≈ An intermediate-trend trader’s best friend. ≈
You can follow any moving average under the sun. Traders use all sorts of time frames. But if you’re going to use these beautiful smoothing mechanisms, please make the 50-day SMA one of them. I’ve found it to be incredibly helpful in identifying the intermediate trend and when it’s reversing.
Let’s keep it simple. When the S&P 500 sits above the 50-day moving average, bulls deserve the benefit of the doubt. The path of least resistance, in other words, is higher. Alternatively, when the S&P 500 falls below the 50-day, bears deserve the benefit of the doubt, and the path of least resistance is lower.
Look at the history of the market. Bad things happen south of the 50-day. It’s like the bad part of town. You can occasionally stroll the streets and return home unharmed. But it’s risky. That’s where the ne’er-do-wells live.
So do yourself a favor and play defense when prices breach the 50-day.
Chart of the Day
SPY Daily chart with 50 MA reversal signals
Here’s a chart of the S&P 500 ETF with all 50 MA crossovers labeled. We’ve never seen a crash without being below the 50-day. But, not every push below the 50-day results in a crash.
Video of the day
Trade Masters Webinar Replay
Watch this replay from last night’s Trade Masters webinar where Coach Mark had Coach Tyler and Greg battle it out to see who could find the best trading picks.
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Originally published at https://tackletrading.com on January 7, 2021.