Moving Averages: The 1929 Lesson Still Saving Investors
Moving averages are a mechanical trend-following tool that protected investors during the Great Depression and remain effective today. By tracking whether assets trade above or below their 10-month or 12-month moving averages, investors can systematically enter and exit positions without emotion. Current June 2026 signals across the Ivy Portfolio and S&P 500 all point to invest positions, though bond volatility warrants close monitoring.
The Great Depression Proof
Moving averages triggered a critical sell signal in October 1929
A simple 10-month or 12-month moving average strategy on the Dow would have signaled investors to exit in October 1929, before the worst of the crash. This single move protected investors from absolute financial ruin by keeping them in cash until a buy signal appeared in August 1932.
How Moving Averages Work
Simple mechanical rule: compare price to trend line
If an asset closes the month below its 10-month or 12-month simple moving average, you sell and hold cash. If it stays above, you remain invested. This removes guesswork and emotion from investing decisions.
Different time horizons produce different signals
The 10-month moving average is more sensitive to short-term volatility and triggers faster signals, while the 12-month average smooths out noise and produces fewer false alarms. Choosing between them depends on your risk tolerance and trading frequency.
Ivy Portfolio Status (June 2026)
Bond ETF (IEF) triggers sell signal on 10-month average
The bond ETF closed 0.1% below its 10-month moving average in June 2026, triggering a shift to cash. However, it sits in a yellow warning zone within 2% of the signal, requiring close monitoring for potential rapid reversal in July.
12-month average keeps all five assets in invest position
Using the 12-month moving average, all five Ivy Portfolio ETFs remain invested for the third consecutive month. The smoother trend line filtered out the short-term bond volatility that triggered the 10-month sell signal, demonstrating why time horizon selection matters.
S&P 500 Status (June 2026)
10-month moving average: S&P 500 at 7.3% above trend
The S&P 500 closed June at 7.3% above its 10-month simple moving average, logging its third consecutive month in an invest position despite the 1.1% pullback in June.
12-month moving average: S&P 500 at 8.9% above trend
Using the 12-month variant, the S&P 500 finished June at 8.9% above its moving average, marking its 14th consecutive month in an invest signal under this specific strategy.
10-month exponential moving average: S&P 500 at 7.5% above trend
The exponential variant, which weights recent months more heavily, shows the S&P 500 at 7.5% above its line for the third consecutive month. Historically since 1995, it has produced fewer false signals than simple moving averages, though it was slower to signal sells after the 2000 and 2007 market tops.
Why Moving Averages Work
Human psychology drives momentum trends
Moving averages work because humans naturally imitate successful behavior, buying as trends go up and panicking when they reverse. These mechanical signals strip emotion out of investing by forcing disciplined entry and exit points.
Practical Implementation Rules
Execute in tax-advantaged accounts to avoid capital gains taxes
Frequent trading triggered by moving average signals can generate short-term capital gains taxes. Using a tax-advantaged account like an IRA or 401(k) prevents this drag on returns.
Adjust data for dividend reinvestments
Ensure your price data is adjusted for dividend reinvestments, or your moving average calculations could throw off false signals and lead to incorrect buy/sell decisions.
Current signals valid through July 31, 2026
All allocations and signals discussed remain valid until the closing bell on July 31st, 2026. Investors should reassess positions monthly based on updated closing prices.
Current Market Alignment
All three moving average frameworks signal invest
The 10-month simple, 12-month simple, and 10-month exponential moving averages are in perfect alignment, all showing green lights for US equities heading into summer 2026. The underlying momentum of US equities remains firmly intact.
Notable quotes
That single move protected you from the worst of the crash — Jennifer Nash
These models don't rely on guesswork or economic forecasts. They rely purely on trend following. — Jennifer Nash
These moving averages strip the emotion out of your investing. — Jennifer Nash
Action items
- Execute moving average trading strategies in tax-advantaged accounts (IRA, 401k) to avoid short-term capital gains taxes
- Ensure all price data is adjusted for dividend reinvestments before calculating moving averages
- Monitor IEF (bond ETF) closely in July 2026 as it sits within 2% of its 10-month moving average sell signal
- Reassess all positions monthly on the last trading day using updated closing prices
- Choose between 10-month and 12-month moving averages based on your risk tolerance: 10-month for faster signals, 12-month for smoother trend following