Moving Averages: December Month-End Update - Thursday, January 2

Note: For anyone who would like to see the 10- and 12-month simple moving averages in the S&P 500 and the equity-versus-cash positions since 1950, email us for an Excel file (xlsx format) of the data. Our source for the monthly closes (Column B) is Yahoo! Finance. Columns D and F shows the positions signaled by the month-end close for the two SMA strategies.

Recommended Reading

In the past, we've recommended Mebane Faber's thoughtful article A Quantitative Approach to Tactical Asset Allocation. The article has now been updated and expanded as Part Three: Active Management in his book The Ivy Portfolio, coauthored with Eric Richardson. This is a "must-read" for anyone contemplating the use of a timing signal for investment decisions.

The book analyzes the application of moving averages the S&P 500 and four additional asset classes: the Morgan Stanley Capital International EAFE Index (MSCI EAFE), Goldman Sachs Commodity Index (GSCI), National Association of Real Estate Investment Trusts Index (NAREIT), and United States government 10-year Treasury bonds.

As a regular feature of this website, we update the signals at the end of each month.


Footnote on calculating monthly moving averages: If you're making your own calculations of moving averages for dividend-paying stocks or ETFs, you will occasionally get different results if you don't adjust for dividends. For example, in 2012 VNQ remained invested at the end of November based on adjusted monthly closes, but there was a sell signal if you ignored dividend adjustments. Because the data for earlier months will change when dividends are paid, you must update the data for all the months in the calculation if a dividend was paid since the previous monthly close. This will be the case for any dividend-paying stocks or funds.

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