No. of Recommendations: 6
Mark
The link below is an article that discusses how the 200d and 50d moving averages have lost their predictive power since 1993.
https://www.morningstar.com/news/marketwatch/20240...From the article.
From 1928 through the end of 1992, according to my calculations, this moving-average strategy outperformed a buy-and-hold alternative by almost 5% on an annualized basis - 14.3% to 9.7%. That's a huge margin.
In contrast, from the beginning of 1993 through the end of this year's first quarter, the moving-average strategy lagged a buy-and-hold one by almost 3% on an annualized basis - 7.4% versus 10.3%. (See the chart below, which illustrates the number of false signals the moving average has given over the past 18 months.)
The most likely cause of this reversal of fortune, according to several finance professors who have studied technical analysis, is the creation of the first broad-market index fund ETF - the SPDR S&P 500 ETF SPY - in January 1993. A related factor was the advent of online discount brokers, which precipitated a long decline in brokerage commissions to today's near-zero rates. Both of these factors allowed investors to easily switch at little cost between stocks and cash with a single transaction.
Aussi
