Page 137 – Playing the 200 Day Moving Average

The 200 Day Moving Average provides an indicator of the long term trend of the market.  This strategy utilizes the 200 Day Moving Average to identify an extremely oversold condition.

1. Buy the SPY when the S&P 500 closes 20 percent below its 200 Day Moving Average (e.g. the crash of 1987  or on September 20, 2001).
2. Sell one month (20 trading days) later.

Utilizing this system since 1950 identifies 79 trades, 82 percent of which were profitable (79 trades) for an average return of 6.43 percent per trade.

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