On Timing the Market with Moving Averages

Introduction to a 5-part series discussing the research behind market timing using moving averages

Today, I’d like to start on a series of Q&A with questions from my premium subscribers. If you have a question you would like to ask, send me an email and I’d love to feature you on either a YouTube video or Substack article.

During the month of August, I’m going to feature a 5-part series answering one of the most interesting, important, and controversial topics in all of investing: market timing. More specifically, market timing with moving averages. This series is inspired by an email from a premium subscriber (I will not mention their name):

I’ve run models and others have commented on selling once the “market” has crossed some threshold such as a 200-day moving average. I’ve been backtesting this on Portfolio Visualizer and it seems to have some merit but that’s a lot of trading. I run the multi-stage financial goal component where I keep a Basis investment with a satellite fund when the market is moving up. Love the results but not sure if this works since I’ve only had one advisor (I get a lot of calls from people wanting to manage my money) that applies this technique. My problem with this technique is that you are playing the odds, your going to get 50-65% positive trades with regrets over long over a period of time (months). Have you done much testing with this process? Pacer Trendpilot 100 ETF (PTNQ) applies this but doesn’t beat the QQQ or NASDAQ over the 4.5 years of existence. I think you are losing because you “run” past the decline slightly while missing part of the “momentum” upswing when the market starts to climb. Your thoughts?

To adequately cover this topic would take a while, so I’m going to break it down into segments. I hope to get at least one article published per week, which should put us in the final installment around the end of August.

5-Part Series Outline

As of now, here is the planned schedule:

  • Part I: The Evidence Against Market Timing

  • Part II: The Evidence For Market Timing

  • Part III: Why Timing Strategies Fail

  • Part IV: Should Anyone Adopt a Timing Strategy?

  • Part V: The Tactical Allocator: A Systematic Timing Strategy Using ETFs (subscribers only)

Ongoing Updates to Portfolio Performance

At the start of this series, I will be making an initial investment into a timing strategy based on some of my own backtesting. It will be experimental. At the end of the month of August, I’ll share the results of that strategy with you and add it to my list of strategies to keep you updated.

Let’s Be Open-Minded

And, finally, this is a controversial topic. Just the thought of market timing makes some people furious. Others wholeheartedly embrace it. In this series, as with everything I write, my objective is to provide the evidence and let you make up your mind. So, before we start the series, I would ask that you come with an open mind to the topic. I’ll do my best to do the same. And together, we will (hopefully) learn something that will make us better investors.

Thank you for your interest in my work. If you would like to get updates whenever I publish a new post, you can sign up (for free). If you would like to support my work, you can sign up as a premium subscriber. Thank you to all of you premium subscribers; seriously, thank you so much.

If you have any other thoughts, comments, or questions, I’d love to hear from you. If there are enough on one particular issue, I may modify the schedule to include it.

Nathan


I do not own any securities mentioned in this article and do not plan to take a position in them within the next 48 hours.

This article and everything else on this blog are for information only. It should not be considered investment, tax, or legal advice. This is not an offer or recommendation to buy or sell any security. I can’t guarantee the accuracy of the data. Past performance is not a guarantee of future results. Investing involves risk. Do your own research before investing or seek professional help. By accessing this article, you agree to the full Disclaimer, which you can read here.