8-Month SMA-Strategy proved yet again its reliability in stormy weather

Introduction

We are viewing a market over 8 months and then work with an 8-monthly Moving Average (SMA). Every end of the month we watch whether the market we are observing is trading above or below this SMA. If it is trading above, then we can stay invested or buy more. If the market is trading below then we propose to sell and – stay out.

As you can see, this simple strategy works in many different markets, especially the Asian stock markets

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8-Month SMA-Strategy proved yet again its reliability in stormy weather

There couldn’t have been a much better timing than that proposed by the mechanic approach of the 8-Month SMA-Strategy by end of July. Almost perfectly in time it got out from 8 of 10 markets just before a storm descended over international stock markets. Only for the MSCI Asia ex Japan and STI Singapore, the raw indicator missed an early signal by merely a couple of hours, due to the fact that it monitors markets only once a month.

Avoiding losses during August of some 7 percent worldwide or almost 15 percent in Germany defended the 8-Month SMA-Strategy’s strong lead compared to a buy & hold strategy over 10 years again. This is particularly remarkable due to the fact that it achieved these results with a much lower volatility than the markets.

Although showing superior results over long term periods the last two years have not been an easy time for such trend following approaches. Was this August the kick off for a new period of more pronounced downward or upward trends?

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