The Test Bench › Moving averages › 200-day moving average
What the 200-day average is, what a close above or below it means, and how timing rules use it, with what our tests found.
The 200-day moving average is the average of the last 200 daily closes, about ten months of trading. A close above it means the price is above that average, which many traders read as a long-term uptrend; a close below, as a downtrend. A close crossing the line is one of the simplest trend signals.
A stock far from its average usually crosses it rarely. A stock moving sideways near it crosses back and forth, sometimes several times in a month, and each crossing is a signal for a rule that follows it. A price crossing compares the close with one average; a golden or death cross compares two averages, the 50-day and the 200-day.
Mebane Faber’s 2007 paper, A Quantitative Approach to Tactical Asset Allocation, popularised a monthly version: hold the market while its month-end close is above its 10-month average, otherwise hold cash. In his 2013 update, US stocks from 1901 to 2012 returned 10.2% a year under the rule against 9.3% for buying and holding, with a worst fall of −50% against −84% on month-end data, before costs and taxes. Checked once a month, the rule gives fewer and different signals from a daily close against the 200-day average.
| Daily rule | Faber’s monthly rule | |
|---|---|---|
| Average | 200 daily closes | 10 month-end closes |
| Checked | Every day | Once a month |
| Signals | Many, with whipsaws | Few |
| Reacts to a crash | Within days | At the next month-end check, for the following month |
How to read these results. An event study compares the days after a signal with ordinary days of the same stocks; a backtest runs one complete rule with costs and reports a median total return per stock over the whole period; the two answer different questions. “Clear” is our own rule: the 95% interval excluded zero under every test setting we ran, which is not proof that a gap will last. All tests use today’s S&P 500 members projected back, which can flatter strategies that hold through deep falls, such as buying and holding (see survivorship bias in backtesting), and price returns without dividends.
Price crossings of the 200-day average on 483 S&P 500 stocks, 2006 to September 2026: no clear difference from ordinary days over the next 100 trading days in either of the two signal tests.
The golden cross, the 200-day average and the 9/21 EMA as trading rules on 483 S&P 500 stocks, 2006 to September 2026, with next-open fills and costs, against buying and holding.
The average of a stock’s last 200 daily closes, about ten months of trading. It moves slowly, and many traders use it as a long-term trend filter.
Its price is higher than its average over about the last ten months of trading, which many investors take as a long-term uptrend. Below the line is read as a downtrend.
In our test, the 100 trading days after a stock crossed above or below its 200-day average were not clearly different from ordinary days. In our separate SPY backtest, 2006 to September 2026, the 200-day rule returned 7.0% a year with a deepest fall of −22%, against 9.1% a year and −56% for buying and holding: a smaller fall and a lower return.
Hold the stock or index while it closes above its 200-day moving average, and move to cash when it closes below. Mebane Faber’s published version checks once a month against a 10-month average.
From Mebane Faber’s 2007 paper: at each month-end, hold the market for the next month if its close is above the average of the last ten month-end closes; otherwise hold cash or bonds. He reports a slightly higher return than buying and holding from 1901 to 2012, with much smaller falls, before costs and taxes. His figures include dividends and interest on cash and cover an earlier period, so they do not compare directly with our daily rule.
Similar in scale, not the same: a 200-day average uses the latest 200 daily closes and is checked every day; a 10-month average uses month-end closes and is checked once a month, so it gives fewer and different signals.
A crossing that reverses within days: the price closes above the line, then back below it. Near the line this happens repeatedly, and a rule that follows every crossing pays a trade each time.
Traders often describe it as support or resistance. Our studies test what followed a crossing of the line; they do not test bounces off it.
Want to test the 200-day rule yourself?
Use the default 200-day average to measure what followed a crossing on your stocks, or backtest holding above the line with a cost on each trade.
Create a free account and build your own strategies → or read the moving average guide →The methods: how a backtest is built · how an event study works