BuildAlpha

So many traders quote market axioms and some actually put their hard-earned money on the line based upon them. The most popular (arguable) technical indicator is the moving average. Everyone knows what it is and almost everyone still tracks one or two of them. It is generally believed that a stock trading above its moving average is bullish and stock trading below its moving average is bearish. BuildAlpha :  The question I pose is… Have you ever tested to see if that truly is the case? In this post, I will examine 4 popular moving averages and their impact on returns across 30+ ETFs and popular individual stocks since January 2006. In this case, pictures say more than any more text can. The main takeaway is that each stock and ETF has its own players and personalities. Each security responds differently to technical environments. It is crucial to understand if you should be buying dips or waiting for confirmation. I always recommend testing everything – and i...

The S&P 500 index has gotten off to a hot start in 2019, so I decided to dive in and see just how hot the stock market has been on a historical basis. And what it may mean. On a closing basis, I calculated the rolling drawdown (peak to trough) and the return for each year through the first week in April starting since 1960. BuildAlpha : Using a profit to drawdown ratio of those two values, 2019 ranks as the fourth-best year since 1960. Here is a quick list of the top years and conversely a snapshot of the bottom years 1995 +8.19 1964 +7.71 1961 +6.77 2019 +6.15 1967 +5.08 1977 – (0.95) 1992 – (0.87) 1973 – (0.84) 1962 – (0.69) 1974 – (0.63) Of course, we cannot capture the bullish strength through the first week of April at this point. So how did the top years do from April onward? Across the top of the chart you can see the year, the percentage return from the first week of April until year-end, the peak to trough drawdown from the first week of...