Moving Average Indicators for DJIA

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From the Weekend Report 12/19/2008: Since the previous week the phase of the oscillator around the 200 bar average is almost unchanged.

Recent Averages with Candlestick Chart. of Dow Industrials

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This section analyzes the predictive abilities of several flavors of averaging as applied to the DJIA index. An infinite selection of moving average techniques is available, including but not limited to moving weighted and exponentional averages and MACD indicators of various flavors.

Unfortunately, some of the most popular indicators of this type can prove to be the worst forcasting indicators. The effectiveness of these methods as applied to DJIA stock price trend evaluation is tested on the next page.

Green is the 20 bar moving average, while the 200 session average is red. Often the simple unweighted moving averages seen in this plot will give a more accurate indicator, with fewer false signals than some of the supposedly more sophisticated techniques that we test below. It is always possible to fine tune an exponential or other weighted average so that it seems to outperform a simple average in a given situation. However, over-tuning can increase false and misleading indicators. Norman Fosback pointed out that a legitimate signal should be one that is clearly evident through a variety of averaging methods.

Moving Average Convergence of Dow Industrials

	Companies In the News
	Friday, January 02, 2009: We have news on Verizon, ticker symbol VZ. A significant moving average event has happened. Also, there are breaking events concerning C.R. Bard, Inc. and Raytheon Company. From the News Archive: (1/2/2009 ) Bad news came from Wisconsin Energy Corporation, Intel, AT and T, and Williams Companies, Inc..

MACD analysis would appear perfect for overtuning, since it may use any of an infinite number of averaging methods and coefficients. In addition to crossover signals from various moving averages, analysts frequently add a trigger line based on some average of the first two averages. Here we depict the results of 12 and 26 session Exponential Moving Averages. The exponential coefficient used here is .18. There is nothing magic about these parameters, but these are frequently seen.

Float the cursor for a longer term chart.

Moving Average Convergence Divergence, or MACD, produces buy or sell signal that are color tinted here.

