This close below the 200-day moving average caused CS|MACO to signal a position-closing trade. Don't remember what CS|MACO is? I don't blame you - it's been very quiet since May, when it went long SPY. As a primarily trend-following trade, the longer it holds a position the more likely it will make serious money. But unfortunately, it also means it will give back a large proportion of its profits when the market turns against it.
This position was typical. CS|MACO signaled a buy on May 10 when the folks who feel obligated to pay AAII for the privilege of filling out a weekly sentiment survey reported that they felt profoundly un-bullish (only 25.4% of them were optimistic). That entry at 136 was about 1/3 of the way through a down-move in the S&P that bottomed on June 4 at 128 (closing price), only to rally throughout the summer to a high of 147.20 (closing price) on September 14 - one of my favorite days of the year. Since then the volatility of the S&P has been increasing and it has been drifting lower through a series of bounces. I knew it was only a matter of time until the 200-day moving average was crossed.
CS|MACO will stay out of the market until one of the following occurs:
- AAII comes out with a bullish number below 27.5% (buy signal); or
- SPY closes above the 200-day moving average again (buy signal); or
- SPY closes below the 200-day moving average, and it in turn closes below the 300-day moving average (short signal). That will be a while.
Just for fun, here's a little chart that plots the weekly prices of SPY (taken on Wednesdays) and the AAII bullish sentiment number. I've limited the time range to be the period of CS|MACO's latest position; that is, May 10-Nov 8.
Including dividends, CS|MACO is up about 4% on a Return on Investment basis since its inception in September 2010. Not a great track record, but I'm sticking with it for now.
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