Posted by biketastic on 31st of Aug 2011 at 06:02 am
Received this today from UK Money Morning writer Dominic Frisby,
who is a technical analyst:
On a number of occasions, such
as last summer and the summer before, the 50 dma has broken down
through the 200 dma. However, on these occasions, the 200 dma has
still been sloping up (in other words, the long-term trend is still
rising).
For the signal to be complete, both moving averages must be
sloping down when the 50 dma crosses the 200 dma. Since 1996, this
has only happened twice. As you can see on the chart above, once
was in late 2000. The other early 2008. Both were times to get out
of the stock market.
... and I guess that you can add
Matt's confirming candle to that
Looking at a chart after the fact, it's always easy to make it
look like the 200 was turning down. In fact, it takes a lot
of down price action to move that slow lumbering MA. Most of
the time the 200 would probably be at best flattish before the 50
crosses it. We all want to be out well before we see the 200
change direction.
well remember that's the nature of long term MA systems, when
any type of long term set of MA's cross (such as a 50/200 day EMA
or a 13/34 week EMA), the market is always overbought or oversld at
that time in respect to the short term. One popular cross is
the 13/34 weekly EMA's on the SPX, however when they have a
negative cross, the market is always oversold on the daily charts
and due for a bounce, when it crosses on the positive side, the
market is overbought on the daily short term charts and due for a
pullback. That's why I always tell people to not trade those
long term MA cross systems when they first occur and instead wait
for the daily charts to work off their overbought/oversold
conditions first, or get a confirmation i.e. when all the long term
MA cross systems crosses and went negative last month, the market
was oversold and due for a bounce.
Newsletter
Subscribe to our email list for regular free market updates
as well as a chance to get coupons!
Interesting take on the death cross
Posted by biketastic on 31st of Aug 2011 at 06:02 am
Received this today from UK Money Morning writer Dominic Frisby, who is a technical analyst:
On a number of occasions, such as last summer and the summer before, the 50 dma has broken down through the 200 dma. However, on these occasions, the 200 dma has still been sloping up (in other words, the long-term trend is still rising).
For the signal to be complete, both moving averages must be sloping down when the 50 dma crosses the 200 dma. Since 1996, this has only happened twice. As you can see on the chart above, once was in late 2000. The other early 2008. Both were times to get out of the stock market.
... and I guess that you can add Matt's confirming candle to that
Dominic Frisby
Posted by jdwm on 31st of Aug 2011 at 09:34 am
is a stand-up comic by trade. And that's no joke!
Boy that's a tough one.
Posted by johnc on 31st of Aug 2011 at 08:37 am
Looking at a chart after the fact, it's always easy to make it look like the 200 was turning down. In fact, it takes a lot of down price action to move that slow lumbering MA. Most of the time the 200 would probably be at best flattish before the 50 crosses it. We all want to be out well before we see the 200 change direction.
SPX 5 year
well remember that's the nature
Posted by matt on 31st of Aug 2011 at 09:30 am
well remember that's the nature of long term MA systems, when any type of long term set of MA's cross (such as a 50/200 day EMA or a 13/34 week EMA), the market is always overbought or oversld at that time in respect to the short term. One popular cross is the 13/34 weekly EMA's on the SPX, however when they have a negative cross, the market is always oversold on the daily charts and due for a bounce, when it crosses on the positive side, the market is overbought on the daily short term charts and due for a pullback. That's why I always tell people to not trade those long term MA cross systems when they first occur and instead wait for the daily charts to work off their overbought/oversold conditions first, or get a confirmation i.e. when all the long term MA cross systems crosses and went negative last month, the market was oversold and due for a bounce.