'Golden Cross' buy signal for the S&P 500 was 1183.08 on 10/22/10. That is a 15.7% rise in less than 4 months -  not very deathly. This theory, when applied to the S&P 500 Index, looks more like a myth, and it even shows an upside bias between 3 and 12 months out.


Buy S&P 500 when 200 day MA crosses below 50 day MA; sell 'n' months later. $100,000 per trade; 1951 to present.
Period
Net Profit
# Trades
# of
 winners
% of
 Winners
Max. Trade
 % DD
Avg %
P/L
Win Avg.
 Profit
Loss Avg.
 Loss
Profit
 Factor
Payoff
 Ratio
1 month
   (21,268.48)
31
15
48.39
-15.93
-0.69
    3,665.28
    (4,765.48)
0.72
0.77
3 months
    49,201.35
31
17
54.84
-20.75
1.59
    7,165.99
    (5,187.18)
1.68
1.38
6 months
    90,755.59
28
15
53.57
-22.97
3.24
  11,639.71
    (6,449.23)
2.08
1.8
9 months
  133,284.54
27
17
62.96
-22.97
4.94
  12,627.48
    (8,138.26)
2.64
1.55
12 months
    64,705.29
25
16
64.00
-49.76
2.59
  12,877.04
  (15,703.04)
1.46
0.82


Data is from Yahoo! Finance and the test was run in Amibroker.  

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