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2010issue C0394-97

Evaluating a 200-day crossover as long, short, and stand-aside rules

A 200-day moving-average crossover on the S&P 500 was kept as one chart rule and then graded as three mechanical procedures: a long-or-short book, a long-only book, and a cash stand-aside rule. The archive treated that rule as a limited piece of a long-term trend model, not as a complete trend-following solution.

  • The same 200-day moving-average crossover was logged as a mechanical long-or-short procedure and then rewritten as a stand-aside rule that held three-month Treasury bills after a downward cross.
  • Each crossover record listed the date, the index level, the moving-average level, and a binary long or short flag.
  • The stand-aside design was tied to lower beta and smaller drawdowns, and to spending about one-third of the sample with no equity-index exposure, not to beating a dividend-inclusive buy-and-hold on total return.
  • The closing assessment gave the 200-day crossover limited use inside a long-term trend model and said it should be combined with other forecasting tools.
Entries in this reading3 entries
Trend following89 readingsCurrent trackMoving-average crossover108 readingsMechanical trading system158 readings

One chart rule, three procedures

A 200-day moving-average crossover was specified as a mechanical long-or-short procedure on the S&P 500. The same rule was tabulated calendar year by calendar year from 1970 through 2009 beside the index for those years.

A moving-average crossover is a repeatable flip between long and short when an index moves through a fixed-length average of its own past levels. Trend following stays aligned with the latest accepted direction rather than forecasting a reversal. A mechanical trading system is a complete, replayable set of entry, exit, and abstention rules tested as one procedure.

What the crossover log recorded

Each logged crossover recorded the date, the index level, the moving-average level, and a binary position flag of long or short. That log is what made the chart condition replayable as one mechanical trading system instead of a loose market story.

From short signal to stand-aside rule

A short signal is a downward cross that, in the base test, reversed the book from long to short. Short signals from that same 200-day rule were judged counterproductive.

A stand-aside rule is a substitution that parks the book in a cash-like instrument instead of taking the short side. The second mechanical variant stayed long the index after an upward cross and moved into that day's three-month Treasury bill after a downward cross.

How the stand-aside book was judged

The stand-aside variant was described as spending about one-third of the sample with no equity-index exposure. The evaluation tied that design to lower beta and smaller drawdowns rather than to beating a dividend-inclusive buy-and-hold on total return.

A risk-adjusted comparison judges a system by time in the market, path of losses, and exposure, not only by compounded total return.

The Treasury-bill variant's worst cited calendar year was 1990. That year was used as a benchmark against several worse buy-and-hold years in the same annual comparison.

Annual returns of a 200-day S&P 500 crossover, stand-aside versus long-or-short versus buy-and-hold

Parking in T-bills on short signals flattens 2008 to 0.05 percent while buy-and-hold loses 38.49 percent, but it also gives up the 1974 and 2008 short-side windfalls (35.61 and 38.33 percent). 1990 remains the stand-aside book's worst year at -14.85 percent. Yearly percent returns are taken from the source tables that grade the 200-day crossover as a long-or-short book and as a T-bill stand-aside book against the same S&P 500 years.
Parking in T-bills on short signals flattens 2008 to 0.05 percent while buy-and-hold loses 38.49 percent, but it also gives up the 1974 and 2008 short-side windfalls (35.61 and 38.33 percent). 1990 remains the stand-aside book's worst year at -14.85 percent. Yearly percent returns are taken from the source tables that grade the 200-day crossover as a long-or-short book and as a T-bill stand-aside book against the same S&P 500 years.S&P 500 · Annual, 1970–2009 · 1970-01-01T00:00:00.000Z to 2009-12-31T00:00:00.000Z

On a short crossover the stand-aside book held that day's three-month Treasury bill instead of shorting the index. The source reported a 9.2 percent average annual return for that variant, below buy-and-hold plus dividends.

Limited use inside a trend model

The closing assessment treated the 200-day crossover as having limited use inside a long-term trend model, not as a complete trend-following solution. It said the rule should be combined with other forecasting tools.

