Tuesday, 1 November 2011

Moving Averages: Month-End Preview

Here is a preview of the monthly moving averages I track before the market opens on the last business day of the month. Two of the three S&P 500 and two of the five Ivy Portfolio ETF monthly moving averages are giving a "buy" signal. The one Ivy change from last month is that VNQ, the REIT index, has flipped to "buy". If we apply a 12-month simple moving average to the Ivy ETFs, then VTI, the total market ETF, has also flipped to "buy". Some of the signals (highlighted in yellow) are close to a trigger value, so the Monday market closing prices could be difference makers.

Note: The index updates are intended to illustrate the moving moving-average timing strategy. They also give a general sense of how US equities are behaving. However, followers of a moving average strategy should make buy/sell decisions on the signals for each specific investment, not a broad index. Even if you're investing in a fund that tracks the S&P 500 (e.g., Vanguard's VFINX or the SPY ETF) the moving average signals for the funds will occasionally differ from the underlying index because of dividend reinvestment.

The Ivy Portfolio

Month-End PreviewThe top table previews the 10-month SMA timing signals for the five asset classes highlighted in The Ivy Portfolio.
I'm also included the 12-month SMA timing signals for the Ivy ETFs in response to the many requests I've received to include this slightly longer timeframe.

After the end-of-month market close, I'll update the monthly moving average feature with charts to illustrate.
The bottom line, as we've pointed out earlier, is that these moving-average signals have a good track record for long-term gains while avoiding major losses. They're not fool-proof, but they essentially dodged the 2007-2009 bear and captured significant gains since the initial buy signals after the March 2009 low.

Note: See the Timing Updates for interim updates throughout the month.

by: Doug Short

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