I like using a mutlitple layer/multiple moving avearage approach with the high yield funds. Why more than one moving average? First off, No single moving average is the holy grail….Short-term moving averages are great, yet often times they can pull you out too quickly and you miss out on some gains, creating false buy and sell signals, compared to longer-term averages. On the flip side they can get you in early and get you out early.
Each of the high yields in the 6-pack below have broken below their 50-EMA, causing me to reduce exposure in this complex. Wanted to update the current situation due to 2 of the 6 funds have broken their 100-EMA lines, see below.
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The high yield funds crossed above the 100-EMA almost one year ago, around 60 days ahead of the lows in the broad stock market, which took place on 9/1.
A futher breakdown (should it happen) would cause a further reduction in high yield holdings. Breaking below a 50-EMA is not that concerning of a message.
The last time the high yields crossed from above to below their 200-ema was back in 2008. Should they break the 200-EMA, a very concerning message would be at hand!
cjk…I use a series of 3 EMA’s to guide the positions. I have a short term portion, medium and longer term portfolio. Per testing, a long term has done tons better than the 50-ema or anything shorter since our buy in back in 2009, because the big trend has been up. Yet know one knows that in the beginning. I have used this concept for over 12 years on a live basis. Works really well. Long term signal went on a sell back in 1998 and didn’t get investors back into the market until 4 YEARS LATER, after a huge hit, over a 40% decline, yet the shorter term EMA line gave one losing signal after another, during the 4 year decline. You would get pulled in, just in time to sell lower. As I shared, no holy grail in this approach, I just found splitting the portfolio into thirds helped a ton.
Good idea. Need to back test each equity to see what fits best. What you use to get in may be different than what you use to get out and if you want to protect capital gains