Hi Guys,
This posting is coupled to Ted’s earlier submittal. It goes to the source of the discussion.
Mark Hulbert just issued a study that focused on a 200-day equity moving average statistic as a signal for market exit-entry decisions. Here is the Link to that study:
http://articles.marketwatch.com/2013-02-19/commentary/37168203_1_moving-average-bull-market-stock-marketHulbert is not happy with the results. Over the entire history of his data set, he finds that the indicator does yeomen work, but it has failed over more recent selected timeframes.
One aspect of that finding is a demonstration of how sensitive conclusions are to the time-span of the selected data. No great surprise here.
Hulbert observes that: “The picture that emerges is of an indicator whose best years came in the early part of the last century. Its market timing value has gotten progressively worse in recent decades.”
His final words are: “The bottom line: If the 200-day moving average is the best we can do in our search for our top-identifying indicators, the rational thing to do would probably be to give up and resign ourselves to buying and holding. Let’s hope there’s something better.”
Hulbert encourages his readers to suggest alternate exit-entry point candidate criteria. He promises to examine them.
Best Regards.
Comments
Thanks for posting Mark Hulbert’s article.
It’s been a long time since I read any of his work because I found it a waste of time.
Something like thirty years ago, I started using the 200-day simple moving average
to move in and out of my long-term equity positions.
It worked well then and it works well now.
Mark Hulbert’s study demonstrates to me that he lacks some basic technical
analysis understanding as he uses the DOW instead of a broader index,
and then uses a single daily data point to generate buy/sell signals.
A small tweak of the parameters produces quite different results.
As you know, I’ve posted my version of a 200-day strategy in the past.
Hulbert observes that: “The picture that emerges is of an indicator whose
best years came in the early part of the last century. Its market timing
value has gotten progressively worse in recent decades.”
Well, as for the most recent 13 years -
From January 3, 2000 through February 19, 2013, my LT equity portfolio
return is slightly greater than 180%, while the S&P 500 return (using SPY)
is up about 41%.
My return does not include gains from bond positions while I was completely out
of equities (which in this sample period was > 3 years).
My LT goal has not been to beat the market, but instead to optimize my returns
within a low-risk investing strategy and I’m satisfied with these returns.
I’m interested to see what other technical analysis strategies he
trashes (either intentionally or unintentionally) in future articles.
Hope you’re doing well,
Flack