Educational research material, not investment advice. Historical source context does not establish present-day performance.
47 of 57 in the Moving-average crossover track
201032-35 pp.Next on Moving-average crossoverRead a 10-and-40 trend on two neighboring time framesA 10-period exponential moving average remaining above a 40-period exponential moving average labels an uptrend on that sampling interval; the reverse ranking labels a downtrend.
All readings on this track · 57 readings
  1. 1988Constructing moving averages: weights, smoothing and crossovers
  2. 1988Constructing breadth and average trend states
  3. 1989Evaluating an always-in-the-market moving-average crossover
  4. 1989Constructing symmetric market-breadth ratio accumulators
  5. 1989Objective crossover tests of Fibonacci wave ratios
  6. 1990Volume-adjusted moving average construction
  7. 1991Constructing a mechanical crossover on a synthetic price series
  8. 1991A two-speed breadth reading for intermediate market direction
  9. 1992A Deutschemark yield map with dual-average and relative-strength timing
  10. 1992Confirming currency-fund trends with a crossover and a filter
  11. 1992A moving-average slope filter for crossover signals
  12. 1992Occupancy and split-sample tests for average crossovers
  13. 1994Gold-mining seasonality and bond-fund duration switching
  14. 1994Price oscillator from two moving averages
  15. 1995Explicit exponential weights and binary entry filters
  16. 1996Currency futures crossover with slope, bond filter, and stop
  17. 1996Two-market average crossover entry with a fixed stop
  18. 1997Construction of a filtered three-average crossover
  19. 1998Two-group exponential average compression as a trend filter
  20. 1998Constructing r-squared trend filters with dual lookbacks
  21. 1998Moving-average length is a habit, not a secret
  22. 1999Solving the close that triggers a moving-average crossover
  23. 2000Kagi yang and yin control versus crossover noise
  24. 2000Constructing simple moving average crossover filters
  25. 2000Building a vertical-horizontal filter to gate trend signals
  26. 2000Two-average crossover as a check on trend following
  27. 2003Stacked exponential-average retracement entries and extreme stops
  28. 2003Evaluating oscillator thresholds against optimized crossovers
  29. 2004Constructing a semicycle trend-quality filter
  30. 2004Commodity subgroups labeled by crossover, support, or convergence
  31. 2004Full-window evaluation of crossover trend systems
  32. 2004Two-average trend filters as a classroom critique of indicator stacking
  33. 2005Three-layer confirmation from a moving-average cross, candles, and Q-stick
  34. 2005Charting put prices beside an equity breakdown
  35. 2005Range-gated moving-average crossover construction
  36. 2007Anticipating a simple-average crossover with a threshold-close
  37. 2007Anticipating moving-average crossovers one bar ahead
  38. 2007Lead-series moving-average crossovers with a stochastic and relative strength index
  39. 2007Next-bar SMA crossover hypotheses from theoretical crossing values
  40. 2007Anticipating a moving-average crossover before confirmation
  41. 2007A three-horizon moving-average stack as a construction problem
  42. 2007Confirming trend with regression slope and r-squared
  43. 2008Constructing a multi-timeframe smoothed crossover
  44. 2008Best-day clusters versus trend filters
  45. 2008Allied markets as a confirmation gate for crossover and breakout signals
  46. 2008Weekly exponential-average crossover as a mechanical trend case study
  47. 2010Evaluating a 200-day crossover as long, short, and stand-aside rules
  48. 2010Read a 10-and-40 trend on two neighboring time frames
  49. 2012Sampling unit as a first-class parameter on dual simple moving averages
  50. 2012Constructing index-ETF entries from volatility-index persistence
  51. 2013Moving-average baselines versus crossover signals
  52. 2013Constructing a typical-price and heikin-ashi crossover as one mechanical procedure
  53. 2016A three-gate checklist for longs after a sharp drop
  54. 2016Weekly inflation-ratio crossover for commodity regimes
  55. 2017Normalized Laguerre zero-axis warning as a two-marker construction
  56. 2019Range-weighted construction of an adaptive exponential moving average
  57. 2020Construct a second-pullback entry after a moving-average crossover
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