Monday, June 8, 2009

The 200 Moving Average

Want to see something interesting? Go find a chart of the S&P 500 for the last 10 years. Then, have the 200 day moving average laid over the chart, which can be done simply on just about any financial info service like Yahoo or WSJ. Notice anything?

The index consistently bounces as it hits, or slightly crosses this line. 10 times in the last 10 years, the index hits the line and then bounces back to continue the trend it was in. Only 3 times does it cross and keep going, and when it does, it does so for a long time.

Why do I bring this up? The rally in the market that has taken place since March has put the index at the 200 day moving average. Will it go through, and establish an uptrend that should become a several year bull market? Or, will it bounce down, retest the lows of March, and possibly even continue lower? Hell, if I knew the answer to that question, you'd have to pay to read my blog!

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