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Moving Avg. 20/200 Divergence	Signaled Appreciation minus non-signaled Appreciation	Annualized %
Buy Signals - 28 instances
Future30SesAvgClose	0.79 % minus 0.56 % = 0.24 %	1.99 %
Future5SesAvgClose	0.30 % minus 0.11 % = 0.19 %	9.49 %
Future2SesAvgClose	0.10 % minus 0.05 % = 0.05 %	5.77 %
Sell Signals - 27 instances
Future30SesAvgClose	-0.17 % minus 0.56 % = -0.72 %	-6.13 %
Future5SesAvgClose	0.06 % minus 0.11 % = -0.05 %	-2.32 %
Future2SesAvgClose	0.04 % minus 0.05 % = -0.02 %	-2.27 %
	.
Moving Avg. 5/20 Divergence	Signaled Appreciation minus non-signaled Appreciation	Annualized %
Buy Signals - 212 instances
Future30SesAvgClose	0.65 % minus 0.56 % = 0.10 %	0.82 %
Future5SesAvgClose	0.20 % minus 0.11 % = 0.09 %	4.64 %
Future2SesAvgClose	0.09 % minus 0.05 % = 0.04 %	5.02 %
Sell Signals - 212 instances
Future30SesAvgClose	0.54 % minus 0.56 % = -0.01 %	-0.09 %
Future5SesAvgClose	0.20 % minus 0.11 % = 0.09 %	4.41 %
Future2SesAvgClose	0.14 % minus 0.05 % = 0.08 %	10.37 %
	.
Moving Avg. 5/200 Divergence	Signaled Appreciation minus non-signaled Appreciation	Annualized %
Buy Signals - 44 instances
Future30SesAvgClose	0.64 % minus 0.56 % = 0.09 %	0.73 %
Future5SesAvgClose	0.29 % minus 0.11 % = 0.18 %	9.29 %
Future2SesAvgClose	0.41 % minus 0.05 % = 0.36 %	45.73 %
Sell Signals - 43 instances
Future30SesAvgClose	0.73 % minus 0.56 % = 0.17 %	1.44 %
Future5SesAvgClose	0.42 % minus 0.11 % = 0.32 %	16.05 %
Future2SesAvgClose	0.41 % minus 0.05 % = 0.35 %	44.80 %
	.
MACD 12/26 Divergence	Signaled Appreciation minus non-signaled Appreciation	Annualized %
Buy Signals - 654 instances
Future30SesAvgClose	0.54 % minus 0.56 % = -0.02 %	-0.15 %
Future5SesAvgClose	0.09 % minus 0.11 % = -0.02 %	-1.07 %
Future2SesAvgClose	0.03 % minus 0.05 % = -0.02 %	-2.66 %
Sell Signals - 653 instances
Future30SesAvgClose	0.57 % minus 0.56 % = 0.02 %	0.16 %
Future5SesAvgClose	0.16 % minus 0.11 % = 0.06 %	2.81 %
Future2SesAvgClose	0.08 % minus 0.05 % = 0.03 %	3.32 %
	.
MACD 12/26 Signal	Signaled Appreciation minus non-signaled Appreciation	Annualized %
Buy Signals - 902 instances
Future30SesAvgClose	0.49 % minus 0.56 % = -0.06 %	-0.54 %
Future5SesAvgClose	0.15 % minus 0.11 % = 0.04 %	2.25 %
Future2SesAvgClose	0.10 % minus 0.05 % = 0.05 %	6.22 %
Sell Signals - 902 instances
Future30SesAvgClose	0.41 % minus 0.56 % = -0.14 %	-1.22 %
Future5SesAvgClose	0.04 % minus 0.11 % = -0.07 %	-3.54 %
Future2SesAvgClose	0.03 % minus 0.05 % = -0.02 %	-2.52 %
	.
Calibrated M by Q Half Cycle Moving Avg.	Signaled Appreciation minus non-signaled Appreciation	Annualized %
Buy Signals - 364 instances
Future30SesAvgClose	0.47 % minus 0.56 % = -0.09 %	-0.74 %
Future5SesAvgClose	0.19 % minus 0.11 % = 0.08 %	3.90 %
Future2SesAvgClose	0.11 % minus 0.05 % = 0.05 %	6.88 %
Sell Signals - 365 instances
Future30SesAvgClose	0.45 % minus 0.56 % = -0.10 %	-0.87 %
Future5SesAvgClose	0.05 % minus 0.11 % = -0.06 %	-3.01 %
Future2SesAvgClose	-0.04 % minus 0.05 % = -0.10 %	-12.16 %
	.
Calibrated M by Q Full Cycle Moving Avg.	Signaled Appreciation minus non-signaled Appreciation	Annualized %
Buy Signals - 261 instances
Future30SesAvgClose	0.38 % minus 0.56 % = -0.17 %	-1.45 %
Future5SesAvgClose	0.15 % minus 0.11 % = 0.04 %	2.19 %
Future2SesAvgClose	0.09 % minus 0.05 % = 0.04 %	4.95 %
Sell Signals - 262 instances
Future30SesAvgClose	0.39 % minus 0.56 % = -0.16 %	-1.37 %
Future5SesAvgClose	0.04 % minus 0.11 % = -0.07 %	-3.66 %
Future2SesAvgClose	-0.03 % minus 0.05 % = -0.08 %	-10.16 %
	.
Projected Crossing of SMA 20/200.	Signaled Appreciation minus non-signaled Appreciation	Annualized %
Buy Signals - 14 instances
Future30SesAvgClose	0.85 % minus 0.56 % = 0.29 %	2.46 %
Future5SesAvgClose	0.25 % minus 0.11 % = 0.14 %	6.97 %
Future2SesAvgClose	0.71 % minus 0.05 % = 0.65 %	82.92 %
Sell Signals - 18 instances
Future30SesAvgClose	1.43 % minus 0.56 % = 0.88 %	7.42 %
Future5SesAvgClose	0.50 % minus 0.11 % = 0.39 %	19.70 %
Future2SesAvgClose	0.20 % minus 0.05 % = 0.15 %	18.70 %
	.
Projected Crossing of SMA 5/20.	Signaled Appreciation minus non-signaled Appreciation	Annualized %
Buy Signals - 195 instances
Future30SesAvgClose	1.21 % minus 0.56 % = 0.66 %	5.58 %
Future5SesAvgClose	0.42 % minus 0.11 % = 0.32 %	16.03 %
Future2SesAvgClose	0.19 % minus 0.05 % = 0.13 %	17.07 %
Sell Signals - 137 instances
Future30SesAvgClose	0.66 % minus 0.56 % = 0.10 %	0.86 %
Future5SesAvgClose	0.16 % minus 0.11 % = 0.05 %	2.38 %
Future2SesAvgClose	0.13 % minus 0.05 % = 0.07 %	9.11 %
	.

The best buy signal for 30 future sessions was 0.66 % from the Projected Crossing of SMA 5/20.,and the best sell signal for was -0.72 % from the Moving Avg. 20/200 Divergence.

For 5 future sessions the best buy signal was 0.32 % from the Projected Crossing of SMA 5/20.,and the best sell signal was -0.07 % from the Calibrated M by Q Full Cycle Moving Avg..

The best buy signal for 2 future sessions was 0.65 % from the Projected Crossing of SMA 20/200.,and the best sell signal was -0.10 % from the Calibrated M by Q Half Cycle Moving Avg..

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