Is It Time To Buy The Dip??? - Part 35
Stock futures are up sharply as the Markets remain optimistic about the States reopening their economies. There is also news on the vaccine front as Novavax said it started the first human study of its experimental coronavirus vaccine. The company said it expects initial results on safety and immune responses in July. Merck also announced plans to work alongside nonprofit scientific research organization IAVI to develop a potential vaccine against the coronavirus.
So can the Markets continue to move higher, based on sentiment yes, but based on the technicals possibly.
The moving average is the most ubiquitous and simplest technical analysis tool used by discretionary and system traders, market analysts and those pestering algos. The 200 moving average, the king of moving averages is used on a daily chart to determining the overall long-term market trend over the last 40 weeks. Discretionary and system traders, market analysts and those pestering algos also use moving averages for support and resistance.
What's significant about where the 200 moving average now is it lines up with the psychological round number of 3000. As humans, we tend to think in terms of whole, round numbers. In trading, most traders / investors tend to prefer rounded values to odd, random values. Because of this psychology, areas of support and resistance tend to form around certain price levels since traders subconsciously tend to place stops and take profits at areas where price is rounded.
There isn’t a name for when price crosses over and above the 50 day moving average, while the 50 day moving average crosses over and above the 200 day moving average, but it’s statistical significant on the S&P 500.
Since 2009, the S&P has crossed above its 50-day moving average, a key technical level, on 10 other occasions (with a minimum of one month between episodes).
Two weeks after the S&P 500 crossed back over its 50-day moving average, the S&P, Dow Jones Industrial Average and Nasdaq Composite all tend to trade consistently higher — each a positive trade 90% of the time, according to a CNBC analysis of Kensho, a machine-learning tool used by Wall Street banks and hedge funds to identify trading opportunities from historical market patterns.
After reaching the March lows, price has stormed back, but for the last month, price has been range bound. Honestly, I don't know what's going to happen next, but will continue to use the charts to guide me.
This post is my personal opinion. I’m not a financial advisor, this isn't financial advise. Do your own research before making investment decisions.
