Are you sure you priced it correctly? I reckon the answer is
simple. A breach of MA(20) down changed the short-term trend to
down. A breach of MA(50) will change the intermediate trend, and
lastly a breach of MA(200) would set the long-term trend to
downward pointing. Infamous Mike Swanson uses these criteria for
his definitions of the trend.
You might be asking something like, Is the top we've seen _the_
top for the entire advance? That cannot be answered with certainty,
and most market writers -- I've read so far -- posit that it is
not.
You're missing something absolutely critical in your assessment.
A breach of the 20, 50, or 200 dma is more often bullish than
bearish, meaning that if the moving average is pointing up, you
almost always get a bounce when the price dips below it. (Take a
look at your charts and you'll see what I mean.) However,
if the moving average is
pointingdownand the stock
begins trading below it, THEN you have a short-term,
intermediate-term, and long-term downtrend confirmed by the moving
average.
Until it turns down, however, a dip below an upward-sloping
moving average is usually a buy opportunity rather than a short
opportunity (4:1 at least). Remember, although a break of the
moving average suggests a possible change in direction, the moving
average has to be pointed down for it to be reliable enough to
short. (And a rally up to or above a downward moving average,
especially when on light volume, is usually a good short
opportunity.)
Hope you don't mind me disagreeing. I won't truly be bearish on
the S&P until I see it trading below a downward moving 50 day
moving average. (However, I am finally bullish on the dollar now
that it's trading above an upward 50. Maybe the market will fall in
line and pull the 50 dma down.)
Are you not going to short this market because the MA(50) is
pointing up :-) ? Only crazy ideas work in this market, because
everyone knows they are crazy and does not do them. LOL!
Well, not necessarily. I've been short for a couple of days now,
and I'm certainly happy about it! But what I won't be saying (at
least until the 50 dma is pointing down and the $S&P can't get
over it in a meaningful way) is that the 2009 rally is over. I
won't be putting on shorts with the intent to hold for a few weeks
until that happens. And when it does, I'll likely do it on a crappy
rally. (In case you haven't noticed, the 20, 50, and 200 day
moving averages are my well-trusted advisors! They charge very
little for their advice as well.)
But if you wanna talk about crazy trades, I've got stories! I
once put the great majority of my portfolio on Hecla Mining
options! (That was before I realized that I sucked at
trading.) Fortunately for me, it worked out. Sometimes I
wonder how I survived those first few years without something
blowing up on me (unless you count the Casey/Dines
uranium bull :P).
Oh, good! This looks so far like a regular correction, which
could only last for 3-4 weeks at best and about 2 months at worst.
In early March retirement money will start flowing in, like it did
last year, which will lift markets higher again. That gives
approximately 5 more weeks, so 3 weeks down and 2 weeks up in
between.
There is one problem with moving averages: everyone knows about
them. If you glance at the GDX chart, you'll notice that it has not
touched its MA(200) and its RSI(14) at 30 for a long while. To
confuse all, I would expect a sudden dramatic drop below MA(200)
while RSI is above 30, and a swift reversal there.
We'll get more crazy trades around here when shorts are forced
to cover all of a sudden. It won't be the banks this time around,
perhaps some of the tech stocks will be good poneys to ride
overnight :-)
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Are you sure you priced
Matt/Steve -- Intermediate trend
Posted by junkie on 22nd of Jan 2010 at 06:25 pm
Are you sure you priced it correctly? I reckon the answer is simple. A breach of MA(20) down changed the short-term trend to down. A breach of MA(50) will change the intermediate trend, and lastly a breach of MA(200) would set the long-term trend to downward pointing. Infamous Mike Swanson uses these criteria for his definitions of the trend.
You might be asking something like, Is the top we've seen _the_ top for the entire advance? That cannot be answered with certainty, and most market writers -- I've read so far -- posit that it is not.
Hey Junkie, You're missing something absolutely
Posted by user32 on 22nd of Jan 2010 at 08:33 pm
Hey Junkie,
You're missing something absolutely critical in your assessment. A breach of the 20, 50, or 200 dma is more often bullish than bearish, meaning that if the moving average is pointing up, you almost always get a bounce when the price dips below it. (Take a look at your charts and you'll see what I mean.) However, if the moving average is pointing downand the stock begins trading below it, THEN you have a short-term, intermediate-term, and long-term downtrend confirmed by the moving average.
Until it turns down, however, a dip below an upward-sloping moving average is usually a buy opportunity rather than a short opportunity (4:1 at least). Remember, although a break of the moving average suggests a possible change in direction, the moving average has to be pointed down for it to be reliable enough to short. (And a rally up to or above a downward moving average, especially when on light volume, is usually a good short opportunity.)
Hope you don't mind me disagreeing. I won't truly be bearish on the S&P until I see it trading below a downward moving 50 day moving average. (However, I am finally bullish on the dollar now that it's trading above an upward 50. Maybe the market will fall in line and pull the 50 dma down.)
Are you not going to
Posted by junkie on 23rd of Jan 2010 at 09:28 am
Are you not going to short this market because the MA(50) is pointing up :-) ? Only crazy ideas work in this market, because everyone knows they are crazy and does not do them. LOL!
Well, not necessarily. I've been
Posted by user32 on 23rd of Jan 2010 at 09:08 pm
Well, not necessarily. I've been short for a couple of days now, and I'm certainly happy about it! But what I won't be saying (at least until the 50 dma is pointing down and the $S&P can't get over it in a meaningful way) is that the 2009 rally is over. I won't be putting on shorts with the intent to hold for a few weeks until that happens. And when it does, I'll likely do it on a crappy rally. (In case you haven't noticed, the 20, 50, and 200 day moving averages are my well-trusted advisors! They charge very little for their advice as well.)
But if you wanna talk about crazy trades, I've got stories! I once put the great majority of my portfolio on Hecla Mining options! (That was before I realized that I sucked at trading.) Fortunately for me, it worked out. Sometimes I wonder how I survived those first few years without something blowing up on me (unless you count the Casey/Dines uranium bull :P).
Oh, good! This looks so
Posted by junkie on 23rd of Jan 2010 at 11:14 pm
Oh, good! This looks so far like a regular correction, which could only last for 3-4 weeks at best and about 2 months at worst. In early March retirement money will start flowing in, like it did last year, which will lift markets higher again. That gives approximately 5 more weeks, so 3 weeks down and 2 weeks up in between.
There is one problem with moving averages: everyone knows about them. If you glance at the GDX chart, you'll notice that it has not touched its MA(200) and its RSI(14) at 30 for a long while. To confuse all, I would expect a sudden dramatic drop below MA(200) while RSI is above 30, and a swift reversal there.
We'll get more crazy trades around here when shorts are forced to cover all of a sudden. It won't be the banks this time around, perhaps some of the tech stocks will be good poneys to ride overnight :-)