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Market Statistics

Records Depend on Metrics

Most records in the market depend on the metric under consideration. When the metric changes, the performance changes, and records can vanish. An example of recent US dollar index performance is included.

The US dollar index has stayed above its 200-day moving average for 352 days, and this is the longest such period since 1971, as already reported on social media.

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The previous record was 297 days above the 200-day moving average on September 14, 1976, and has now been exceeded by 55 days.

But notice that, on average, the volatility was much higher in the 80s as compared to current volatility. Volatility affects moving average crossovers, in this case, the price, which is a moving average with a period of one, and the 200-day.

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As a result of the high volatility, in the 80s there were three occasions when the price dropped below the 200-day moving average, and thus there were four distinct periods of the index rising above the average for about 250 days each.

We can select a 400-day moving average that will accommodate the volatility of the uptrend and the crossovers in the 80s.

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The US dollar index is currently above the 400-day moving average for 279 days, and this is far from the record in the 80s of 1,177 days. The choice of metric matters when discussing records. If the metric changes, what appears to be a record may turn into normal action.

The purpose of this article was to show with an example how purported record-breaking in financial media and blogs depend on the metric considered. If the metric changes, some records will collapse to normal or even below-average action. This tends to be true with all price indicators, including volatility. It is also one reason that lagging indicators have a high failure rate in forecasting price action.


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Disclaimer:  No part of the analysis in this blog constitutes a trade recommendation. The past performance of any trading system or methodology is not necessarily indicative of future results. Read the full disclaimer here.

Charting and backtesting program: Amibroker. Data provider: Norgate Data