Ever have a boss or a dude with a “smoothing mechanism” on Old Wall TV tell you that something looks good because it’s trading above it’s moving average? Per our friends at Investopedia, a simple moving average “is an arithmetic moving average calculated by adding recent closing prices and then dividing that by the number of time periods in the calculation average.”
Isn’t that so smooth and attractive? Other than confirmation biases, what does something trading above or below its moving average indicate? Does it back-test as relevant using a ROC (rate of change) 4 Quadrant Economic Model at The Cycle turns?
Yeah, I lost both Euclidean Geometrists and Technical types with that last question. No worries. It’s all in good fun. It was fun to believe that being “long China, Europe, and EM” at this time last year looked good on “the charts.” Wasn’t it super cool and fun to buy into charts of US stocks and high yield bonds with the moving averages looking awesome back in AUG and SEP of 2018 too?