Nothing too scientific here. I simply used the trendline tool to project the 50 day and 200 day simple moving averages out a couple of weeks. Of course this is merely a projection, and a strong move in either direction will affect the actual cross date.
When the cross actually occurs, I will run the Golden Cross test adding the short trade to the mix. (Sell Short when the 50 day sma crosses below the 200 day sma and cover when it crosses above it). Since the system would be short right now, I will just wait for the trade to close so that we have the actual figures to work with. I can say that playing the Golden Cross long only is going to outperform playing from both the long and short sides.
Dr. Woodshedder,
Whats your short-term outlook for this week?
This market just cant seem to be going down…there are rumors going around that JPM is bidding up the SPYs late in the day…
Technical indicators are useless in a blatantly manipulated [and thinly traded] market.
I agree with Scum Bucket in terms of the manipulated portion, but I must say that the 200d on a lot of these tiny, small cap pieces of shit has been holding back a couple of companies from breaking out. I watched this occur with AMAT and CMCO towards the end of the week.
Thinly traded, however, I’m not too sure. Crosses and what-not still tend to move a stock, no matter how much volume is moving in and moving out of the company.
I like this projection and am anxious as to how it will perform in the latter. Nice stuff Wood!
Big Mike, even if JMP is bidding up the SPYs, what does that change? How do we know they haven’t always been bidding up the SPYs? The point is, when trading a system, you just don’t give a crap about all that stuff. Just trade the system.
My short term outlook is still bearish. It makes sense to have longs hedged here.
Scum, the markets have always been manipulated, and yet, technical analysis has always worked. Granted, different measures and different forms of analysis will come in and out of vogue, and therefore edges will come and go.
Point is, what can you do about the manipulation? Are you going to stop trading because of it?
My opinion is to just keep plugging away, being sure to maintain risk prevention/containment procedures such as stops.
According to Investopedia, “the Golden Cross indicates a bull market on the horizon and is reinforced by high trading volumes. Additionally, the long-term moving average becomes the new support level in the rising market.”
Wood,
Beside providing the above context, which is ideed very useful in making trading decisions, do you have any specific tactics in mind for entering or exiting a trade on said cross. For example, are there timing parameters? Would you get in immeditaely on a long cross and out or short immediately on a short cross. Or whatever… I hope you get the intent of the question.
H Five-0, if I were a long-term buy and holder, I would be taking a position in the SPY the morning after the cross. The win% on this trade is huge, and the winners are MUCH larger than the losers. This setup beats buy and hold but with less risk as you are not in the market all the time.
All that being said, I’m a short-term trader and do not want to tie up a part of my capital in a long-term trade.
I do think it is important for establishing sentiment. Unless something changes pretty quickly, I’m seeing a lot that will make me change from intermediate bearish to bullish.
Thanks Wood,
I’ll be there if and when it happens!!!