33 years of SPY data: the 200-day moving average rule made 8.2% a year vs 10.8% for buy and hold, but cut the worst loss from -55% to -24%. Live chart.
Buy the S&P 500 when it closes above its 200-day moving average, sell to cash when it closes below. It is one of the most shared trading rules on the internet, usually with the claim that it beats simply holding the index.
We tested it on 33 years of SPY data, trading the way a real investor could. It did not beat buy and hold on returns: 8.2% a year against 10.8%. What it did, consistently, was cut the worst loss by more than half. The live signal below updates every trading day.
Market regime · S&P 500 (SPY) · 200-day rule
Above average · investedSignal: invested since Apr 9, 2026, 137 sessions. SPY is +11.8% since the switch.
Switches to cash if SPY closes more than 2% below the average (below 712.47 today).
No. Since 1994 it returned 9.6% a year against 10.8% for simply holding SPY, and led in only 6 of 32 calendar years. What it did was cut the worst loss from -55% to -19%. In 2008 it finished +1.3% while SPY lost 36.8%; in 2023 it made +13.5% while SPY made +26.2%.
| 200-day rule | Hold SPY | |
|---|---|---|
| Annual return | 9.6% | 10.8% |
| Worst drop from a peak | -19% | -55% |
| Volatility | 12.0% | 18.7% |
| Time invested | 74% | 100% |
| Switches (1994 to 2026) | 58 | 0 |
Backtest 1994 to 2026: SPY with dividends reinvested; cash earns the 13-week T-bill rate; 0.05% cost per switch; a signal from one close is acted on at the next session; 2% buffer. Before taxes. A historical study of a rule, not a recommendation to trade it.
Test conditions: SPY from January 1994 to September 2026, dividends reinvested, cash earning the 13-week T-bill rate, and 0.05% deducted on every switch.
By decade, the rule only came out ahead once:
If you have read that the 200-day moving average beats the market, one of three things is usually going on.
1. Trading on the same close that created the signal. Our test with that one change, acting at the signal's own close instead of the next session, returned 20.6% a year. That is not a strategy, it is information from the future. A daily rule can only act after the close it reads.
2. Price-only data. The S&P 500 price index leaves out dividends. That quietly takes 1% to 5% a year away from buy and hold, depending on the era, while the rule, sitting in cash, is credited with interest.
3. A convenient start date. Begin a test in 2000 and the rule dodges two 50% crashes in its first decade. That window is real, but it is not the whole record.
The rule is a crash filter. Its best calendar years against buy and hold were 2008 (+37 points), 2002 (+19), 2001 (+15) and 2022 (+4). Long, grinding bear markets take months to unfold, and the 200-day average turns before most of the damage.
Across 1960 to 2026, using the S&P 500 with estimated dividends, the picture is similar: 10.1% a year for the rule against 10.5%, with the worst drop cut from -56% to -23%. It clearly won in the 1960s and 1970s (8.9% against 6.6%), a period of repeated slow bear markets.
Fast crashes that recover quickly are the rule's weak spot. It sells after the fall and buys back after the rebound, locking in the loss and missing the recovery. Its worst years against buy and hold were 2019 (-15 points), 2023 (-15), 2020 (-13) and 2010 (-13). In total it beat buy and hold in only 4 of the 32 full calendar years.
Taxes make this worse. Outside a tax-sheltered account, about seven switches a year turn long-term gains into short-term ones.
Most whipsaws happen when the price hovers right at the average. Requiring a close 2% below the average to sell, and 2% above to buy back, filters most of them out:
Treat the 200-day rule as a risk dial, not a return booster. It suits an investor who would otherwise sell in a panic near the bottom of a crash, because it replaces an emotional decision with a mechanical one and historically kept the worst loss near 20%. It does not suit anyone who expects it to outperform: over the last three decades it trailed in most years.
Right now the signal simply tells you which side of its long-term trend the market is on. For how ACCE's own themed portfolios have performed against their benchmarks, see ACCE indices.
Method: SPY daily closes from Yahoo Finance, January 1994 to September 16, 2026, total return. Cash earns the 13-week T-bill yield. Signals use the close; trades happen at the next session with a 0.05% cost per switch. Long-run S&P 500 figures use the price index plus decade-average dividend yields and are approximate. Before taxes. This is a historical study, not investment advice.
Not on returns. From 1994 to 2026, holding SPY above its 200-day average and cash below it returned 8.2% a year against 10.8% for buy and hold, trading at the next session with dividends and T-bill interest included. It did cut the worst loss from -55% to -24%.
The live chart at the top of this article shows SPY's latest close, its 200-day average, the distance between them and the current signal. It updates after every trading day.
It is the average of SPY's last 200 daily closing prices, about ten months of trading. Investors use it to judge the long-term trend: a price above the average suggests an uptrend, below it a downtrend.
Usually because they trade at the same close that produced the signal, which uses information no investor has in time. In our test that single change lifts the return from 8.2% to 20.6% a year. Price-only data that leaves out dividends and start dates around 2000 also flatter the rule.
A buffer reduces whipsaws. Selling only below 2% under the average and buying back only above 2% over it cut switches from 222 to 58 between 1994 and 2026, raised the annual return to 9.6% and reduced the worst loss to -19%. It still trailed buy and hold's 10.8%.