I am a novice and learning from all of you very generous
traders, so what I am going to say will prob sound naive. It seems
from looking at the charts for the last 5 years ( SPX ) that the
only times the SPX drops big is when the price drops below
the 200 day MA. Said another way it is rare to see a big drop in
price if the price is currently at or above it's 200 MA. Exception
would have to be black swan news events.
Meaghan, you know what they say, "there is no such thing as a
dumb question, just dumb answers"; at the risk of giving a dumb
answer here's my take.
The maket can what ever and when ever it wants ad money flows in
or out. The 200 DMA is watched by lots of traders and is considered
a safe way to stay on the right side of the market but since the
markets were taken over by machines that trade $Trillions$ at
the speed of light it's not nearly as important as it used to be.
Here's two charts for you to log and watch, first is a my spy
chart, the spy fell sharply below the 200 dma last Aug. if you had
waited for that to happen as a sell trigger you would have left $10
on the table. But if you had bailed out when the stocastics and
willaims gave a sell signal you would have caught the whole
move.
Next is a chart of percent of NYSE stocks above their 200dma, it
is great tool and one to watch, it too would have protected
you from that huge move down.
also notice on the spy chart that it is starting to give
a sell signal yesterday with the slow sto 14 crossing over
the 3, I want to see it get below 80% and other indicators turn
down as well before I go too short but the markets are ripe for a
sell off at this time.
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$NYAD daily
Posted by ditch on 10th of Jan 2012 at 04:21 pm
Look at the daily A/D, last time we were this extremely over bought the SPY dropped $25, it was July 4th.
NYAD
Posted by meaghan on 10th of Jan 2012 at 05:26 pm
I am a novice and learning from all of you very generous traders, so what I am going to say will prob sound naive. It seems from looking at the charts for the last 5 years ( SPX ) that the only times the SPX drops big is when the price drops below the 200 day MA. Said another way it is rare to see a big drop in price if the price is currently at or above it's 200 MA. Exception would have to be black swan news events.
Is this accurate from your experience ?
Thanks
Meaghan, you know what they
Posted by ditch on 11th of Jan 2012 at 09:03 am
Meaghan, you know what they say, "there is no such thing as a dumb question, just dumb answers"; at the risk of giving a dumb answer here's my take.
The maket can what ever and when ever it wants ad money flows in or out. The 200 DMA is watched by lots of traders and is considered a safe way to stay on the right side of the market but since the markets were taken over by machines that trade $Trillions$ at the speed of light it's not nearly as important as it used to be. Here's two charts for you to log and watch, first is a my spy chart, the spy fell sharply below the 200 dma last Aug. if you had waited for that to happen as a sell trigger you would have left $10 on the table. But if you had bailed out when the stocastics and willaims gave a sell signal you would have caught the whole move.
http://stockcharts.com/h-sc/ui?s=SPY&p=D&yr=1&mn=3&dy=0&id=p62223266142&a=205655459&listNum=1
Next is a chart of percent of NYSE stocks above their 200dma, it is great tool and one to watch, it too would have protected you from that huge move down.
http://stockcharts.com/h-sc/ui?s=$NYA200R&p=D&yr=1&mn=0&dy=0&id=p06425505978&a=212588592&listNum=1
also notice on the spy chart that it is starting to give a sell signal yesterday with the slow sto 14 crossing over the 3, I want to see it get below 80% and other indicators turn down as well before I go too short but the markets are ripe for a sell off at this time.