Simple Tests of an Asymmetric SMA Strategy

A reader asked: “Should the moving average crossover threshold be symmetrical, or does it make sense to try getting back in close to the bottom?” In other words, should we perhaps use a 200-day simple moving average (SMA) to stick with the typical long bull market grind upward and then switch to a 50-day SMA signal after crossing under the 200-day SMA so that we re-enter closer to a V-shaped bear market bottom? Using daily closes for the S&P 500 Index commencing 5/20/59, the 3-month Treasury bill (T-bill) yield commencing 1/4/60 and S&P Depository Receipts (SPY), adjusted for dividends, commencing 1/29/93, all through the end of October 2011, we find that: (more…)