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Momentum Signals With SPY ETF And S&P 500 Index

Photo by Burak The Weekender.

On October 31, 2023, the S&P 500 closed below its 12-month moving average, but the SPY ETF closed above its 12-month moving average.  Which is better to use for momentum signals? The ETF or the index?

This is the monthly chart that shows the levels of SPY (top) and S&P 500 (bottom) and the 12-month moving averages as of the close of October 31, 2023.


We have a problem here, and it is the usual one with market analysis: small samples. We have data for the S&P 500 index going back officially to 1960, and with extrapolation, many decades or even a few centuries, but the SPY ETF data start on January 29, 1993 We could use other funds that track the S&P 500, but the sample size will not change much.

What is the sample size of divergences between the signals using the S&P 500 and SPY ETF for exiting the markets, i.e., after the price crosses below the 12-month moving average? The answer is provided below, along with the backtests and our analysis.

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Specific disclaimer: This report includes charts that may reference price levels determined by technical and/or quantitative analysis. No charts will be updated if market conditions change the price levels and/or any analysis based on them. All charts in this report are for informational purposes only. See the disclaimer for more information.

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

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