Global Indices ETFs Round-Up: 20-day Weighted Moving Average

With the 'Joe Soap' regular 20-day moving averages broken or under threat I took at look at the positional aspect of the weighted 20-day MA. Like any moving average it is subject to whipsaw but breaks through the line tend to support bullish or bearish periods of 1 month or more. However, because it is weighted the whipsaw signals don't tend to be so damaging.

[1] S&P/SPY

Closed Wednesday just above the 20-day WMA. Another down day Thursday will see a break which could define the action for the rest of the summer with the potential for another seasonal washout in September/October. That's hearsay for now but today will mark the test.


My 1-month Call for $94.49 fell shy of the target but did at least finish in the plus column.

[2] FTSE 250/MIDD
Thursday marked a break of the 20-day WMA as the Spring rally falters. Below 685p there are two bands of potential support; an upper tier between 675-685p and a lower tier between 575-600p. Each can be used to take partial profits/profits on a maturing downphase.


I have put a YourCall for a move to the upper tier - but with the risk I have defined it's not really worth it on current pricing and whipsaw remains a concern.

[3] ISEQ/0ESE

The much maligned Irish Stock Exchange has suffered considerable pain but there is evidence the worst is behind it (even if the Irish economy has yet to see it). The exchange suffered more than others in false dawns. Currently the exchange sits right on its 20-day WMA. For it to hold would be a major achievement, but it is likely to follow the FTSE 250 lower; this would leave punters looking at €4.15 for a measure of support.


[4] Nikkei/EWJ

Thursday's sell off in the Nikkei is likely to take this back to the 20-day WMA. Supply lurks around $9.77 but a break above psychological $10 could see a move to $10.90. The expectation is for the Nikkei to break its 20-day WMA and at least shift sideways over the summer months



[5] BOVESPA/EWZ

While global markets were shifting around in the latter of 2008 and the early part of 2009 the Brazilian index was relatively stable if somewhat whipsawy. The global correction is likely to see it lose its 20-day WMA but the groundwork on the part of bulls looks more favourable than for any other of the aforementioned indices. Should see good support in the $41s.


[6] Mumbai/PIN

While not a direct correlation to the entire Mumbai SE it's a reasonable approximate. Behaving very similar to the Brazilian ETF with a neat double bottom for November and March lows. Unlike US and UK markets this has managed to test September 2008 lows (as did the Brazilian EWZ). On a relative scale it is outperforming the S&P and FTSE 250. On that basis it should be the first to rise through its 20-day WMA if current support fails to hold.


Looking at these six indices it would appear the best prospects going forward are in the emerging markets.

Dr. Declan Fallon, Senior Market Technician, Zignals.com the free stock alerts, market alerts, and stock charts website
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It's 1974 again - except worse

On November 20th the S&P closed at 752. In the context of the last fifty eight years this is the worst performance the S&P has ever recorded. In 14,368 data points, the past six weeks rank 14,349th to 14,368th with respect to S&P performance relative to its moving averages (20-, 50-, and 200-day MAs). On the day it closed at 752 the S&P finished 16% away from its 20-day MA, 25% from its 50-day MA and a staggering 40% from its 200-day MA. The only other year in recent memory to come as close was October 3rd 1974. Then the S&P closed 7% away from its 20-day MA, 14% from its 50-day MA and a comparably bullish 29% away from its 200-day MA.

For the month of December, taking the post September/October routs into perspective, 1987 was the only other year coming close to matching now. Then the S&P lingered 2% from its 20-day MA, 10% from its 50-day MA and only 20% from the 200-day MA (this was for December 10th 1987).



Bears and worried bulls could look to December 1973 when the S&P traded 3% from its 20-day MA, 10% from its 50-day MA and 13% from its 200-day MA - only to see the following year perform even worse. Will this be the story for 2009?


The most likely outcome is somewhere in between as the market drifts sideways as the moving averages 'catch up' to the market. One month on from my "Obama Bottom" article the S&P has completed the Obama unwind and should be in a position to rally from here into the early part of next year. But given the new boundaries of despair the S&P has set I wouldn't be betting big on it.

Just for interest, the best the market performed was November 3rd 1982 when the S&P traded 5% above its 20-day MA, 12% above its 50-day MA and 23% above its 200-day MA. Those numbers appear a million miles away from where the S&P stands now.

Have an opinion you would like to share? Make a call on your favourite stock. Here's the call spread for Bank of Ireland (BKIR)



Dr. Declan Fallon, Senior Market Technician, Zignals.com the free stock alerts, market alerts, and stock charts website
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