Bank of America looks at the historical success rates of well-known technical indicators

Technical Analysis

Bank of America (BofA) has shared insights into 8technical strategies based on historical performance data, revealing a variety of potential investment patterns. Key findings include:

  1. Golden Cross: This event, when the 50-day moving average (MA) crosses above the 200-day MA, tends to precede rises in the DXY (Dollar Index) 65-79% of the time, typically 20-80 days later. The S&P 500 (SPX) also tends to deliver strong returns 30, 65 and 195 days post Golden Cross, with an uptrend observed 75% of the time.

  2. Death Cross: When the 200-day simple moving average (SMA) is declining, the DXY has historically been lower 11 of 13 times 5-25 days later. Ten-year US Treasury yields often rise 65-76% of the time 45-60 days post Death Cross.

  3. Ichimoku: In forex markets, bullish (bearish) signals occur when the conversion line crosses above (below) the base line with a green (red) cloud. High success rates have been observed in USDKRW, USDINR, NZDUSD, USDTHB, and USDZAR pairs under these conditions.

  4. DMI with ADX: In G10 forex, bearish DMI crosses with an ADX below 15 or spot below the 50-week SMA have historically signaled downtrends.

  5. Bollinger Bands: G10 forex has shown a tendency to breakout more than mean-revert when price first exits a 26-week band, with signals being more prominent when the USD weakens.

  6. TD Sequential™: Historically, USDSEK often rises 72% of the time 5 weeks after a TD Setup 9 weekly buy signal below the 100-week SMA. GBPUSD also tends to rise 80% of the time 5 weeks post a TD Countdown 13 weekly buy signal.

  7. Breadth Thrust: The S&P 500 has typically traded higher 82% of the time 250 days after a breadth thrust, with average and median returns of 17.5% and 21.2% respectively.

  8. Coppock Curve: Since the 1930s, when the Coppock Curve ticks up while below zero, the S&P 500 has averaged 12-month returns of 11.1%, with median returns of 16.4%.

While these strategies provide historical insights, BofA reminds investors that past performance is not indicative of future results.

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