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!
Boy that's a tough one.
Interesting take on the death cross
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.